Assessing benefit eligibility and adequacy

Last week we’d been chatting about the unemployment benefit in Australia and the reasons why some unemployed people don’t get it, while some people who aren’t unemployed do.

Everything boiled down to eligibility criteria – criteria that are intended to exclude those that aren’t deemed to need it.

After realising this, my colleagues and I at e61 were interested in using available data to provide an assessment of the whether these eligibility criteria were effective at this stated aim. So here is the note, and here is the appendix. We also used a similar method to evaluate outcomes for those who did receive the payment.

The key result – judging by consumption responses, there are a group of single Australian’s (likely older and without kids) who appear to go through greater hardship following job loss.

[Update: After setting this post to go up I’ve been sent that the government is going to increase payments for those over 55 – I’m guessing for single individuals. Not the biggest fan of highly bifucated rates, but will wait for the proposal and discuss – and would note that outside of the consumption responses we yarn about the international labour supply evidence on this is quite mixed and hopefully we can comment a bit on Australia in a few months 😉 ]

Before jumping to the post I want to note a couple of things:

  • You might believe that irrespective of means this should be a payment for job loss, or a provided minimum income – in this case you’ll still want to scrap criteria no matter what this research says. And that is legitimate.
  • You might weigh the costs from individuals missing out much more highly than the provision of a payment to someone who doesn’t need it – in this case you’ll want to dig in further to identify very narrow groups of individuals who may be excluded. This is also legitimate, but the data sources aren’t quite ready to go that deep … yet!

Given this, lets chat.

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What is income for tax?

I’ve now read the IRD and Treasury effective tax rate reports, and they’re good. I’ll read them a few more times before writing anything on them in a couple of weeks – but the authors of all these reports were really careful to provide rationale and scenarios to explain what all the different numbers meant. It’s pretty awesome to see things so carefully described and released in public like this – and it would be great to see even more of it.

For this reason I initially found the discussion I’ve seen publicly – and via people contacting me – a bit perplexing. That was until I read the release from the minister – David Parker. Although I thought it was quite a polite release, it did take a particular view about how we should consider measures of progressivity – for both consumption and income taxes – as if it was a matter of fact.

And, in truth, these things can be a bit contensious – a reason why it appears both reports spent a lot of time discussing how the estimated tax rate would change depending on what we view as income. So let’s have a yarn about what income is shall we 😉

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Effective tax rates

I just spotted in the news that the New Zealand IRD and Treasury “effective tax rate” reports have been released. The IRD report is here and the Treasury report is here. I also see that OliverShaw slipped out a report a week prior.

I will read both policy reports in the future. I know both the policy teams well, they are smart, have integrity, and provide genuinely useful insights. And my interactions with OliverShaw have always been reasonable, so I’m sure that report is of interest also. As a result, I don’t have much interest in giving a knee-jerk reaction to anything until I’ve had a chance to read the work and to educate myself a bit.

The headline results from all the reports sound pretty plausible – my key concern is that people who aren’t the researchers might start talking about them without understanding what the numbers mean. And man, I don’t want to be one of those people!

How can I say all these different results sound plausible when they are all quite different?

Well, how about we chat about effective tax rates a little bit first to discuss how there are different measures – and why they are different!

I’m pretty into the topic (i.e. my studies, my hobbies) and for those who know me I have a more respectable brother who arguably gets even more excited when he hears about this topic. So it is something I enjoy thinking about and chatting about. Lets have a go.

Note: I have not read any of the reports that are online yet – so please don’t read these as comments about any of the work, as it will be out of context. They are comments about me being a nerd.

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Does JobSeeker go to JobSeekers?

After yesterday’s pitch and related tweet thread, I was keen to dig a bit more into elements of the first note from this release – Income Support Gaps: When JobSeekers don’t seek jobs. The research note can be found here, and a bundle of supplementary material is here.

What is “fair” is complicated and economists have a habit of making it boring (i.e. me here). This leads economists to run away from discussing issues that relate to fairness, towards something where we can make more solid conclusions. However, fairness matters so we should be able to communicate the trade-offs that exist in these types of policy issues.

In this way economists can still add value without telling people what to do – and this is by clearly articulating what a policy is doing and describing the related trade-offs. This first note is simply about defining who receives the JobSeeker Payment (read unemployment benefit) in Australia and who doesn’t. So let’s chat about it.

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How adequate are unemployment benefits? A new perspective

Over night the e61 Institute released some work that I’ve been involved in (with a bunch of amazing economists) chatting about the JobSeeker payment in Australia. Let’s have a bit of a yarn about it below.

[Sidenote: If you’re interested in how the payment works, you can play around with this a bit – noting the numbers are out of date, and there are still extra benefit rules to implement]

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Compulsory income insurance submissions

Hey all, just a reminder that submissions are currently open on quite a major policy change – the introduction of large scale fully funded income insurance in New Zealand. So if you have thoughts or feelings on the issue, make sure to get a submission in before Tuesday.

In the lead up Simon Chapple has posted a good article on the issue, and I’ve posted up my own article as well. This is a major policy proposal that is being pushed through under de facto urgency without a proper policy design process – and with lots of unintended consequences. As a result, even though we both agree with looking at improving support and transitions for individuals facing hardship – in fact this is an issue we have both focused on in the past – this ain’t it son.

For those who do not want to trudge through text, the thoughts can be boiled down as follows:

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