Cuts to JobSeeker, Jobkeeper: out of the frying pan and into the fire

by | Sep 27, 2020 | Government

Hefty cuts to income support mean that Australia now faces a potentially more deadly epidemic than Covid-19. But it is largely avoidable, writes Michael Tanner.

While the wealthiest Australians can look forward to having thousands of dollars a year extra in their pockets, thanks to the Treasurer’s plan to bring forward tax cuts, the most vulnerable Australians, which now number in their millions, have just had their income slashed by nearly 30%.

The Coalition government’s proclaimed ideological shift from prioritising budget management towards job creation will provide little comfort for those Australians whose JobSeeker and JobKeeper payments have been cut. The coronavirus supplement for JobSeeker has been cut from $550 to $250 a fortnight, while JobKeeper has been cut to $1200 from $1500 a week.

Treasurer Josh Frydenberg claims his shift is a move away from austerity, which would be “damaging to the economy”. Shane Warne would be proud of the spin. Figures show that Australia’s income support for people who are unemployed will now fall to one of the lowest in the OECD, the group of 37 mostly wealthy countries. It will be higher than only Greece and New Zealand. (The old Newstart rate of $40 a day was the lowest in the OECD).

Hallmark of austerity

Low expenditure on social services, which includes income support, is a hallmark of austerity. The government’s claim that higher (read: adequate) income support payments disincentivise people from applying for a job is getting repetitive. And this is one falsehood that will never become true, no matter how many times it is repeated.

There are already 13 jobseekers for every job vacancy. Vacancies for dishwashing and similar jobs have seen thousands of applications per role. Not only are there simply not enough jobs to go around, but higher social support has been linked to making it easier, not harder, to get a job. Pushing people further into poverty makes them less, not more, likely to get a job.

Prime Minister Scott Morrison – in a pre-recorded interview for ABC Insiders – was unable to answer a straightforward question of whether or not Treasury had done any modelling on the economic impacts of cutting the coronavirus supplement. His dodging of questions spoke volumes.

Deloitte has, however, modelled the economic impact of cutting the coronavirus supplements. It suggests the cuts will cost the economy $31 billion and 145,000 jobs over the next two years, doing more harm than good. The Australia Institute agrees. Australia’s most eminent economists agree. Even the Reserve Bank agrees that the baseline welfare payment should increase permanently.

The more concerning issue, though, is the downstream health effects. Australia is facing a potentially more deadly epidemic than Covid-19. An epidemic of suicide, poverty, homelessness and early deaths. But unlike the Covid-19 pandemic, this epidemic is largely avoidable.

Recessions have a curious influence on health. They do lead to some better health outcomes – when people have less money, their use of alcohol and cigarettes sometimes decreases; participation in exercise can increase, as people without a job have more time.

Serious harms await

But there are serious harms, too. And these reflect the downstream effects of government policies.

When austerity policies – reducing government spending – are introduced in times of recessions, the health effects are profound. Mental health problems increase, leading to an increase in the number of suicides. Reduction in unemployment support leads to increased rates of poverty and homelessness, which lead to a skyrocketing risk of the spread of infectious disease, development of multiple medical conditions, and early death.

The collapse of the Soviet Union in the early 1990s resulted in extensive privatisation and dramatic cuts to social spending. This saw an estimated three million excess deaths in the years that followed. Following the East Asian financial crisis in 1997, there were 10,400 more suicides across Japan, Hong Kong and Korea in 1998 compared to the previous year. Malaysia refused to cut government spending and sailed through with the nation’s health intact.

Burdening the health system

These are but a few examples of the profound damage austerity can cause. The damage is exacerbated by cuts to health budgets that often occur in times of financial crisis, particularly when tax revenue is down. Yet at these times, the burden on the health system is greater, with more appointments and services required, leading to worse health outcomes because of the overloaded system.

We have spent much of 2020 seeking to minimise the spread of Covid-19 and ensuring hospitals are never overwhelmed. Australia has done a remarkable job from a global standpoint.

Yet the worst has passed, and the government has now started withdrawing one of the most important weapons in the arsenal for continuing the fight against Covid-19.

