It seems that the ACTU is considering a push for a nationwide unemployment insurance scheme, as part of an increase in superannuation contributions to 12%:
The internal ACTU report, prepared for today’s meeting of the ACTU executive, argues for superannuation contributions to be lifted from 9 to 12 per cent; 1 per cent of the increase would fund unemployment insurance…The report argues the proposal, to be underwritten by government, would be self-funding, with most workers receiving 80 to 95 per cent of their previous wage for up to six months.
If this is accurate, it sounds like a no-brainer to me. Everybody wins – employees get a much better safety net, employers get less grief when there are job losses, and the government gets a bigger whack of counter-cyclical stimulus that it doesn’t have to fund itself.
So what’s the catch? Is this really self-funding if unemployment goes through the roof? Is there concern about moral hazard (in a nutshell, the insurance payments encouraging people to sit on their arse for a few months when they lose their job)? What am I missing that explains why this wasn’t introduced decades ago?
I don’t see a downside, though no doubt pro business commentators will come up with something.
As to why it’s not been done before:
(a) we need the existing regime of super contributions to build on for funding for this sort of thing – we’ve never really had the principle of insurance as the basis for welfare payments in this country (unlike many others);
(b) we’ve also had a fairly punitive attitude towards the unemployed at least since the 1970s, though its cultural roots are older.
I think it’s an excellent idea!
Wouldn’t it just create a 2 tiered unemployment benefit favouring the already advantaged shorter termed unemployed over the very poorly resourced longer termed out of work?
It further weakens the social security net, and increases the inherent inequality that sees benefits flowing to higher income earners.
Given the numbers of short term unemployed are much higher than 1% (it’s about 5% for less than 12 months so I’d guess 3-4% for less than 6 months), how exactly does this pay for itself with only a 1% input?
it’s a bit suspect. if it is self-funding then why does it have to be mandatory?
drscroogemcduck @ 5 – its not mandatory and the proposed scheme would allow employees to opt out. However I’m pretty suspicious of the claim that its self funding at just 1%. Looking at it another way to break-even it assumes that a person on average will only be unemployed for a total of about 6 months over their entire working life which would include the high unemployment rates at the start and end.
Once introduced it would politcally be very hard to remove or raise the premiums and the government would end up funding the shortfall.
I’m wondering what restrictions there would be on the cause of the unemployment or how open to exploitation a scheme would be. Someone could work for 6 months of each year but then get paid for 12 months each year if they played their cards right.
Not a bad idea, my only quibbles would be the funding amount (as mentioned a couple of times above 1% does seem low), and the usual habit of governments to treat funds like this as “general expenditure” and hollow them out.
Apart from that, why not?
Just on another plus side I dont think was emphasised enough. It would be much, much easier to commit to 6 months training/upskilling if you had the luxury of your normal income for the time it took. It could benefit motivated people, rather than see tham take a selection of short term positions to “make ends meet”, then re-enter the workforce with no more skills than when they left.
(or am I missing something?)
Increase current unemployments benefits etc instead.
If we can afford to throw billions of dollars at super superannuation rich people, a la Howard and whatever that treasurer bloke’s name at the time of the pre -election budget was, we can afford to do this.
Totally off the agenda of course.
Its not that different to what happens in most European countries. The funding may include the current unemployment benefit and just use this as a top up. While it does benefit high income earners more than low income earners it more effectively provides actual insurance from unemployment. If you have a mortgage then the current unemployment benefit does little to really protect you from the risk of losing your job.
There are also advantages to these types of schemes. They tend to generate broad electoral support, unlike targeted schemes that often stigmatise their recipients. And that means they are usually more generous (even for the poor). This is even more likely if it is government run, as the minimum payment tends to be a bit higher. Finally, as if they are insurance based, then they will be partly redistributive because unskilled workers are more likely to be unemployed for longer than skilled workers.
