Tim Beshara, a Greens advisor, tweeted an interesting quote from Robert Menzies in 1944, on the topic of unemployment and sickness benefits:
Menzies: People should be able to obtain these benefits as a matter of right, with no more loss of their own standards of self-respect than would be involved in collecting from an insurance company the proceeds of an endowment policy on which they have been paying premiums for years.
This quote was widely re-tweeted, including by me. In response, Peter Brent remarked that he suspected unemployment benefits in the 1940s were very low as a percentage of average salaries. This piqued my interest: how high were unemployment benefits, relative to salaries, in the 1940s? Was the ratio significantly lower than it is today?
Unemployment benefits were $2.50 per week from their introduction in 1945 until they were doubled in 1952. The earliest male average earnings figure I have is for 1949, when the average wage was $18.27 per week. The unemployment benefit in 1949 was therefore equal to 13.7% of the average male wage.
In late 2013, the unemployment benefit was $250.50 per week, which was 18.5% of the average male wage. Unemployment benefits in 1949 were a fair bit lower than they are today, 13.7% vs 18.5% of the average wage, although this difference is actually smaller than the gap between 1996 (23.7%) and today.
Of course, the earliest ratio I have is for 1949. This is four years after the introduction of unemployment benefits, four high-inflation post-war years in which benefits were frozen in nominal terms. The ratio of unemployment benefits to average wages would have been higher in 1945. How much higher?
If we assume that wages between 1945 and 1949 grew at an average of around 12% a year (as they did between 1949 and 1954) then the ratio of the unemployment benefit to average wages would’ve been 21.5% in 1945. If we assume wages grew at half this pace, the ratio would’ve been 17.2%. The grey shaded area in the chart below shows the range between these two estimates.
Unemployment benefit for a single adult as a proportion of male average weekly earnings
I think it is likely that the unemployment benefit for single adults was around its current level in 1945, as a proportion of male average wages, and it’s quite conceivable that it was higher.
Note: The sources used in this post are:
- Male average weekly earnings from 1949 to 1993 from the RBA (table 4.17)
- Male average weekly earnings from 1994 to 2013 from the ABS (table 10.C).
- Unemployment benefits for single adults from 1945 to 1969 from DSS (table 8).
- Unemployment benefits for single adults from 1969 to 2013 from DSS.
I converted pre-1969 currency to dollars at the rate of 1 pound=2 dollars; 1 shilling=10 cents.
I used male average weekly earnings because it has the longest time series.