Eliminating unemployment benefits will extend the time recipients remain out of work, research shows, refuting claims that additional COVID-era payments did not deter people from looking for jobs.
The $550-a-fortnight JobSeeker Coronavirus Supplement reduced job finding by 19 percent, according to a study published Tuesday by nonpartisan think tank e61 Institute.
Based on the data, researchers calculated that increasing unemployment benefits by 10 percent would lead to a 2.1 percent decrease in the number of jobs found.
That means the average person would be out of work for about an extra week.
Although it is a commonly held belief that the more generous the benefits, the less incentive there is to look for work, proving that this has been difficult.
But the paper's authors were able to measure it in this case by looking only at the Covid lockdown supplements and comparing Australians with New Zealanders living in Australia.
Although both groups faced the same labor market and lockdowns, Australian benefit recipients had access to the higher Jobseeker's Allowance, while New Zealanders did not.
What they found is that New Zealanders found it easier to find work during the Covid era than Australians who received the supplements on top of their benefits.
Economists disputed claims that higher numbers of job seekers during COVID discouraged people from looking for a job
“People who qualified for the JobSeeker Coronavirus Supplement were less likely to find a job than those who did not,” said e61 research manager Matt Nolan.
“This tells us that higher benefits reduce the incentive to work.”
It is a very controversial subject.
At the time of the benefits, many economists rejected the idea that the extra payments would discourage people looking for work.
Former Prime Minister Scott Morrison pointed to anecdotal evidence from the business community as a reason to cut the payment, but University of Melbourne professor Jeff Borland said there was no evidence of people avoiding work to stay on benefits.
Researchers say eliminating unemployment benefits by 10 percent equates to a 2.1 percent drop in job openings
While increasing unemployment benefits led to people spending more time out of work, it didn't necessarily mean it was bad policy, Dr. Nolan said.
“It is designed to help households and limit the spread of disease during the pandemic,” he said.
“A reduction in labor supply does not undermine the justification for increasing payments.
“In addition to serving as insurance against job loss, unemployment benefits play a crucial role in preventing poverty and maintaining a social safety net.”