Although I’m wary of super being the mechanism. Remember super funds crash at exactly the same time unemployment increases. If these are only personal schemes (ie you only get back what you put in) then it doesn’t help much if unemployment is either more likely to effect the young or those who have already been unemployed (both are true so the scheme would be limited). If it were an insurance model, where you pay 1% and get covered regardless of your own contributions, then it raises the problem of adverse selection – where some funds have lots of pay outs and others few pay outs. As super funds are defined largely by industry this is actually very likely (as some industries decline and others grow). All up, if you want an insurance scheme, governments are much better placed to deliver than private investment funds. I presume the state would have to guarantee them anyway, so they might as well run them. But then the ACTU doesn’t run the government, and they do run the super funds – so that might explain their proposal
Yeah. Absolutely great excuse, once its introduced, to cut out the dole completely. So after six months once you’ve used upyour unemployment insurance you end up with no money and nowhere to live if you haven’t got a job (which can always happen to people when we have a cyclical downturn. Why they don’t just say they want to Americanise our social welfare system I don’t know.
The Liberal p[arty will just love this once they get back into office.
Bit like the sell out on wages and industrial relations the ACTU gave us with the Accord? Remember? The low wage scheme John Howard eventually turned into Workchoices?
desipis@7: most unemployment insurance schemes have the same restrictions on compensating for ‘voluntary’ unemployment as does our current social security system: so no payouts for voluntary quits, or after being sacked for misconduct, and probably for refusing an offer of suitable work (although obviously much hangs on how you define ’suitable’ in that last instance). In fact, with an explicitly insurance-based scheme, this type of restriction presents itself as an obvious one: no insurance scheme of any kind seeks to compensate you for loss you cause to yourself.
Good point Ben@11 about the potential problems with using super funds as the piggy banks in this.
Paul@10, in most European countries social insurance schemes continue to co-exist with ’social assistance’ schemes, the latter akin to our dole. So I don’t think the dole would die, but it would remain as lean and mean as it currently is (at least) and we would end up with a two-tiered system whereby people with little work history and the long term unemployed would be no better off than they are now
Anthony, I think the point is, a scheme like this may well give a conservative government of the future the opportunity to dump our present social security net saying that a fine new one now exists.
So rather than a European model, via the backdoor, the appalling American style system they so long for, would be introduced.
It seems to create two tiers of unemployment. How would it help the most marginalised who wouldn’t have unemployment insurance anyway? I do think the US model is the more apt comparison, rather than the European model, as we seem to be heading in that direction anyway.
Looking back at my comment at #10 I see that I was ambiguous.
I am totally against a US style unemployment insurance scheme, it would be a disaster and rapidly and inevitably lead to the present scheme being diluted to disappearance.
Any changes that should be made to the present system should only be in the direction of increasing the value, not just of unemployment benefits by the way, all pensions etc..
I agree with joe2, Alister and Paul above.
I can’t understand the ACTU going for it, I know they are not what they were or should be any more but there must be a missing element that I’m not taking into account or else …..the ACTU has got worse than even I thought it had.
BTW, I think where I said “at least” I meant “at best”
Has anyone mentioned a Job Guarantee?
I can’t imagine why anyone would want to drive a nail into the welfare state. User pays unemployment insurance is the thin edge of the wedge.
I am totally against any scheme with an ‘insurance’ tag
The Australian insurance companies have vast funds garnered over a century of collecting premiums and paying out a pittance
What’s wrong with our current unemployment benefts
Also confused about the benefits of disability insurance. Am getting old and stroppy enough to smell a rat in any system I can’t understand
“Has anyone mentioned a Job Guarantee?”
I hear you Andos, pity no one else does.
I think those raising the issue of a two-tiered system have a good point. On the face of it, it looks like it would benefit mostly higher income earners and scarcely do anything for those at the bottom end.
You know what Andos (I’ll address you because I don’t think anyone else is interested), perhaps we could have both this and the job gaurantee?
While this kind of unemployment insurance would likely benefit higher income earners while doing little for lower income earners, the reverse would probably the case for the job gaurantee – a gaurantee of a minimum wage job to fall back on would likely be enough to support a lower income earner but a higher income earner would likely have a mortgage debt that could not possibly be serviced with the minimum wage.
It would still be a two-tiered system which I find the idea of somewhat offputting but it might be workable.
Maybe you could ask Bill what he thinks?
