Australia’s Newstart benefit hasn’t been increased in real terms in a generation, and pressure is growing on the Commonwealth government to address this inequity and raise the rate. Even RBA Governor Philip Lowe has indicated that better Newstart benefits would stimulate consumer spending and support the economy.
But the government continues to reject the idea, and instead has fostered lamentable and divisive rhetoric about “dole bludgers” and the supposed lack of “aspiration” among unemployed Australians. Old stereotypes about unemployed people choosing to subsist on poverty-level benefits, instead of looking for work, have been invoked.
In this paper, Prof. Raja Junankar of UNSW University shows that keeping the Newstart Allowance constant in real terms at a poverty level does not help the unemployed find jobs more rapidly. Despite rock-bottom benefits that have declined notably relative to average wages, long-term unemployment has increased – including among vulnerable groups of workers (like younger and older workers).
The solution to unemployment is more jobs, not inadequate income benefits.