RESEARCH FOR ACTION Unemployment: the Economic and Social...

R E S E A R C H F O R A C T I O N

Unemployment: the Economic

and Social CostsDon/Z Dixon

Brotherhood of St Laurence

UNEMPLOYMENTThe Economic and Social Costs

2nd Edition

Brotherhood of St Laurence Melbourne 1992

First published 1988 by the Brotherhood ofSt Laurence 67 Brunswick Street Fitzroy, Victoria 3065

Reprinted and revised 1992

@ The Brotherhood of St Laurence 1988,1992

Research for Action No. 1 (1992)ISSN 0818-8106

Australian Cataloguing-in-Publication

Dixon, DarylUnemployment: the economic and social costs

2nd ed.Bibliography.ISBN 0 947081 57 7.

1. Unemployment - Australia. 2. Unemployment - Social aspects - Australia. 1. Brotherhood of St Laurence. II. Title, (Series: Research for action (Melbourne, Vic); 1992,1).

331.13730994

This book is copyright. Apart from fair dealing for the purpose of private study, research, criticism, or review, as permitted under the Copyright Act, no part may be reproduced by any process without written permission. Enquiries should be addressed to the publisher.

Set and made up by Graca VeigaCover design by Pauline McCIenahan and Sharon CarrCover photograph by Dyranda PrevostPrinted by Cunency Productions Pty Ltd, North Melbourne

Foreword

Ung/npJoyment.' economic and social updates a report commissioned in 1988 by the Brotherhood of St Laurence on the impact of continuing high levels of unemployment on the economic and social fabric of Australian society. In spite of levels of unemployment currently in excess of 10 per cent of the labour force plus a significant incidence of hidden unemployment, there has been little analysis of the cost of unemployment to the Australian economy and to the community in general.

This report reviews the literature on unemployment in other countries, especially in the United Kingdom and the United States, and- suggests comparisons with the situation in Australia. It analyses the major items of government income and expenditure that are related to unemployment and estimates that the direct cost of unemployment to the Australian government through declining tax collections and increased welfare payments could be up to 60 per cent of the private income lost through unemployment. Another 10 per cent could be lost through costs in housing, health, community services, and correctional and crime prevention services.

The report also points out that some of the adverse social outcomes of unemployment are high levels o f indebtedness, homelessness and insecurity over housing, family breakdown, boredom and alienation among unemployed people, and severe financial hardship in families.

In March 1992 there were about 990 000 unemployed persons, 820 000 of whom were on unemployment benefits. The total direct costs to the Australian government of this level of unemployment is between $10 and $18 billion per annum: a 10 per cent reduction in unemployment would improve federal government budget outcomes by at least $1 billion.

The Brotherhood of St Laurence has previously undertaken a number of research projects relating to poverty and unemployment in Australia, and also developed policies aimed at resolving these economic and social ills. It has also advocated programs to assist low income and unemployed people.

Since the 1930s depression the Brotherhood of St Laurence has acknowledged the relationship between poverty and unemployment. Over the past two decades it has undertaken research to identify and describe poverty; has developed policies aimed at offering positive solutions; and has tested out programs to assist unemployed people.

Despite this research and understanding, the Australian response to unemployment is still a narrow one which fails to adequately provide the necessary range of options to integrate unemployed people back into the work force. Insufficient resources are allocated to labour market programs still, especially as there are now over 300 000 people who have been unemployed for over a year and who will need help to obtain a job.

Unemployed people desperately need a job most of all. This report is published in the hope that unemployment, its disastrous consequences, and its remedies will be a central preoccupation for national policy.

iv Unemptoyment: the economic and sociat costs

Alison McClelland Director

Social Policy and Research Brotherhood of St Laurence

ERRATA

p.6,1991 dataTable 3 Number of unemployment beneficiaries Australia 1970-1991

1991 524.7 74.7 177.6 25.3 702.4

p.17,1991 dataTabie 10 Labour force status of civilian population aged 15 and over Australia 1970-1991

1991 7,669.2 806.0 13,520.5 9.5 62.7

p.38,1991 dataTable 16 Numbers of unemployment beneficiaries Australia 1970-1991

1991 524.7 74.7 177.6 25.3 702.4

Contents

Foreword iiiAcknowledgements vii

1 Introduction 12 The Impact of Unemployment 33 Tax Collections and Government Income Support Payments 7

The cost o f unemployment benefitsTaxation o f unemployment benefitsLoss o f taxation revenueTaxation o f redundancy and separation paymentsExamplesMacro-economic considerations

4 The Cost of Government Services 19Education and trainingHealth outlaysCommunity servicesLaw enforcement and correction services

5 Summary and Conclusions 27A comment on the aggregate cost of unemploymentAppendix 1 31Unemployment Benefits: Contributions and Features

vi Unempioyment: the economic and sociai costs

Appendix 2 Additional Tables 33Bibliography 43

LIST OF TABLES1 Unemployed persons: mean duration o f current period o f unem

ployment (weeks) by sex (all age groups) Australia 1970-1991 52 Unemployment beneficiaries by duration o f receipt of benefit

