Australia is trailing behind other countries in terms of unemployment benefits, which is pushing Aussies towards the poverty line, the Organisation for Economic Co-operation and Development (OECD) has warned.
While social security benefits were recently increased to keep up with the rising cost of living the OECD has indicated this is not nearly enough.
In a new report, the OECD said the benefit for a single person in the first month of unemployment is just 29 per cent of the average wage.
“The income shock from falling into unemployment in Australia is much larger than in other countries and minimum income supports remain well below the relative poverty line,” the OECD report said.
“One estimate suggests that 85 per cent of recipients of unemployment benefits will be in poverty.”
The report pointed to Government benefits being judged on the average wage, instead of the average cost of living, increasing the risk of Aussies falling into poverty.
This is because wage growth has remained stubbornly low, while the cost of living continues to rise.
The OECD said the Australian Government should consider increasing unemployment support payments as well as moving to increase wages.
“The government should further increase the generosity of unemployment benefits and consider indexing further increases to average wage growth,” it said.
How do we fix the problem?
More employment training needed
The OECD said the Government should increase spending on training programs for unemployed Aussies as well as ensuring private companies are doing all they can to keep their employees trained.
The report said Australia has fallen behind the curve in training opportunities for unemployed people, compared to other nations.
“Spending on training for the unemployed, as well as the incidence of such training, has historically been quite low in Australia compared with other OECD countries,” the report said.
“The authorities should be careful to ensure that the private employment service providers are adequately incentivised to facilitate training for the unemployed under the new system.”
Another major pitfall the report drew attention to was that Australia lacks rewards for long-term employment.
It said that, on average, training programs only support Aussies up to 26 weeks of being employed.
The report said initiatives that promote high quality training programmes will also benefit other vulnerable groups where low skills can be a barrier to finding a job, such as Indigenous Australians.
“Initiatives that promote high quality training programmes will also benefit other vulnerable groups where low skills can be a barrier to labour market integration, such as Indigenous Australians,” it said.
Reducing personal income taxes
The report said while the Government has made some progress in lowering the personal income tax burden on Aussies, more needs to be done.
It pointed out that the way the tax system is laid out in Australia, as soon as you get a wage increase you run the risk of creeping into a higher tax bracket, essentially negating your income rise.
The organisation suggests that taxation should be aligned with different forms of savings, saying our current system has “little consistency”.
It said there is a big difference between how the young and old are taxed, which has led to a large gap in wealth between generations.
“In addition, Australia does not have an inheritance tax, after such levies were removed at both the state and federal level four decades ago.”
To fix the problem, the OECD said there needs to be an overhaul of the taxation system which can improve equality across generations.
“A first step could be to reduce some of the concessions for the taxation of private pensions, particularly those that favour high income earners,” it said.