The Job Guarantee sounds (on the surface) work for the dole by another name.
Slightly odd idea, I must admit. Income protection is currently available privately for illness and injury and the premiums are around 1-2% of one’s current income, at least for a high risk job like medicine. I would have thought if you added on other causes of job loss then either there will be a funding short fall or a fairly brief payment period.
Anyhow, not sure how this is any benefit over a 1% tax rise tipped into unemployment benefits.
Well, given how the super’s gone… there could be endless conditions on it, subject to change. You might not be able to access the insurance until so many months unemployed, or maybe burn through that at the same rate as the regular unemployment benefit, giving you only so much income for so many weeks, you might not be able to get it if you quit your job, etc.
And maybe if you’re Aboriginal they’ll quarantine some of your insurance payout to ensure you buy stuff from the overpriced local store.
I’m not a fan of that ‘Job Guarantee’ scheme by the Newcastle academics, which Andos referred to. It has a nasty little sting in the tail: people would have to accept the job the government found for them, or get nothing at all.
“While membership of the labour force would remain voluntary, the abolition of unemployment benefits would require persons who are able to work to enter the labour force in order to acquire a subsistence income.
As opposed to the requirement the unemployed already have to continually jump through hoops or face being breached for an income significantly less than the minimum wage?
“The Job Guarantee sounds (on the surface) work for the dole by another name.”
It’s not a work for the dole scheme Steve – it’s a gaurantee of employment for the minimum wage.
Flynnboy, I’ve been on the dole for a little while now. The hoops really aren’t that hard to jump through — particularly since the ALP came to power. A little bit of cheerful bullshitting and obfuscation will go a long way.
I’ve got a project lined up for early next year which will see me cease to be a parasite on society.
In the meantime, I really wouldn’t want to be assigned to some crappy job by a Federal bureaucrat, so I for one am very happy there is no such compulsory ‘Job Guarantee’.
Let me guess the people that came up with this you bewt scheme all have jobs and relatively safe ones at that?
Like others have said this would just create a two-tier system and like Paul said once the Liberal Party get back into power (given it’s a generation away) the dole would disappear quick smart. That’s what we need more slums and abject poverty just like the US and there is a big enough gap between the have’s & have not’s here already.
OK then Paulus – maybe a two-tier system along the lines that I believe Norway has. If you don’t want the crappy job assigned at the proper minimum wage and conditions, then you can fall back on the dole and be financially worse off (but still get unemployment benefits).
Of course, if people with any imagination really took the implementation of this thing seriously, you might find that you are not simply assigned a crappy job but have an array of dozens of crappy jobs to choose from. In speaking to local governments around the country, Bill Mitchell and his team concluded that there was unmet demand for hundreds of thousands of jobs that would provide great benefit to society but will never be fulfilled by the private sector because it simply isn’t lucrative to do so.
Many unemployed people might actually find a sense of worth in say, tending to the gardens or houses of the elderly who are otherwise forced into nursing homes because they are too frail to continue doing it for themselves (I have actually done such a job). It might be civic or environment beautification or restoration – it’s really only limited by the imagination.
Furthermore, a person who has been working in a job gaurantee position for say, two years is probably more likely to secure employment in the private sector than one who has been unemployed for two years. Employers tend to sniff at the longer term unemployed. I think it might provide a better stepping stone into a “non-crappy” job than dole. Or some people might be happy to stay there.
The thing is, the private sector almost NEVER desires to use all available, willing labour – it fluctuates with the economic cycle but typically about 10% (unemployment and underemployment) of willing labour goes unutilized. This creates both a wastage of valuable resources and more importantly, creates social disadvantage and hardship by creating a permanent underclass of long-term unemployed.
It is a naturally occuring defect of the capitalist system but one that I think an approach such as this could help to overcome.
The alternative is that we all continue to accept the existence of a permanent underclass. Since most people here consider themselves progressives in some way, shape or form, I had thought that this idea might have found slightly more acceptence.
Does no-one except me have a problem with the potential employment impact of another 3% of salary impost for employers? It may not sound like much, but any extra tax on employment will affect employer’s job creation decisions to some degree, and coming on top of Fair Work, state payroll taxes, etc……?
