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  • rmacculloch

A Welfare Reform Proposal (to add to the debate that we're not having!)

The ACT party is advocating for a welfare reform, at least regards to unemployment insurance. They propose dedicating 0.5 percent of income tax at current rates "to a ring-fenced employment insurance fund ... a worker who loses their job would be able to claim 55 per cent of their average weekly earnings ... capped at a maximum amount of $60,000 for a year". The ACT party argue that their scheme "would be fairer than the current system because people get paid out in proportion to what they pay in, rather than a flat benefit rate regardless of their outgoings or previous tax contributions".


The government and opposition are sure to strongly oppose such a policy and even dismiss the debate completely. But our two major parties, unwittingly, have already endorsed a not-too-dissimilar policy, one which was designed in a rush, on an ad-hoc basis. It's called the "wage subsidy scheme"(!) Whereas existing beneficiaries haven't been much helped these past months, those in jobs before the virus crisis blew up were greatly assisted by the government, enabling them to continue being paid at least 80% of their wages. Most of those workers were effectively temporarily laid off, being unable to work during lock-down.


Better to debate how to carefully design the best unemployment insurance scheme that can cope with times of crisis, rather than to implement hasty substitutes that have created all sorts of problems. For example, the wage subsidy was paid to firms, not to workers direct, which has meant that plenty of large firms which didn't need it have still benefited.