Lifting unemployment benefits does lengthen how long recipients stay out of work, research has revealed, disproving the assertion that extra COVID-era payments did not discourage people from looking for jobs.
The $550-a-fortnight JobSeeker Coronavirus Supplement reduced job-finding by 19 per cent, according to a study released on Tuesday by the non-partisan think tank e61 Institute.
Based on the data, researchers calculated increasing unemployment benefits by 10 per cent would lead to a 2.1 per cent decline in job-finding rates.
That means the average person would spend about one week extra out of work.
While it is a commonly held belief that the more generous welfare payments are, the less incentive there is to look for work, proving that has been difficult.
But the paper’s authors, in this instance, were able to measure it by looking only at the Covid lockdown supplements and comparing Australians to New Zealanders living in Australia.
While both groups faced the same job market and the same lockdowns, Australian welfare recipients had access to the higher JobSeeker payment while New Zealanders did not.
What they found is the New Zealanders found work more readily during the Covid era than did Australians receiving the supplements on top of their dole.
Economists disputed claims during COVID higher JobSeeker rates discouraged people from job hunting
‘People eligible for the JobSeeker Coronavirus Supplement were less likely to find jobs than those who were not,’ e61 research manager Matt Nolan said.
‘This tells us that higher benefits reduce the incentive to work.’
It’s a highly contentious topic.
At the time of the supplements, many economists rubbished the idea that the extra payments would provide a disincentive to people looking for work.
Former prime minister Scott Morrison pointed to anecdotal evidence from business as a reason to cut the payment, but University of Melbourne Professor Jeff Borland said there was no proof that people were avoiding work to stay on welfare.
Researchers say lifting jobless benefits 10 per cent equals a 2.1 per cent drop in job-finding rate
Even though raising unemployment benefits did lead to people spending more time out of work, it did not necessarily mean it was bad policy, Dr Nolan said.
‘It was designed to help households and limit the spread of disease during the pandemic,’ he said.
‘A reduction in labour supply does not undermine the justification for increasing payments.
‘Beyond serving as insurance against job loss, unemployment benefits play a vital role in preventing poverty and maintaining a social safety net.’
