Newstart is meant only as a stop-gap measure? That’s cold comfort


The deputy PM says $277.85 is only temporary. He should tell that to someone near retirement and jobless for two years

There seems to have been some political calculus invoked by the government that, given a large proportion of unemployed are young people, there is little need for them to bother about the calls to increase Newstart. But as our population ages, more and more people in their 50s and 60s are experiencing unemployment. And worryingly, they are also more likely to experience it for a long time.

The best way to predict what your employment status will be next month is what you are doing this month. Overwhelmingly, people stay where they are.

Roughly 93% of people who were working full-time last month are working full-time this month. Of those working part-time last month, 82% are still doing so, while 11% of them have shifted to full-time work. And 93% of those who were not in the labour force are still not working or even looking for work:

For those who are currently unemployed, the prospects are, fortunately, less fixed. Some 21% of those who were unemployed last month are now working, while 23% have left the workforce. But that leaves 57% of those who were unemployed last month still searching for work this month.

That is a sobering statistic, when you consider the meagre amount of Newstart. It is also why asking politicians whether they would be able to live on $277.85 a week not only trivialises the issue, it also is rather a false premise. Most people have to live on Newstart for much longer than a week. Much, much longer.

This week the deputy prime minister, Michael McCormack, told Sky News’s Keiran Gilbert that he was not interested in raising Newstart because “it is that stop gap, it is that safety net measure. It’s not meant to be a living wage … it would be a very meagre existence but it’s only supposed to be a safety net between jobs.”

Now we’ll just note in passing that McCormack – perhaps unwittingly – conceded that Newstart is not enough to live on, but that is not enough of a reason for him to think the rate should be raised.

But let us also look at this suggestion of it being a “stop gap” measure. Because yes, Newstart is supposed to be temporary, but temporary and stop gap can understate just how long that period can be.

Getting by on $277.85 for one week might be possible – with any luck the bills don’t come that week and maybe you have some meagre savings from your previous time working. But what about four weeks … eight weeks … 52 weeks?

Currently around 20% of people who are unemployed have been so for less than a month, while an additional 25% have been for 1-3 months. That, however, means more than half of all unemployed people have been so for more than three months. And more than a third have been so for more than six months:

Twenty four weeks on $277.85 a week starts seeming a rather mean way to categorise “stop gap”.

But long-term unemployment is only counted when you have been unemployed for more than a year – this rose sharply during 2013, from a rate of 18% to now just under 24%, but it has remained at that level now for more than four years:

I suspect the quarter of unemployed would struggle to find much joy in being told that Newstart is a stop-gap measure.

And even worse, the growth in long-term unemployment has come from those who have been unemployed for more than two years.

At the start of 2017 the number of unemployed people who had been looking for work for one to two years was the same as those who had been looking for two years. Now there are 68,400 people who have been unemployed for one to two years and 95,800 who have been unemployed for over two years.

And this should be of interest to the deputy prime minister, because this increase has occurred at the same time there has been a big jump in the share of unemployed who are aged 55 to 64:

And yes, this is to be expected because our population is ageing, but the data shows that while the share of employed who are aged 55 to 64 has remained steady at around 14.5-% to 15% since early 2017, the share of unemployed has risen from 9% to nearly 12% of all employed:

And where it gets worse is that unemployed of this age are greatly overrepresented among long-term unemployed.

They might be 11.7% of all unemployed, but those aged 55 to 64 make up 21% of those who have been unemployed for more than two years:

This is because those who are of that age are more likely than those younger to be unemployed for longer periods of time.

While around 37% of those aged 25 to 44 are likely to be unemployed for more than six months, half of those aged 55-64 are in that situation:

That makes for a pretty tough time just prior to retirement – especially as that is the period during which the superannuation tax breaks are most advantageous for workers.

And it makes a mockery of the belief that Newstart is just about being a stop-gap measure. For many that stop gap lasts longer than half a year, and the closer you get to retirement, and supposedly more likely to be within the government’s target voting block, the more likely that stop gap will last a very long time indeed.

Greg Jericho writes on economics for Guardian Australia


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