The effective unemployment rate already sits at 13%. Now with the cut in JobKeeper, we can add another 145,000 Australians to that tally, many of whom will be plunged into poverty. The Guardian interviewed four young people last week, who had been beneficiaries of the Covid-19 supplement. Freya, 22, was able to pay for her arthritis medication, and afford her room in a share house, without skipping meals. Similarly, Jess, 21, and Jade, 24, were able to buy medication they needed, eat fresh food and not skip meals.

Advance Australia Unfair: tax cuts to favour men over women, old over young, rich over poor

Beyond poorer nutrition and the unaffordability of essential medications, countless Australians will lose a safe roof over their heads. Homelessness is associated with extraordinary rates of infectious disease, from tuberculosis to scabies – largely a result of inadequate access to services that enable adequate hygiene. Think it’s possible to socially distance in a homeless shelter? Think again.

With unemployment rates so high, people will not stay home when unwell due to fears of losing work – which has been considered a major driver in the spread of Covid-19 in Melbourne.

The government is cutting taxes and putting more money in the pockets of wealthy Australians, while withholding support from the poorest Australians. Reduced spending on social services is the root of many of the health consequences of past recessions. The Coalition’s temporary swing to the centre lasted long enough for the worst of the pandemic to subside – then it was back to the free-market policies that have seen a meteoric increase in the wealth of billionaires in 2020 while global poverty is increasing for the first time in decades.

Society pays price for inequality

But even those who support the removal of JobKeeper should be concerned. Cutting taxes for the rich while reducing welfare is going to turbocharge the increasing inequality that successive Liberal governments have presided over. The thing about inequality is that it leads to entire societies performing worse, not just the lower socio-economic groups affected. Infant mortality; drug abuse; poor mental health; obesity; child wellbeing; education; teenage birth rate; imprisonment; violent crime and homicide.

The Covid-19 pandemic was always going to lead to economic crisis. But the government can respond in ways to tackle it. In the wake of the global financial crisis, the federal government increased fiscal stimulus – as advised by the then Treasury secretary Ken Henry: “Go early, go hard and go to households.” Australia was one of the few countries in the world to avoid a recession.

There is another way to tackle the economic crisis Australia faces. Instead of taking inspiration from Thatcherism and Reaganism, Frydenberg and the Coalition should look closer to home at Kevin Rudd’s and Ken Henry’s response to the global financial crisis – a path that promises recovery for both the economy, and our health.

ABOUT THE AUTHOR

Michael Tanner

Michael Tanner

Michael Tanner is completing a Doctor of Medicine/Doctor of Philosophy. His writing explores the intersection of economics, the media and public health. His writing has also been published in The Age. Michael’s Twitter handle is @MichaelTanner_

8 Comments

  1. Avatar

    Within major centres like Melbourne and Sydney, much of this rings true. In many regional and rural centres, however, there is a severe shortage of available workers. Examples include orchards in Queensland, and pubs and hotels in Western Australia, precisely the sort of entry-level roles for which many are applying. The current JobSeeker/Keeper rates really are a disincentive here. Why would you relocate to somewhere hundreds or thousands of miles away when you could safely stay put and be paid for being at home? Reductions to these benefits will incentivise jobseekers to look further afield, and to look within new industries. JobKeeper at $1500/fortnight is around $39,000/year, a generous amount when compared to average earnings for those in work.

    I suspect the high application volumes are more about future-proofing; securing the job now in preparation for the inevitable reduction in payments. That was my situation in June, when I started a new role in a new industry. For a nine-day fortnight, I receive around $2,000/fortnight after tax. Essentially, I’m getting just $250/week more than someone sitting at home on a benefit. If a $1500/fortnight benefit was guaranteed for, say, the next two years, the number of job applications might be significantly lower. Relocating as necessary, and/or switching industries as necessary, become more appealing when there is a tangible financial advantage in doing so; that advantage just doesn’t exist with the current high rates of benefit payment. I think there is merit in using a HECS-style loan system with regards to some benefits, but that’s another topic altogether.

