This report looks behind the headline unemployment statistics to reveal who is affected, why it’s no easy matter for most unemployed people to secure a job, and the disturbing growth in long-term unemployment. We also look at the chances people on unemployment payments have of getting a job, and the help they receive from jobactive employment services.
People receiving unemployment payments are not who many people think
The main unemployment payments are Newstart (NSA) and Youth Allowance (YA). In July 2018 there were 827,794 recipients of these payments. They are largely, but not entirely, the same people as the 713,000 the Australian Bureau of Statistics classified in that month as unemployed.
The media presents a stereotypical image of unemployed people (for example, young surfers). The real story is that NSA and YA recipients come from diverse backgrounds and age groups (Figure 1):
- 17% were under 25 years, 38% were aged 25- 44, and 43% were over 45 (a growing share of unemployed people are older);
- 13% are principle carers of children (mainly sole parents), many of whom were diverted from Parenting Payment to the lower NSA under ‘’Welfare to Work’’ policies;
- 24% have disabilities (as more people are diverted from Disability Support Pension to NSA);
- 13% identify with Aboriginal and Torres Strait Islander background;
- 19% had culturally and linguistically diverse backgrounds.
Most of these groups face significant barriers to employment, including disabilities, caring roles, and employer discrimination.
Almost two-thirds of people receiving unemployment payments are long- term recipients
In March 2018, 547,066 people (64% of recipients) were unemployed long-term - that is, had received unemployment payments for more than a year. This represents a slight increase on the 62% in 2016 and 60% a decade ago (just before the GFC). Of great concern is the 44% who have received unemployment payments for over two years and 15% for more than five years.
This is a serious, and long-standing, policy failure. A majority of unemployed people are systematically excluded from paid employment. As people become unemployed for longer periods, their job prospects sharply diminish. Among recipients of Newstart and Youth Allowances in 2015, the average probability of being off benefits 12 months later (in 2016) was 55% for those unemployed for less than three months, compared with 30% for people unemployed for 12 to 24 months, and 22% for those unemployed over 5 years.
In Figure 2, we also publish for the first time a breakdown of those who receive Newstart and Youth Allowances long-term. They belong to groups who struggle to secure paid work. Among all long-term recipients in September 2017:
- 49% were aged over 45 years;
- 29% had disabilities;
- 16% were principal carers of children, including sole parents;
- 11% identified as being of Aboriginal and Torres Strait Islander background;
- 21% were from culturally and linguistically diverse backgrounds;
- 29% lived outside metropolitan areas.
It isn’t easy for people to find employment
Growth in jobs was almost stagnant from the Global Financial Crisis (GFC) in 2008 to 2017, and most of the new jobs created over that period were part-time. Jobs growth picked up during 2017, with an extra 360,000 jobs created over the year, but from the end of last year to May 2018, employment declined by 11,000 jobs.
In May 2018 there were 723,700 people unemployed (5.4% of the labour force). While this is close to the Reserve Bank’s estimate of ‘full employment’, this does not mean it is easy for unemployed people to secure paid work. For instance, another 1,102,700 (8.3% of the labour force) were under-employed (employed part- time and seeking more paid hours).
Altogether, in May 2018, there were eight unemployed or under-employed people for every job vacancy, down from ten a year earlier. When employed people changing jobs are added in, the number applying for each vacancy almost doubles (for example, to 16 in 2016).
Further, the share of the low-skilled jobs which many unemployed people seek is gradually shrinking, and those jobs are increasingly offered on a part-time or casual basis so that more people are cycling between unemployment payments and jobs. In 2017, among low-paid workers (those receiving less than two-thirds of the median hourly wage), 55% were part-time and 63% were casuals.
People out of paid work don’t get enough help
The fact that almost two-thirds of people on unemployment payments have received them for over a year underscores the importance of an adequate income for unemployed people, and employment services that help them prepare for a job and support them in paid employment. Yet, as well having the lowest unemployment benefit in the OECD at $277 per week, Australia spends less than half the OECD average level on employment assistance.
Australia has among the toughest work requirements for unemployed people in the OECD, with most having to search for 20 jobs a month and participate in compulsory ‘annual activities’ like Work for the Dole for up to six months of each year, in order to receive unemployment payments.
The main employment service program, jobactive, focusses mainly on supervised jobs
search, which on its own won’t get many people out of paid work for prolonged periods ‘over the line’. Of the help offered to people unemployed long-term, wage subsidies are relatively effective and Work for the Dole is relatively ineffective. Work experience in regular paid employment, together with career advice and training to update skills, are important stepping stones to secure jobs.
In 2016-17, of those engaged in the six months of compulsory ‘annual activity’, 26% were in part- time employment, 17% were in training, and 48% were in Work for the Dole. A smaller share received a wage subsidy for employers to trial them for 3-6 months. Employment outcomes (the share of participants in paid employment three months later) varied among these programs, from:
- 36% after vocational training;
- 32% after voluntary work; and
- 27% after Work for the Dole.
During 2016-17, among people unemployed for 12-24 months, 45% were in employment 3 months after participating in jobactive. This was an improvement on the 43% a year earlier. However, consistent with the changes in low- skilled jobs discussed above, 62% of the jobs they obtained in 2016-17 were part-time and 38% were casual.
How to reduce poverty and prolonged unemployment
ACOSS has welcomed the government’s major review of employment services, as an opportunity to undertake the fundamental reform in this area that’s needed, once jobactive contracts end in July 2020. It’s time to raise the single rate of Newstart and Youth Allowances so that people can meet basic living costs and search for employment, and refocus employment services towards intensive help that makes a difference, and away from Work for the Dole and other forms of benefit compliance.