It’s a strange phenomenon.
Experts are trying to figure it out.
Currently, there are 125,000 more people relying on unemployment payments than there were before the pandemic.
How could that be, when employment has hit record highs?
We don’t know.
We’ll have to be patient while the experts investigate it.
However, in the meantime, we should all be wary of people who rush to fill the information vacuum.
That happened in the 1970s, with a similar phenomenon, and we’re still paying the price.
An unexplained phenomenon
See the graph below?
The blue line shows the number of officially “unemployed” people. In March, there were 580,300 of them (in original terms).
The red line shows the people receiving JobSeeker and Youth Allowance (Other) payments. There are currently 935,280 of them.
Notice what’s happened?
For 25 years before the pandemic, there were roughly 10 per cent more people, on average, receiving unemployment payments than the number of people considered officially unemployed by the Bureau of Statistics.
But that relationship has broken.
The volume of people needing financial help jumped sharply at the start of the pandemic, and it hasn’t returned to pre-pandemic levels.
In March, there were 61 per cent more people receiving unemployment assistance than were officially unemployed.
Why?
Professor Peter Whiteford, from the Australian National University, says he’s been looking at these sorts of numbers since the late 1970s.
And it’s one of the most complicated things he’s ever researched.
Last week, he co-wrote an article with Associate Professor Bruce Bradbury from the University of New South Wales that mentioned how more people were relying on unemployment payments today than before the pandemic.
“The reasons for this difference are complex, but a significant factor is that a very large share of people receiving unemployment payments are not required to seek jobs and have a reduced capacity to work,” they wrote.
“Among them are people whose access to the disability support pension has been cut and Australians who would have been of pension age before the age was lifted.”
On that last point, the pension age used to be 65 but is in the process of being increased to 67 (which it will hit next year).
It means many older Australians, who already face age discrimination when looking for work, are being forced to rely on the abysmally-low JobSeeker unemployment payment for longer before they qualify for the age pension.
Michael Klapdor, a social policy researcher, says recent data show Australians aged 55 and over are also struggling more than other age groups to live without unemployment assistance in the post-lockdown era.
See the purple line below.
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And that’s just one dynamic.
Professor Whiteford says a major barrier to understanding what’s going on is that researchers are trying to work with different datasets that aren’t in sync.
He says policy changes in recent years, and the economic impact of the COVID-19 pandemic, have also impacted the data.
Beware of the information vacuum
So what can we do with the knowledge that it could take some time to understand the phenomenon?
Well, we can be on the lookout for people who want to jump to conclusions.
We saw that happen in the 1970s, when “dole bludger” hysteria exploded in Australia.
The 1970s was an important decade in Australia’s political and economic history.
It was the decade in which policymakers abandoned the “full employment” model of the post-World War II era — from 1946 to 1975 — and embraced a new one.
Under the new model, cemented in the 1980s, policymakers deliberately allowed a much higher level of unemployment.
That higher level of unemployment was used as a policy tool to suppress wages and inflation.
And that shift in models coincided with a shift in ideology.
What does that mean?
During the “full employment” years, high unemployment was seen as a failure of the economy and government to create enough work for everybody, due to inadequate aggregate demand.
However, from the mid-1970s, high unemployment was recast as the fault of workers for being too lazy, or of government “intervention” in the labour market in the form of overly generous income support and minimum wages.
And how did the issue play out in the nation’s media?
During the 1975 federal election campaign, there were 28,000 registered job vacancies and 185,000 people on unemployment benefits.
There weren’t enough jobs to go around, by an order of magnitude.
But the unemployed were blamed for that unemployment.
At the same time, problems that had been developing in the unemployment statistics produced by the Commonwealth Employment Service were making it difficult to know what was happening on the ground.
There was an information vacuum.
And, in the media hysteria over the apparent explosion in “dole bludgers,” journalists were badly misrepresenting statistics that they were being given.
Who are the real bludgers?
One episode is infamous.
In the months before the 1975 election, Labor’s the minister for social security, John Wheeldon, released some figures on the administration of the dole.
He said a Department of Social Security survey had found that, in one area of the country, 14,462 unemployment benefit recipients had been investigated and 30 per cent of them were ineligible for benefits.
However, he said, just because recipients were found to be ineligible did not mean they were cheating the system.
Most of those cases occurred because of administrative problems, he said.
For example, if a recipient told the Commonwealth Employment Service that they’d found a job, the under-staffed office might have been slow in processing the information and passing it to the Department of Social Security, which paid the unemployment cheque.
Or the office might not have registered someone’s change of address.
There were multiple reasons for the discrepancies.
In fact, of the 4,451 people who were found to be ineligible in the survey, 3,753 of those cases — 84 per cent — could be blamed on administrative problems.
That left just 698 people of the original 14,462 — or 4.8 per cent — who were found to be ineligible and worth investigating further.
Senator Wheeldon said the area of the country surveyed was also expected to be one where a relatively high number of persons not entitled to the unemployment benefit was expected to be found, so no conclusions about the national average could be drawn from that survey.
However, that didn’t stop the media wildly misrepresenting the figures.
Reporters took that “30 per cent” figure, ignored the Senator’s qualifications, and extrapolated it nationally.
Australians were suddenly told that 30 per cent of dole recipients were cheats and frauds.
Naively, Senator Wheeldon then tried again the next month and released the results of a second survey that had similar findings, with similar qualifications.
But the media response was predictable.
Even “serious” newspapers repeated the same misrepresentations. See the headline on the story at the bottom of The Age’s front page?
Here’s the story itself, which shows how the survey’s results were reported.
The headline is grossly misleading.
But it fit the “30 per cent” narrative that had already been established, so it was just confirming previous reports of the same figure.
Regular consumers of the news would have been familiar with the 30 per cent figure.
But check the interesting qualification at the bottom of the story:
“It is believed that the survey results are biased because it was conducted amongst people suspected of not being eligible.”
That’s a classic line.
It’s the type of line that comes at the bottom of a story that undermines the entire framing of the story.
It hints at the possibility of a more accurate interpretation of the phenomenon being reported, leaving you wondering why that interpretation wasn’t the one getting the headlines.
However, given it’s at the bottom of the story, someone would have missed it if they only read the headline.
At any rate, that’s just one example.
And The Age was not alone in the way it framed the story.
The same misrepresentations were made by the major dailies and TV channels, and the “30 per cent” figure became embedded in the public’s mind for years, bedevilling the national conversation about unemployment and welfare.
It’s what can happen when familiar economic dynamics abruptly change and there’s an information vacuum.
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