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What determines the choice of residential location for workforce-age income support recipients? Does location matter for employment outcomes? This report examines these two questions using data from the Department of Family and Community Services Longitudinal Data Set (LDS).

Answers to these questions are important for housing, income support and other policies designed to help those most disadvantaged in the labour market, as well as for policies that seek to ensure a smoothly functioning labour market. Does cheap housing (public or private) attract people to areas where they have little chance of finding employment? Should housing and income support policies attempt to discourage this?

Current social security legislation does assume that location matters. People can be excluded from unemployment benefits if they move to areas of higher unemployment.

These questions are also relevant to housing policy decisions about where to site affordable housing and how to structure rent assistance programs to take account of regional variations in housing costs and labour markets.

In addressing these questions, this report deals with two main methodological issues. The first question is how to best measure the labour market characteristics of the different regions of Australia. In particular, how do we take account of the patterns of commuting between the regions of our cities? Often the local unemployment rate of an area will be more a reflection of the characteristics of the people that live there, than it will be of the labour market opportunities available to people in this location. To address this question, the report calculates a travel region unemployment rate, which summarises the balance of labour demand and supply facing individuals living in each postcode area.

The second (related) issue concerns the estimation of the impact of labour market conditions on individuals’ employment outcomes. It is well known that some rural, regional and outer urban areas have higher unemployment and lower employment than other areas in Australia. It is possible that this reflects the disadvantages associated with these regions (eg lack of economic growth, transport problems). If this is the case, then there may be a policy case for measures to encourage unemployed people to either not move to, or to move out of these regions. On the other hand, this association might simply be a reflection of the fact that these locations are the only regions where people with low income earning potential can afford to live. If this is the case, then a policy that encouraged an unemployed person to move to a region of greater employment opportunity (or discouraged them from doing the opposite) might not have any impact on their labour market prospects. To address this issue it is necessary to control for those difficult-to-observe factors that influence both location and employment outcomes. We do this by examining the change in the labour market outcomes of individuals as they move between locations.

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