“Fairer” work only makes us poorer

Essentially, increases in the minimum wage represent an attempt to shift the cost of improving the incomes of the less well off from government to employers. But it is the job of our welfare system to ensure an adequate standard of living.

This includes providing income support payments at adequate rates, ensuring access to quality housing, health care and education, and maintaining a labor tax system. progressive income that does not take income from low-income families. It should probably also include an “in-work” tax credit scheme that effectively increases the wages paid to a low-income worker, but paid by the government rather than the employer.

The arguments in favor of measures to increase job security are even weaker than those in favor of raising minimum wages.

As with minimum wages, legal protections and other mechanisms to increase job security have superficial appeal but are misguided. They reduce labor market flexibility and the ability to dynamically adjust to structural and other economic changes, and hamper the ability of the labor market to create new, better paid jobs.

They also reduce employers’ willingness to take a chance on untested workers and, in some circumstances, will reduce productivity and therefore wages due to reduced employee effort.

The arguments in favor of measures to increase job security are in fact even weaker than those in favor of raising minimum wages. Put simply, it is not clear that job insecurity is a problem requiring a solution. A retrospective look at the last 30 years shows a substantial downward trend in the rate of job losses, while average job tenure has increased.

Available data on perceptions of job insecurity also show little change over the past decades. Consistent with these patterns, the share of casual employment has remained broadly unchanged since the mid-1990s, and there is no evidence of an increase in the use of fixed-term contracts.

Need unemployment insurance

Indeed, when it comes to the sharp end of job security – the risk of job loss – improving job security solves the wrong problem. A more accurate diagnosis is that the costs job losses are too high in Australia. Our unemployment benefit, paid at a flat rate widely seen as insufficient, means that the loss of a job can too often condemn an ​​individual and their family to poverty.

What Australia lacks, which almost all other OECD countries have, is a large-scale unemployment insurance system. Such a scheme provides a percentage of an unemployed person’s previous earnings for a limited time – usually up to one or two years, and usually only payable upon involuntary job loss.

Implementing an unemployment insurance scheme may seem too difficult, but Australia already has much of the infrastructure required for such a system in the form of a superannuation. Most pension schemes provide insurance for illness, injury, disability and death – the Australian Securities and Investments Commission reports that around 10 million pension accounts have such insurance.

As a result, a significant portion of personal pension contributions are already used to pay insurance premiums rather than to increase retirement savings. It is therefore perhaps a mystery why unemployment insurance is not a feature of pension plans and does not seem to be on the radar of policymakers or funds.

With the pension guarantee being increased to 12% by July 2025, and many argue this is not in the interest of workers, coming at the expense of wages, perhaps it is time to wonder if these increased contributions would be better directed towards an unemployment insurance plan than towards retirement savings.

This would reduce the costs of job loss for employees without the need to increase job security, and could simultaneously help to improve the dynamic efficiency of the labor market.

There are, of course, efficiency costs of unemployment insurance schemes: international evidence shows that they tend to prolong unemployment spells. But mechanisms exist to reduce these costs, such as the mandatory verified job search, the gradual reduction of benefit generosity as the duration of unemployment increases, and the reduction of benefit generosity when labor market conditions are solid.

Unemployment insurance is just one idea to improve the labor market and the welfare of the Australian community. The Jobs Summit will undoubtedly produce a number of good ideas. Hopefully the government will embrace these ideas, rather than politically expedient but ultimately damaging policy options.

Roger Wilkins is Deputy Director of the Melbourne Institute and Deputy Director (Research) of the HILDA Survey program.

Maria D. Ervin