    • Avatar

      Isn’t JobKeeper for people to remain employed in roles that they can’t perform due to imposed covid restrictions? I don’t even think those on JobKeeper count as unemployed. $1500 (or soon to be $1200) a week isn’t a figure relevant to your argument. Your alternative to earning $2k a fortnight is $250 a fortnight for JobSeeker, which is criminally low. I don’t think the higher $550 a fortnight is a disincentive to seek work, even far afield. Wouldn’t it be better to incentivize people to move to remote and rural areas (paying relocation costs and subsidies rent say) rather than try to disincentives people from remaining in a big city by shafting them in to poverty (how do you move if you have $125/week to live on?). Regardless it hardly seems a time to hand out tax breaks for higher earners, that’s probably the worst crisis management move you could make.

    • Avatar

      I was on the low payment pre covid , I did not incentivise me to move , I could not afford to move

  2. Avatar

    Excellent article Michael Tanner, and leaves no doubts as to where we, as a country have been heading for some time.

    Expecting a psychopath like Morrison, to join the overarching dots to his ideologically driven agenda, is a bridge too far.

    We are dealing with people, both within and externally to Governance, who are choosing to deal with “details that allude and escape us, and we don’t even see that we don’t even see them, and what we do see is generally what we want to see, what we feel we ought to see, what we have talked ourselves into seeing, and of course, when we are not talking ourselves into seeing things, we are listening to other people persuading us that we can see things one way more than we can see it another way.”

    In other words cognative dissonance, along with its close fellow traveller cognative biases. A rather extensive list indeed, however as described by Wikipedia “Cognitive biases are systematic patterns of deviation from norm and/or rationality in judgment. They are often studied in psychology and behavioral economics.[1] https://en.wikipedia.org/wiki/List_of_cognitive_biases

    What we need are some really good REBT practitioners to sort out our flawed ways of emoting and its subsequent
    thinking, both within Governance organisations and externally as well, which covers the broader mental health aspects of the article and the population in general.

    As for this country’s experience during the Great Depression of the 1930’s https://en.wikipedia.org/wiki/Great_Depression_in_Australia#Varying_experiences_of_the_Great_Depression nothing much in terms of LNP policy has changed.

    It’s a BIG lesson that we have failed so far. Will we ever learn?

  3. Avatar

    Demands for tax cuts seem to be associated with the selfish and greedy who only care about themselves and money in their pocket and FU Jack.

    Or could it be a quasi-religious belief system that because I’m rich, it’s because God Wants Me to Be Rich and therefore I should get more because that’s What God Told Me I Should Do … ?

  4. Avatar

    The coronavirus supplement for JobSeeker has been cut from $550 to $250 a fortnight, while JobKeeper has been cut to $1200 from $1500 a week.

    Good article, but it should read a fortnight here, not a week.

  5. Avatar

    Could I suggest that the Fed. Govt. require those on JobKeeper/JobSeeker head to Bundaberg, Childers, Qld., and other areas, and assist with the harvest rather than produce being ploughed into the ground creating shortages of food and thus increasing prices for consumers.

    Readers have undoubtedly heard how Star Casinos and Qantas sacked workers yet paid their half dozen or so executives over $1million bonuses out of the JobKeeper payments made by the govt. Frydenberg apparently unable to comment on specific cases.

  6. Avatar

    If the government truly wanted to reduce unemployment and the amount of people seeking welfare payments, mental health should be their primary focus. A person on a mental health care plan only has access to 10 psychologist and 2 psychiatrist visits a year covered by Medicare — if you can find medical professionals that bulk bill. Even then, you’ll be waiting months for an appointment.
    Because of the COVID-19 supplement (I’m on JobSeeker), I’ve FINALLY been able to afford to spend money on seeing a psychiatrist. Hell, I can even look into finding a psychologist or counsellor now. Previously, for any costly medical appointments, I’ve had to rely on my parents to pay for it. I’m in my mid-20’s, it’s pretty damn humiliating.
    And yet, I’m one of the lucky ones. I shudder to think of what kind of circumstances people face without the sort of support system I’ve had.
    But I can guarantee that if I had the financial means to spend money on caring for my mental health, I would be back in the workforce now. I would be on the path to healing the crippling anxiety I experience in any workplace. But here I am, two years later, only now being able to freely look at options regarding recovery. The cycle of “I can’t afford it” finally broke.
    The government simply digs its own grave by cutting JobSeeker (and generalising welfare recipients and their circumstances down to one “neat” little payment),

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