A key feature of the government’s approach to unemployment is the constant vilifying and harassing of the unemployed.  It may be a good strategy for diverting attention from government stuff-ups and appealing to voters darker side but there are no signs that it is reducing real unemployment , creating jobs, preparing people for more productive work or helping to share the available work in a fairer way.

This post asks whether there are smarter, fairer ways of dealing with unemployment.  It also presents some useful employment and unemployment welfare system data.

How many dole recipients aren’t trying to find work?

Long term unemployment might be used as a rough guide to the upper limit on how many unemployed people aren’t trying to get work.  For financial years 06/07 to 10/11  only 14 to 19% of the unemployed had been unemployed for over one year with  50 to 58% being unemployed for less 13 weeks*.  This suggests that the vast majority of the unemployed are actively seeking work and would find the government’s vilification and harassment a distraction. Keep in mind that many of those who have been unemployed for over one year will still be actively seeking work but finding it hard to get jobs because they have the wrong skills, poor health, live in the wrong place etc.

(*NOTE: See the data set at the end of this post for links to quoted data.)

Is there really is a work shortage?

Hassling the unemployed might make a bit of sense if there was a surplus of jobs that the unemployed could do. However, the facts strongly suggest that there is a real and significant shortage of work and that this has been the norm for a long time.  For example, in June 2014 there was a total of 783,000 people unemployed compared with job vacancies of 146.100.  (Over 5 unemployed people per job vacancy.)

In addition, many people with a job want to work longer hours.  August 2010 data  indicated that total hours worked would have increased by 3.0% if all people with jobs had been able to work the hours they wanted to.  This adds to the real shortage of work.

Conclusion: There is a real and significant shortage of work.  Worse still, this shortage has lasted for over 30 years and shows no signs of ending in the foreseeable future.  Implications:

1. The vilification of people on the dole is based on a work ethic that says that  people on the dole are bludging on those who have work.  However, the ethics should change while there is a shortage of work. The ethical thing for  someone who is happy to live on the dole is to not to compete for jobs against people who really need the work. 
2. The really unethical people during a work shortage are the “work hogs” whose long hours help reduce the number of people their employer needs to employ.  Ditto employers that insist on work rosters that lock in long working hours.  Ditto also employers that pressure people to work longer hours by moving employees from hourly wages to salaries. (If you are on a salary when there is a shortage of work you work long hours in the hope that you won’t be the one who loses your job.)
3. Work shortages create opportunities to provide work for people who really need a job by supporting others who are willing to leave their jobs and live on the dole while they attempt to start a business, get more education or pursue some other dream.  With luck, the result may be a new job creating business, a better educated person or perhaps a stunning book of poetry.

What about unfilled vacancies?

It is inevitable that some vacancies will be difficult to fill even if a lot of unemployed people could do the job.  There is nothing in the current rules that says unemployed people have to apply for a particular job.  Many vacancies won’t attract applicants because of issues such as location, the nature of the work, employer reputation or simply a failure of the employer to notify potential applicants of the vacancy.

Some government rules make it harder to fill these problem vacancies.  For example:

Waiting periods.  These are the delay between when the dole is applied for and when the payments start. They can vary from one week upwards depending on circumstances. For example, a single person will have to wait an extra week for every $460 of fluid assets held compared with someone with no fluid assets. Maximum of 13 weeks wait .  (NOTE: There are some provisions for exemptions and hardship payments.)

Waiting periods may make the unemployed be more cautious about applying for a job.  They are spooked by the risk of being trapped in what turns out to be a rotten job in a rotten place until they can save enough to survive the waiting period.

Claw back

Claw back is the amount the dole is reduced when the recipient obtains other income.  The claw back is very punitive. For example, the payments to a single person will be reduced by 60 cents for every extra dollar earned above $125 per week.  In some cases income tax will have to paid as well.  Someone who moves from the dole to earning the minimum hourly wage ($16.87/hr) will have no more than $6.75/hr left to pay the extra costs of  going to work.

What claw back and waiting really mean is that an unemployed person who goes fruit picking can easily end up out of pocket because of the cost of travel, accommodation costs etc.

Micro business:

Small business often means that expenses and income are erratic even if the annual income is fairly steady.  Friends of mine who have micro business’s to boost the pension find that Center-link hasn’t got a clue about what these types of business are like and how to deal with variable expenses and income.  Some of these friends have decided that it is not worth the hassle and shut the business down.

SO WHAT MIGHT WE DO?

1. Accept that there is a real and significant shortage of work.
2. Start talking about work hogs, the employers that encourage people to be work hogs and the importance of sharing the available work.
3. Levy the employers that allow/force people to be work hogs.  (Using the levy to pay the cost of our unemployment system.  Seems fair to me.)
4. Stop vilifying the unemployed and get rid of policies that are all about punishing the unemployed for government and business failure.
5. Set priorities.
   • Get at least one breadwinner employed  for families with dependant children.
   • Get the young employed.
   • Then worry about people who are close to retirement.
   • Those who don’t really need the income (or who would be happy on the dole) and could get the social benefits of working by volunteering, trying to start a new business or…
6. Accept that people who are happy to be unemployed are an asset at times when there is a shortage of work.  (These people may make significant contributions to society as unpaid volunteers, micro business developers etc.)
7. By all means encourage unemployed people to volunteer for community etc. work.  (However, don’t use these unpaid volunteers as a replacement for paid employees.)
8. Understand why some jobs are hard to fill and try and do something about it.
9. Understand what it is like to be on the minimum wage
10. Make the waiting rules much less harsh.  People need to be encouraged to save when they are working instead of being punished for it.  A person who starts unemployment with savings has a much better chance of staying employable than someone who hasn’t.
11. Find some way of making the claw back less extreme.  This might mean continueing the dole for a while after someone reaches the minimum wage or ????
12. Seriously consider adding unemployment benefits the HECS loan.  There are a number of attractions to this approach:
    • It always seemed ridiculous to me that someone has to take out a loan to study full time while someone who was doing nothing got a welfare gift.
    • It would help reduce costs.  Clive Palmer isn’t the only well off person who was on the dole at one stage of his life and could afford to repay later.
    • It helps get rid of the idea that unemployed people are bludging off taxpayers.
    • It makes it easier to increase the amount paid to people when they really need it.
    • It reduces the claw back disincentive because, in theory, it has to be paid back at some time in the future.

