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House: House of Representatives

Portfolio: Social Security

Purpose

To replace the unemployment benefit with the Job Search and Newstart allowances.

Background

The decision to replace unemployment benefits with the Job Search and Newstart allowances was announced by the Treasurer in the February 1990 Economic Statement. The Job Search allowance will be available for the first 12 months of unemployment and after this period the Newstart allowance will become available, although there is no automatic transition from one allowance to the other. The reasons given for the change where that the unemployment benefit is now out of date and the new allowances will provide a more'active' system. The change in nature of the labour markets since the introduction of unemployment benefits in 1945 was noted, particularly the increase in the underlying rate of unemployment (the long term background rate has increased, remaining above 5% since the 1970s) and the increase in the number of people spending extended periods unemployed. It is argued that a system developed to assist people for a short period until they find employment (i.e. the unemployment benefit) is no longer relevant due to these changed conditions.

On 23 April 1991, the Australian Bureau of Statistics released its survey of unemployed people conducted in July 1990. Part of the survey deals with the reasons given for the main difficulty in finding work. The following Table gives the major reasons given in July 1982 and July 1990.

Reason given

July 1982

July 1990 No vacancies at all

26.9%

16.7% Considered too old or too young by employers

15.3%

15.3% No vacancies in line of work

16.3%

14.5% Lacked necessary skills/education

7.3%

13.4% Insufficient work experience

10.9%

9.3% Own ill health or injury

3.8%

6.7% Too far to travel/transport difficulties

4.7%

5.2% Language difficulties

1.7%

4.4% No difficulties reported

4.4%

5.6%

The survey also shows that the average duration of unemployment has fallen in recent years. In July of the relevant year the average duration, in weeks, was: 1982 - 34.3; 1984 - 47.8; 1986 - 52.2; 1988 - 53.1; and 1990 - 46.7. The percentage of people unemployed for 52 weeks or more has also declined, falling from 31.2% of unemployed in July 1988 to 23% in July 1990.

Another interesting figure relates to the percentage of unemployed that have taken active steps to find employment, with 75.8% of unemployed being registered with the CES and only 1.5% taking no other steps to find work. The survey also found that 91.9% of the unemployed had contacted prospective employers.

Main Provisions

Job Search

A new Part 2.11, dealing with the Job Search allowance, will be inserted into the Social Security Act 1991 (the Principal Act) by clause 7 which will also repeal the current provisions regarding the unemployment benefit. To be eligible for the allowance, a number of criteria must be met, including

* the Secretary is satisfied the person is unemployed;

* the person satisfies the activities test or is excluded from the test (see below);

* they are between 16 and pension age and is an Australian resident;

* is registered with the CES; and

* the person is either under 18 or, if older, has not been registered for 12 months (proposed section 513).

Proposed section 516 will allow the Secretary to disregard periods of paid work when determining if a person is unemployed, having regard to the nature and duration of the work.

People will not be eligible for the allowance if their unemployment is due to industrial action unless they satisfy the Secretary that the unemployment was due to others engaging in industrial action, that the people involved, or some of them, were members of a trade union and that the person was not a member of the union during the period. The onus will be on the person to satisfy the Secretary (proposed section 517).

As well, people will not be eligible if they move to an area of lower employment prospects without sufficient reason, which have to do with moving to with or near a family member or for health reasons. This will not apply where the move is in conjunction with a formal training scheme.

People will not be eligible for the allowance for four weeks if their liquid assets (eg shares, debentures and amounts deposited with banks) exceeds $5 000 for a single person and $10 000 for others (proposed section 519).

Proposed section 521 contains special provisions for males aged between 55 and 64 and 6 months and females between 55 and 59 and 6 months. Such people will be eligible to receive the Job Search allowance if they have been in receipt of certain allowances or benefits, including the Job Search allowance, for the previous 12 months, and, in the Secretaries opinion, are not likely to be employed and could reasonably be expected to satisfy the above eligibility criteria. The effect of this section will be to allow such people to receive the allowance without complying with the regular reporting etc. criteria.

