Grogonomics
Australian economy

Contrary to the stereotype, Newstart is more likely to be going to middle-aged parents. Raising it is a must

The latest labour force figures, released last week, were a continuation of the very good news for people seeking work, but a report by the Australian Council of Social Service (Acoss) reveals that many – especially those in the so-called prime working ages – are struggling to gain work and are being left behind.
First the good news – the unemployment rate is down to 5.3%, the lowest since 2012, and the underemployment rate has also fallen slightly. But at 8.3% it remains historically high and over the past 18 months there has been little change in the gap between the two rates.
Whereas in the past the underemployment rate would generally be around 2% points higher than the unemployment rate, now it is around 3% points:
This suggests a larger degree of “spare capacity” in the labour market – at every level of unemployment – than in the past.
The growth of employment certainly has slowed this year. Whereas in 2017 employment grew by 3.4%, the past 12 months has seen growth of 2.5% – slower but still very much above what we have experienced over the past seven years.
What is more concerning is that the annual growth of hours worked has slowed by more. In the past 12 months the growth of hours worked grew by just 1.8%:
While this is not too bad, as a general rule the greater the gap between the annual growth of hours worked and employment the worse the economy is performing.
Over the past 30 years, any time the gap between the two has been greater than 1% point, the economy is in a pretty bad way. We’re not there yet, but it is worth keeping an eye on – especially as the slowing of annual employment growth appears to be coming to an end, while the slowing of growth in hours worked looks to be continuing.
One reason is that part-time work is now surging, while the growth of full-time employment is slowing:
And yet it is clear this record has occurred due to the influx of women entering the workforce more than accounting for the decline in men. While the percentage of women aged 25-64 who are working has risen from 68.1% at the start of 2011 to 71.1% now, in the same period the percentage of men working has fallen from 84% to 83.2%.
And more concerning is the big drop in the percentage of men in these prime-aged years working full-time.
At the start of 2011, 75% of men aged 25-64 worked full-time – now it is 73.2%. Thankfully this has risen from the nadir of 72.5% in October 2016, but it still represents around 120,000 fewer men employed full-time than would have been the case had the level of 2011 remained in place:
This goes to the issue for unemployed revealed in a study released on Friday by Acoss and Jobs Australia, Faces of Unemployment.
Even worse is that 49% of the long-term recipients of Newstart are aged over 45.
As such, suggestions that Newstart needs to be kept low to encourage people not to stay on welfare are laughable. Those on Newstart are more likely to be middle-aged parents than kids bumming around on the beach like in some screwed-up version of reality you might see in the tabloids.
One reason the report found is that “as unemployment falls, those who are less disadvantaged in the labour market find jobs more quickly, leaving behind the more disadvantaged groups”. Those who are older are more likely to have health issues or disabilities, which in the past would have seen them on the disability support pension but which under “the welfare ‘reforms’ of the mid 2000s and 2010s” which were designed to boost workforce participation, often merely just “shifted people from higher [DSP] to lower [Newstart] social security payments.”
Crucially the report notes that “the labour market has changed so that jobs that were previously available to people with similar characteristics to today’s recipients of unemployment payment (especially those with lower qualifications and skills) are either harder to get, or harder to keep”.
Indeed, at the end of 2002, just under 30% of all workers were either labourers, in sales or machinery operators and drivers – now it is just 25% - the equivalent of just over half a million fewer jobs in these three lowest skilled occupations:
The Acoss report found that the most effective short-term solution was wage subsidies for long-term employed. The report found that these lifted “the chances of leaving income support 12 months after a job placement by an average of 14 percentage points” compared with a pathetic 2% increase for the government’s preferred method of work-for-the-dole programs.
The report’s author, Peter Davidson, notes that “the main reason that wage subsidies are more effective is that people receive direct experience in a regular paid job, and are often kept on after the subsidy ends. Work-for-the-dole activities are further removed from regular employment.”
The good jobs figures are certainly encouraging. The solid growth in employment has now been going for over a year and half. But even within these good times are problems, especially for older workers dealing with the changing economy that sees a shift away from full-time low skilled work.
It means there are plenty of cracks through which older workers can fall if they lose their job and why raising the rate of Newstart during a period when tax revenue is greatly exceeding expectations is a must.

• Greg Jericho is a Guardian Australia columnist