The thing that really got to me was Joe Hockey’s smartarse reply when asked what he would do if he was unemployed.  All his reply of “I would get a job.” did was convince me that he was an unfeeling bastard who didn’t have a clue how the other half lived.

USEFUL DATA SET

ABS employment data June 2014

• Unemployed 783,000 (5.9% – some of these will be willing and able to work)
• Employed 11.582 m
• Participation rate 64.7%
• Aggregate monthly hours worked 1,613 million  (=25.32 per employed person per week)
• Disability support pension recipients 2010 792,581

ABS domestic students in higher education 2010

• 857,000  (Some of these would prefer to work if they could get a reasonable job.)

ABS job vacancies May 2014

• 146100

Minimum wage after 1/7/14

• $640.90 a week ($16.87 an hour)=38 hr week
• Will affect people on the minimum wage and award-rate workers, including Australia’s lowest-paid cleaners, retail and hospitality staff, childcare workers, farm labourers and factory workers.”

Newstart allowance income test (The newstart allowance is $250/week for a single adult.)

• Income above $50 and up to $125 per week reduces payment by 50 cents in the dollar.
• Income above $125 per week reduces payment by 60 cents in the dollar. Leaves $6.75/hr for someone getting the basic hourly rate.  Keep in mind that someone who has worked part of the year may be paying tax on top of this! (Imagine how the entitled rich would scream lack of incentive if they were taxed 60 cents in the dollar?)

Newstart allowance waiting periods  Waiting periods before the payments start will be at least a week and often much more.  For example:

• Base waiting period – One week.
• Liquid assets (accessible money) based waiting period can range up to 13 weeks depending on liquid assets.  For a single adult the 13 week wait will be reached if liquid assets exceed $5500.  (The government saving from the 13 week wait is 55% of $5500!)
• The Seasonal Work Exclusion Waiting Period may apply “If you or your partner have finished doing seasonal, contract or casual work in the 6 months before you claim, you may need to wait for a period of time before you can receive your payment.  The Seasonal Work Preclusion Period will depend on how much you earned from your work and how long you were working for. The duration is based on how long it would take an average wage earner to earn the same amount as a person engaged in contract, seasonal or casual work. 

ABS 1301.0 Year Book 2012 was a mine of useful information.  In particular:

Table 8.30 provided information on the duration of unemployment from financial years 06/07  to 10/11.  Key figures:

• Less than 13 weeks – 50 to 58%
• Less than 26 weeks – 67 to 74 weeks
• Over 52 weeks – 14 to 19%

Table 8.32 provided information on the the difficulties in finding work.  Note that there were some important differences between men and women.

Subsequent pages in this workbook cover topics such as underutilization and reasons why some people are not classified as being in the workforce.

Table 8.37  gave “volume measures” of labour underutilization for August 2010.   The table shows that hours people worked would have increased by 3.0% if all the people with jobs had been able to work the hours they wanted to.  If all the unemployed and underemployed had been able to work the hours they wanted to this would have added 7.5% to hours worked.

From “The shock of being forced back to work.”  Rob Burgess  Business Spectator. (These graphs are a useful starting point to a discussion re what is happening to  available work):

 

Manually taking figures off the graphs gave the following:

 

YEAR	PEOPLE PARTICIPATION	WEEKLY HRS PER PARTICIPATOR	% DROP IN WEEKLY HRS SINCE 2008
Mar 1978	61%	NC	NC
Mar 2008	66%	25.3	0
Mar 2014	65%	24.0	6.5

The unemployment rate was 4.1 % for March 2008 and 5.8% for March 2014

 Comments:

1. Average hours worked per month dropped by 6.4% between July 08 and Mar 14 despite the unemployment rate staying relatively stable. The good news here is that the decline in hours worked during this period was handled by sharing the available work rather than an increase in unemployment. The bad news is that the available work declined even though this didn’t show up in the unemployment stats.
2. If we were to do the logical thing and measure productivity in terms of available hours (instead of hours worked) productivity would have dropped dramatically.
3. Figures would look better if we counted being trained and educated as useful work.
4.  People participation in the workforce actually rose from 62% to 66% between Feb 78 and Feb 08, dropping to 65% by Feb 14. No signs of a participation crisis here.

Doing things to make life harder for the unemployed or parents spending more time looking after their children is nothing but a cruel joke when the jobs aren’t available.

 

Disability Support Pension recipient numbers 1990 to 2010

Year	DSP recipients
1990	316 713
2000	602 280
2004	696 742
2005	706 782
2006	712 163
2007	714 156
2008	732 367
2009	757 118
2010	792 581

Note: Years selected track growth over last two decades and show the impact of 2006 reforms.

Source: Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA).[2]