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.
it’s going to be interesting to see which way Morrison jumps, vis-a-vis Job Seeker. Ideologically he must be keen on getting things back to sub-poverty levels, but politically, he wouldn’t want economic recovery going backwards, in conjunction with creating a brand new bunch of angry voters, first-timers to the Centrelink experience, taking it out on him at the polling booth. I’m betting he will announce an increase, but it will be meagre, and he will try to dress it up as being much grander than the reality. Albo should then counter with a fair amount that puts it over the poverty line. A simple difference to take to an election.
Waste of time trying to explain basic economic commonsense to this economically illiterate bunch of ideologues still trapped in the Reagan Thatcher trickle dow time warp, a P.M who takes his orders from Rupert Murdoch and a national party that takes orders from big Gina NOHart only care what`s in it for them post-politics.
I read part of Gina’s paper today and was pleasantly surprised to find 4 informative thoughtful articles. That would have been a good ratio when Fairfax owned it,.. an anomaly?
One article referred to the subscribers forum directly, something that Crikey could do more of.
Often the comments are at least as informative or pertinent as the original article, in terms of building resistance required living in a Neoliberal dominated age..ie .. removing the white noise sell of their ideology.
Reporting the agenda of current media/government is immersing the reporter in a world that isn’t healthy and requires a very strong personality to remain independent of thought and perspective
The key to understanding the supplement to jobseeker is that Morrison said that they deserved it because it wasn’t their fault. The corollary of course is that anyone who was unemployed before, about 5%, were unemployed because it was their fault.
The reason they were unemployed was entirely political. Those boneheads at the RBA are blessed with a mythical figure known as the NAIRU. It was always a theoretical figure, and they were so worried about inflation they didn’t want to see full employment, because that would lead to higher wages.
But hold on, isn’t the big problem with the economy the lack of wage increases. Of course it is, so why do we have a political policy to keep unemployment at around 4.5%, no lower. Oh that’s because of inflation fears. But hold on, isn’t inflation currently a problem because it’s too low?
Oh, yes it is. So why don’t we expand the economy with government stimulus to bring the unemployment rate down to, maybe 1%? That would be crazy, what would the RBA have to do if there wasn’t some easily solved problem that addressed two major economic issues? They’d be sitting on their arses once a month wondering how things got so good.
The underlying theme here Jason is that the unemployment rate ie ENTIRELY a political decision. They choose what rate they think is right, and the RBA is complicit in poor political policy which has deleterious economic effects. The RBA is hopelessly politicised, as the ABS, but that’s for another rant.
Unemployment numbers have been a farce for a long time, and as pointed out in this article bear little resemblance to the reality of people out of work.
There’s also another big cohort of people that are Under Employed, mainly due to the continuing escalation of the casualised workforce.
Unemployment numbers are only ‘a farce’ because of our precarious labour market. If people could always choose fulltime employment, there wouldn’t be anywhere near the problems presented by those working low or inconsistent hours. Don’t always assume unreliable measurement is the fault of the person measuring, PeterM.
In any case, if the UE rate is unreliable, we should start measuring and using a unit of underemployment. Now, how shall we define that?
Also quite a large cohort of people who are unable to attain sufficient points under the LNP’s revised criteria to qualify for Disability Support payments. They dont actually have to look for work (even if they could work) or meet their “mutual obligations”. It just enables the Feds to pay them a lower level of benefits.
Scomo is an opportunistic survivor, I expect the dole to go up and jobseeker to not drop any more.
Even with a majority neoliberal media, the average person doesn’t quite have the unabashed disgust for the unemployed our media has peddled for so many years.
Reasons are becoming more obvious and harder to challenge and belittle for say,.. A currant Affair.
Who knows one day in Australia it may be possible to hold your head high and not have a 9 to 5 job, people may even appreciate those that live frugally but well.
But we will need different media owners for that to happen.