The Social Dividend: An Actuarial Case for Higher Income Support

Increasing JobSeeker is an investment which provides economic benefits, social benefits and critical efficiency savings.

There has been much research on the economic benefits of increasing JobSeeker, but much less research on the social benefits and efficiency savings. This report seeks to fill this gap by combining actuarial techniques with microdata and econometric analysis.

The key finding of the report is this: increasing JobSeeker to 90% of the Age Pension would deliver a social return of 24% and deliver key efficiency savings which outweigh any potential reduction in job search intensity.

Every $100 invested in an increased JobSeeker payment delivers a $24 social return. This includes a range of physical health benefits, mental health benefits, and intergenerational benefits through positive impacts on childhood development.

There are efficiency benefits, too, through avoided hospitalisations, fewer GP visits, lower mental healthcare costs, fewer justice system interactions and lower children’s lifetime social security system use.

Importantly, these efficiency savings outweigh even the most generous estimates of any potential reduction in job search intensity – which is already unlikely in Australia given that a higher JobSeeker payment will remain much lower than average wages.

The JobSeeker Payment is below all poverty measures in Australia

Around 830,000 people – 5% of the comparable working-age population – are receiving JobSeeker. Single JobSeekers receive $389 a week, much lower than the average wage in Australia of $1,923. This puts JobSeeker recipients below all of Australia’s poverty measures. Australia ranks the second-lowest in the OECD in terms of its support to unemployed people after two-months.

The low payment is correlated with poorer outcomes for recipients and their children

Microdata analysis shows that JobSeeker recipients exhibit higher rates of death by suicide, financial stress, severe psychological distress and risk of homelessness than the broader population. They report worsening physical health, poor nutrition and an inability to afford medicines, healthcare and meals.

Research shows that increasing JobSeeker would grow the economy and create jobs

Unmet consumption needs mean people on low-incomes spend more of their income than people on high incomes (who save more). Increasing JobSeeker supports the economy, including through this secondary spending. JobSeeker is also an ‘automatic stabiliser’ because it results in more government spending during economic downturns (when unemployment is high). Deloitte Access Economics estimates that increasing JobSeeker by $75 a week would grow the economy by $4 billion and create 12,000 jobs. These results, however, did not quantify social benefits.

Quantifying social benefits, the social return from increasing JobSeeker exceeds 24%

This report combines actuarial techniques with micro-datasets (HILDA, PLIDA, DOMINO) and leading econometric research to measure the impact of increasing JobSeeker to 90% of the Age Pension (from the current $389 per week to $515 per week for singles). This increase halves the poverty rate of JobSeekers.

This study finds that increasing JobSeeker would deliver a social return of more than 24%. This return quantifies physical and mental health improvements and childhood development impacts. Every $100 invested in an increased JobSeeker payment delivers a $24 social return. These benefits accrue to the Government, the individuals and society. Importantly, the efficiency benefits far outweigh any efficiency costs.

Increasing JobSeeker provides efficiency savings which outweigh even the most generous estimates of reduced job search intensity

Almost a quarter of the social return comes in the form of government efficiency savings. Increasing JobSeeker results in avoided hospitalisations, fewer GP visits, lower mental healthcare costs, fewer justice system interactions and lower children’s lifetime social security system use.

Increasing JobSeeker is unlikely to result in people staying on JobSeeker for a longer duration given that, even with the increase, it is still far below the replacement rate. However, even if people did stay on JobSeeker for longer, the efficiency benefits to Government would outweigh these costs under even the most generous estimates from the international literature.

Increasing JobSeeker provides benefits to individuals and children

Just over a quarter of the social return accrues to JobSeeker recipients and their families. This includes improved mental-health related quality adjusted life years, increased earnings when they become employed and avoided out-of-pocket mental health costs.

Increasing JobSeeker provides broader benefits to society

More than half of the social return accrues to broader society through avoided lives lost due to suicide, avoided childhood poverty, avoided adolescent justice interactions, avoided insurer mental health costs, and productivity gains to GDP.

This report does not consider all potential benefits of increasing JobSeeker. But including the social benefits along with the economic benefits is key to unpacking the overall impact of increasing JobSeeker.

Read the full report here.