Also what others have said re costs. A blithe assurance from the ACTU of its self-funding capacity is not convincing. Level of compulsion comes into it too. I note that “opt out” is envisaged – and personally I would prefer if super contributions go up 3% to have that all go to super, not to employment insurance – but mass opt outs would affect the figures, and we have an authoritarian, control-freak Government from which one suspects that an everybody in directive would be more likely in any event.
In short, no.
In long, the economy continues to grow and is likely to continue to do so over the medium to long term. The question is then what that growth gets used for. Unemployment insurance is one potential thing that could be done with it.
You are not alone Wozza. If an employee is paid $1000 per week this would raise the direct cost of employing that person from $60,460 to $62,100 thus for every 60 employees One person would have to be sacked to pay for it.
Should this be done by shop floor ballot, or management discretion?
SATP, GDP per person will continue to rise over time. That will result in some combination of wages rising, non-wage benefits rising, and profits rising.
This is simply a proposition that some of those wage rises should be diverted into an unemployment insurance scheme.
With due respect, Robert, that is a complete non-argument.
No-one disputes that GDP will continue to rise. The question is whether that rise is better put to supporting an unemployment insurance scheme, or to a zillion other potential uses. The fact that GDP will rise per se says absolutely nothing about the merits of the proposal.
You’ve got the money, please bung it at a scheme subsidising my constituency is the immemorial cry of rent-seekers everywher.
Which, I think, was my point.
By the way, describing roughly half of the Australian population as “rent-seekers” is in this context kind of harsh…
OK Robert so we’re saying the same thing, though when you posed it along with phrases such as “no brainer … everyone wins” it sounded to me rather less of a question than it was in my mind.
I doubt that half the population of Australia is unemployed, though perhaps you are looking to the future, post the institution of the CPRS and when the Kevin Rudd memorial debt comes home to roost.
It’s clearly not costless. I do happen to think it may well be worth the cost (I’m unconvinced by a lot of the arguments against it, by the way).
My point with roughly half the Australian population is that roughly half the Australian population is in the labour force.
Robert – do you think its self funding at 1% ? I’d support it at 1%, but not if the real cost is 3% or 5% (even if the remainder was government funded)
Frankly, I’m pretty doubtful it’s self-funding at 1%.
Gotta love this Rudd Labor government now they’re bringing in compulsory income management in which 50% of it to be quarantined for everyone on the dole. Disgraceful.
http://www.theaustralian.com.au/politics/new-law-to-quarantine-all-welfare-payments/story-e6frgczf-1225803474284
They wouldn’t need to do this if they increased the dole to the rate of the pension. I can pay rent, pay off bills (with the assistance of vouchers for the winter electricity bill),buy medicine, buy good food for the fortnight. which includes vegetables and chicken – I eat very little red meat – (though I do live on rice and spaghetti bolognaise for the last two days of the fortnight). And afford to buy at least $50-$100 worth of books or DVDs and 2 pkts of smokes each fortnight. With no problems. Mind you, I’m single, live in the country and have outgrown all my responsibilities, don’t use airconditioning and except for bubble baths, use cold water to shower even in winter and do my washing, never have any electrical appliance on stand-by, and only use one light at a time at night time.Sometimes i even have money left over on the day before pension day.
Thanks for the considered arguments, Flynnboy. Couldn’t have put it better myself.
Cheers Andos.
Maybe someone will at least come up with a good, considered argument as to why it is a terrible idea unworthy of consideration, instead of just ignoring it into non-existence.
This seems to ignore the self-employed. The sole trader, freelancer, subbie. Or perhaps penalise them. Income protection insurance as offered currently isn’t 1-2% of income; not in my neck of the woods – more like 6% of gross. (and we wont mention public liability, professional indemnity, etc etc etc as likely business costs). So would it be 1% of gross, or taxable income? How would income be ascertained? By averaging taxable income over a number of years? Last lodged tax return? How would unemployment be defined? As per current social security rules? Would you be able to attempt to trade out of trouble while receiving one’s unemployment insurance?