In Australia the government almost doubled the value of the unemployment benefit to $557.85 a week.
New Zealand should do something similar.
I propose that for at least the next six months we should give all unemployed, sickness, invalid and sole parent beneficiaries a tax-free benefit equal to the net national superannuation rate for a single person – $425 a week with a tax on all other income of 39%. I will explain where I got this idea and how it will work a bit later.
$425 a week is about 40% of the average net wage which is what adult unemployment benefit values were in the 1980s before being slashed to about 33% in the 1990 budget. Since 1990 their value has dropped again to only 20% of the average wage because they have only been increased by the Consumer Price Index movement rather than the average wage movement. This was changed in this year’s budget and the increase matched the average wage increase but the damage has been done and without a substantial real increase the losses over two decades will never be made up.
There was also a near halving of the percentage of people qualifying for an unemplyment benefit around 2008 when deliberate and punitive barriers were put in place to block people being able to access benefits despite their legal right to do so.
This has been an important part of what has driven the explosion of poverty levels, homelessness and dependence on foodbanks over the last decade before the most recent crisis.
It is this sector of society who have suffered the most over the past decade and needs the biggest help during the crisis period.
It can also be made into a first step towards a universal basic income at a meaningful value to make a difference.
Economist Susan St John has proposed something similar for those on national superannuation that hasn’t been given the attention it deserves.
Susan St John was proposing this change to National Superannuation as a fair and progressive alternative to the right-wing economists demanding cuts to national superannuation because it is allegedly “unaffordable”. Her proposals would have saved a lot of money but be much fairer than raising the age or cutting the value, for example.
She proposed we establish a non-taxed basic income grant equal to the current living alone net national superannuation income of $425 a week.
All other income would then be taxed at a set rate to ensure those on high incomes do not benefit unnecesarily. That rate could be set at any number, but Susan gave two examples in her paper. In one she used a 39% tax rate which would mean anyone earning over $123,000 a year would lose the entire benefit. Another alternative was 20% on all income up to $20,000 and then 45% beyond that which would cut off any benefit at around $100,000.
The beauty of these simple suggestions is that the benefit doesn’t get paid to people who don’t really deserve it but national superannuation would retain its universal character and be available to everyone at age 65.
In Susan’s proposals Superannuitants earning more than the cut off points would simply choose not to receive the benefit. But in my view, it makes sense to have the respective marginal tax rates of 39% or 45% apply on all incomes over $100,000 or $123,000 examples as well to help fund an extension of the benefit to others. Personally I would then add even more marginal rates at higher incomes until we reach 100% at $250,000.
We should also bring in wealth taxes and death duties for anyone with accumulated wealth above $5 million to make sure that this class of people (property owners in particular) who have avoided taxation their entire lives can no longer do so. I’d also look at a Financial Transaction Tax but would prefer that to be used to replace the regressive GST tax.
But with a universal non-taxed grant in place for those aged 65 and over, Susan St John did think it could easily be extended to other groups if we chose to. She suggested we may want to start with sole parents, or those aged 60 and over have worked in manual jobs.
But the same basic income grant could be extended to anyone who was unemployed, and also used to replace student allowances if we had the income to pay for it.
At the moment, when were are in a crisis, and we are literally printing money to deal with the problems we face, then we need immediate steps to deliver money to the poorest sections of society and those who have suffered the biggest loss of income – the newly unemployed and those already on benefits.
Current benefit levels are simply starvation rates – $250 net for an adult. It is only $200 each for a couple. Youth rates apply aup to 24 years of age. And you can’t access a benefit if your partner works. Then to add insult to injury a sole-parent family loses $75 a week from an In Work tax Credit for their child if they lose their job. That also must change.
We need all benefits (including national superannuation) individualised so you aren’t punished for being in a relationship.
All benefits should be set at the single rate for national superannuation ($425 a week), made tax free and all other income taxed at 39%.
Making these benefits as universal as possible also undercuts the ability of some groups to criticise others for receiving them. It has been interesting that there was little criticism of the winter energy payment (now $40 a week for singles) going to beneficiaries and others on low incomes, when it was also given to those on national superannuation.
The wage subsidy has been effective in keeping most people in employment for at least the next three months. But tens of thousands of workers have still lost work and that could easily grow to several hundred thousand. Many workers in grey areas of the economy doing cash jobs also could not access support. Workers on temporary visas have also missed out on support if they lose their jobs. These workers need much more support immediately.
We can certainly “afford” to do it for six months while we debate the wealth and other taxes that may be needed to sustain this proposal longer term.