The activities test is dealt with in proposed Subdivision B. To satisfy the test, the person must satisfy the Secretary that they are actively seeking, and are willing to undertake, suitable, paid employment. Participation in an approved training course will also satisfy the test. People in military training camps will not be required to satisfy the test, and others may be excluded from having to comply if the Secretary, having regard for the location of the relevant offices, the persons education and cultural background and difficulties with transport, considers that compliance would be unreasonable (proposed section 523). People under 18 will not have to satisfy the test if they are engaged in full-time voluntary work for an approved organisation for each day in the relevant period and were qualified to receive a relevant benefit for at least three months before starting the voluntary work. This will apply for a maximum of 20 days a year. Similar provisions will apply to those over 55, although they will not have had to be eligible for a benefit for three months and the maximum period of such work will be 65 days (proposed section 525).

Proposed section 526 lists a number of circumstances where the allowance is not payable, including:

* the person has not supplied a tax file number;

* the assets test is exceeded (the limits for the assets test are listed in proposed section 529);

* they are a full-time student;

* they have not served a relevant waiting period;

* the person is in goal; or

* they are in receipt of another social security or service benefit (proposed section 532).

Proposed Subdivision D deals with waiting periods. Generally, these are:

* the ordinary waiting period (7 days);

* the unused annual leave waiting period (a maximum of 28 days); and

* the education leavers waiting period ( six or 13 weeks depending on the persons age, marital status and whether they have dependents).

The allowance will also not be payable where the person fails to comply with a requirement, such as failure to attend the CES or the Department, the unemployment is due to a voluntary act or misconduct, or the person refuses a job. In such cases, eligibility for the allowance will be deferred for six weeks.

Proposed Divisions 2 to 8 deal with largely administrative matters, while Division 9 provides for a bereavement allowance where a person was receiving an allowance at a rate calculated on the person having a dependent child and that child dies. The allowance provides for the higher rate to continue for the bereavement period (generally 14 weeks from the death).

NEWSTART

The Newstart allowance will be introduced by proposed Part 2.12. The eligibility criteria are contained in proposed section 593 and are similar to those for the job search allowance, with the major differences of only being available to those who have been registered as unemployed for 12 months and recipients must be prepared to enter into a Newstart Activity Agreement (NAA) (see below).

The provisions relating to when people are not eligible are the same as for the Job Search allowance, as is the provision concerning the treatment of those over 55. The activities test is substantially the same as with Job start, but the test will also be satisfied if the person is taking reasonable steps to comply with a NAA, and, if they are not complying with a NAA, they cannot be taken to have satisfied the activities test (proposed section 601).

NAAs are dealt with in proposed sections 606 to 607. Proposed section 604 provides that each person receiving the Newstart allowance is to have a NAA, and if such an agreement is not in force the Secretary may require the person to enter into a NAA (proposed section 605). NAAs are to require the person to perform one or more of the following activities:

* a job search;

* a vocational training course;

* training that will assist in searching for work;

* paid work experience;

* measures designed to reduce the persons disadvantage in the labour market;

* participating in a CES labour market program;

* an activity proposed by the person.

The Secretary is to take the persons skills, age, experience, locality etc. into account when determining a persons ability to comply with a NAA. If a person refuses to negotiate a NAA they will be taken to have refused to enter into a NAA and so will be ineligible for the allowance.

Proposed section 608 lists a number of circumstances where the allowance is not payable and is similar to proposed section 526, except account is made of periods where the person refuses to negotiate or comply with a NAA.

Waiting periods are dealt with in proposed Subdivision E. The periods will be the same as for the Job Search allowance, but will not apply where the person transfers to the Newstart allowance. The only cases where the waiting period will apply will therefore be when the person is eligible for Newstart but had not received Job Search (i.e. where they were registered for 12 months and received no allowance).

Similar non-compliance provisions will be imposed and the person will not be eligible for the Newstart allowance if they fail to enter a NAA (proposed section 625), or fail to comply with a NAA (proposed section 626).

Proposed Divisions 2 to 8 deal with largely administrative matters, while proposed Division 9 contains a bereavement allowance the same as for Job Search.

Bills Digest Service 30 April 1991

Parliamentary Research Service

For further information, if required, contact the Education and Welfare Group on 06 2772410.

This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

Commonwealth of Australia 1991

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Published by the Department of the Parliamentary Library, 1991.