Most unemployed people aren’t on the dole — here’s why this is so important

I spend a lot of time communicating economic facts. The one the causes the most trouble is the unemployment rate. People HATE it.

They hate the fact that under the statistical definition promulgated by the International Labour Organisation you need only work one hour a week to be counted as employed and they hate that it is measured by a survey.

People hate doing surveys and so distrust the output of surveys. “Why not just count up the people on the dole?” people ask me in an infuriated tone, inferring more often than not that the Bureau of Statistics is in the pocket of Big Lies, and that the choice of a survey is a way to hide the true unemployment rate.

There’s a number of reasons not to do it like that, but here’s the big one: most unemployed people are not on the dole.

Yep, that’s right. The majority of people who are looking for work are not collecting the fortnightly payment formerly known as Newstart. They are forgoing their $556 a fortnight (base rate, single person), for a litany of reasons. Maybe they’re not eligible, maybe they’re not interested in getting screwed round by Centrelink, maybe they’re on a different income support payment like the disability support pension, maybe they expect to be unemployed for only a few weeks and it is not worth it, etc.

The corollary to this fact is also surprising: most people on the dole are not unemployed.

What the? Well, here’s why: if you’re on the dole and you pick up one shift a week, the government doesn’t whisk the payment away from you. That would create unhelpful incentives for workforce non-participation. The whole point of the payment is revealed in its new name: JobSeeker. The government wants people receiving these payments to find work.

So you can get the dole and also work, so long as you earn less than $600 a week. The payment is removed little by little the more you earn, designed in a way that makes it smart to always take on another shift. Some people on the dole also don’t count as unemployed because they were not looking for work.

Here’s the above information summarised graphically. (Shout out to the Parliamentary Library who were the first to do this Venn diagram):

While we always know the number of unemployed and the number of people on Newstart, we find out the intersection only when the ABS does its survey of income and housing. This is why the data is from 2017-18.

You might be wondering if the same applies now, from our vantage point two-thirds of the way through a pandemic. The following charts suggest yes.

Unemployed people and people on the dole do not simply cross over neatly — the rise in the number of unemployed is a hefty 300,000, but the rise in people on JobSeeker is a far larger number, around 600,000.

The JobSeeker rule changes that came in in 2020 caused a lot of eligible people to get on the dole. As the ABC reports, wealthier people started signing up for the dole. The changes to the rules around seeking work made getting the dole a lot easier and the increased payments made it much more worthwhile to bother with.

Furthermore, the JobSeeker supplement was available to anyone, even those who were earning so much from work that their usual dole payment was just a few dollars. Remember how you can work and still get the dole, but it fades out? Now it fades out with a boom at the end.

So long as you are getting even $1 in regular JobSeeker payments a fortnight, you are eligible for the JobSeeker supplement. It is now $150 a fortnight but earlier in the year it was as much as $550 a fortnight.

But the JobSeeker supplement is due to expire in March. Will the government extend it again? There is a lot of pressure to do so.

The reason for all this detail about JobSeeker is to make the impact of such choices clear.

One: reducing JobSeeker doesn’t just hit the unemployed, it hits many other people too. Two: the macroeconomic impact of reducing the JobSeeker supplement — and changing the eligibility rules — is real.

Without those extra income payments flowing into the economy, the risk of an economic slump is greater in 2021. And nobody wants to see the unemployment rate rising again.