Posted: January 26, 2005

Not fully employed

Last Friday, the front page of the Sydney Morning Herald (SMH) screamed "Sydney leads the way as job market booms". But this was just part of the story. While Sydney's unemployment rate fell to 4.3 per cent in December - and Parramatta had the lowest unemployment rate in the country at 1.9 per cent - the ABS data shows the prosperity gap with outer suburbs and regional areas has widened. For example, the Northern Rivers region of New South Wales finished the year with the nation's worst unemployment rate (10.1 per cent). On the CofFEE home page you will find a number of papers examining the spatial distibution of unemployment.

Commenting on the unemployment data in the SMH article, Commsec economist Craig James said "It's getting extremely close to levels that could be described as full employment". A memo to Craig: once we have unemployment rates of 1.9 per cent in all regions of Australia you will have a case to put. You don't have a case now.

Claims about 'full employment' or 'record low unemployment' have to be challenged. For a broader measure of labour underutilisation, readers can look at CofFEE's Labour Market Indicators to see how we continue to waste over 10 per cent of willing labour resources through the combined effects of unemployment, underemployment and hidden unemployment.

It is also important to remember that particular groups in the community shoulder an unacceptable unemployment burden: indigenous Australians, people with mental health problems and young people, to name just three. How dare we start talking about full employment when our youth unemployment rate in December 2004 was 17 per cent? How dare we talk about full employment when the average duration of unemployment for those out of work in December 2004 was 40 weeks, and 170 weeks for the 102,700 Australians who were (and in all likelihood still are) long-term unemployed.

If commentators want to offer an informed perspective on how today's unemployment rate compares to rates in years gone by, they must also consider the dramatic and continuing growth in the Disability Support Pension (DSP). In 1970 there were 134,500 Australians receiving the disability payment. This increased to 236,800 in 1980, 328,200 in 1990, 602,300 in 2000 and had reached 696,740 in June 2004. But isn't this just a consequence of population ageing? In part, but it has a hell of a lot to do with the high levels of unemployment our policy makers have been prepared to tolerate and their attempts to mask it.

In a 2003 paper in the Journal of Australian Political Economy George Argyrous and Megan Neale found that employment conditions in regional labor markets have had a major influence on disability pension recipient rates, after controlling for the different age and health profiles of each region. The authors conclude that the disability support program has "acted as an institutional mop for soaking up older males who have lost jobs". Their analysis suggests "job loss is the initiating factor that leads to a rise in the pension recipient rate. It is the labor market that is ‘disabled’ and needs government attention, and not just the individuals on DSP". Craig James should read the paper.

Last Friday, the front page of the Sydney Morning Herald (SMH) screamed "Sydney leads the way as job market booms". But this was just part of the story. While Sydney's unemployment rate fell to 4.3 per cent in December - and Parramatta had the lowest unemployment rate in the country at 1.9 per cent - the ABS data shows the prosperity gap with outer suburbs and regional areas has widened. For example, the Northern Rivers region of New South Wales finished the year with the nation's worst unemployment rate (10.1 per cent). On the CofFEE home page you will find a number of papers examining the spatial distibution of unemployment.

Commenting on the unemployment data in the SMH article, Commsec economist Craig James said "It's getting extremely close to levels that could be described as full employment". A memo to Craig: once we have unemployment rates of 1.9 per cent in all regions of Australia you will have a case to put. You don't have a case now.

Claims about 'full employment' or 'record low unemployment' have to be challenged. For a broader measure of labour underutilisation, readers can look at CofFEE's Labour Market Indicators to see how we continue to waste over 10 per cent of willing labour resources through the combined effects of unemployment, underemployment and hidden unemployment.

It is also important to remember that particular groups in the community shoulder an unacceptable unemployment burden: indigenous Australians, people with mental health problems and young people, to name just three. How dare we start talking about full employment when our youth unemployment rate in December 2004 was 17 per cent? How dare we talk about full employment when the average duration of unemployment for those out of work in December 2004 was 40 weeks, and 170 weeks for the 102,700 Australians who were (and in all likelihood still are) long-term unemployed.

If commentators want to offer an informed perspective on how today's unemployment rate compares to rates in years gone by, they must also consider the dramatic and continuing growth in the Disability Support Pension (DSP). In 1970 there were 134,500 Australians receiving the disability payment. This increased to 236,800 in 1980, 328,200 in 1990, 602,300 in 2000 and had reached 696,740 in June 2004. But isn't this just a consequence of population ageing? In part, but it has a hell of a lot to do with the high levels of unemployment our policy makers have been prepared to tolerate and their attempts to mask it.

In a 2003 paper in the Journal of Australian Political Economy George Argyrous and Megan Neale found that employment conditions in regional labor markets have had a major influence on disability pension recipient rates, after controlling for the different age and health profiles of each region. The authors conclude that the disability support program has "acted as an institutional mop for soaking up older males who have lost jobs". Their analysis suggests "job loss is the initiating factor that leads to a rise in the pension recipient rate. It is the labor market that is ‘disabled’ and needs government attention, and not just the individuals on DSP". Craig James should read the paper.

Blog entry posted by bill