(per cent) Australia 1970-1991 63 Number o f unemployment beneficiaries Australia 1970-1991 64 Federal government outlays on selected social security benefits

Australia 1977-1991 75 Age composition and marital status o f unemployment benefit

recipients (000's) 1977,1987 and 1991 96 Work force participation rates by age, sex, and marital status at

August 1991 (% o f age group) 97 Average per capita payment o f unemployment benefits Australia

1978-1991 108 Loss o f taxation revenue resulting from unemployment Australia

1991-92 tax scale 129 Net cost to government o f unemployment Australi a 1991 -92

fiscal year 1410 Labour force status o f civilian population aged 15 and over

Australia 1970-1991 1711 Numbers unemployed and unemployment rates by sex Australia

1970-1991 3312 Unemployment rates by age and sex (per cent) Australia

1970-1991 3413 Unemployed persons by age (per cent) Australia 1970-1991 3514 Unemployed persons: duration o f current period o f unemploy

ment by sex (per cent) Australia 1970 to 1991 3615 Unemployed persons: proportion married within age group

by sex (per cent) Australia 1978 to 1991 37

16 Numbers ofunemploymentbeneficiaries Australia 1970-1991 3817 Unemployment beneficiaries by age Australia 1970-1991 3918 Male unemployment beneficiaries: mean and median duration o f

benefit by age Australia 1983-1991 4019 Female unemployment beneficiaries: mean and median duration

o f benefit by age Australia 1983-1991 41

Acknowledgments

Daryl Dixon was assisted by Alice Dixon and Bridget Stenson in the preparation o f the original paper. Jan Carter the previous Director of Social Policy and Research at the Brotherhood of St Laurence is to be thanked for convincing the author of the scope for a major contribution to the development of Australian social policy from this research project. Graeme Brewer, and several members of the Social Issues Group at the Brotherhood of St Laurence, made many helpful suggestions. Professor Bob Gregory of the Australian National University also kindly assisted with help in updating the many tables contained in this report.

viii Unempioyment: the economic and sociai costs

Chapter 1 introduction

Levels o f unemployment in Australia in 1992 stand in excess of 10 per cent of the total labour force, significantly higher than at any other time in our history except for the Great Depression. This high level of unemployment has been accompanied by considerable hidden unemployment as reflected in declining work force participation rates particularly of older males, and the inability of certain groups in the female population (e.g. in rural areas) to effectively participate in the work force. The feature of hidden unemployment was first identified by Strieker & Sheehan (1981).

Trends in the level of employment are highly dependent upon economic performance and business investment. These are of course influenced by government policy action affecting such key economic variables as aggregate demand and savings, investment incentives, and wages policy. This paper does not deal with the various fiscal and monetary policy approaches to achieve the highest possible levels of employment of the actual (or potential) Australian labour force.

Instead attention is centred on identifying and where possible quantifying the costs of unemployment to the Australian economy and community to highlight the economic and social costs of continuing high levels of unemployment. The direct economic benefits to be gained from reducing the level of unemployment can then be shown to be large ones supporting action to lower the level of unemployment.

If by changing structural, policy or institutional arrangements, unemployment can be reduced major gains will flow from the reduced costs

associated with a lower level of unemployment.

Other macro-economic objectives, (especially those involving the balance of payments and the rate of inflation) may cause a government to set upper limits to the aggregate level of demand and employment. This study can only recognise but not help resolve such conflicts between competing policy objectives. It does however provide basic information about and analysis of the cost of any government or private action which increases the level of unemployment. These costs of unemployment can then be compared with the direct and indirect benefits of achieving the other policy objectives (such as reducing inflation or improving the balance of payments).

This monograph focuses solely on the financial dimensions of the impact of unemployment on the community and individuals. Continuing unemployment results in significant economic costs via the direct impact on government revenues and outlays. This is a first stage effect. Through multiplier and other indirect macro-economic effects, increased unemployment will subsequently reduce the aggregate level of economic activity resulting in further reductions in government revenues and outlays. The major emphasis is placed on identifying first-round effects of unemployment. This however is not to deny the importance of the second-round effects.

The monograph has another four chapters. Chapter 2 covers the general impact of unemployment, and Chapter 3 examines the specific issues of income support payments, taxation collections and general macro-economics. Chapter 4 deals with government programs and directly provided services, and the conclusions are presented in Chapter 5.

In discussing the impact of unemployment on the level of income support payments, this paper refers to unemployment benefits, rather than Job Search Allowance (JSA) and NEWSTART, the two payments which replaced Unemployment Benefits. Job Search Allowance was the term for unemployment benefits for 16 to 18-year-olds, first introduced in 1987. Prom July 1991 NEWSTART was the term coined for unemployment beneficiaries over the age of 18 who are unemployed for over a year. JSA since July 1991 also refers to those aged over 18 who have been unemployed for less than 12 months. In this report, these different terms are all referred to as unemployment benefit.

2 Unemployment: the economic and socia! costs

chapter2 The tmpact of Unempioyment

Unemployment directly affects individuals and families materially by reducing their incomes. The personal costs o f reduced income flow on to the community in several ways:

* reduced community savings and investment because income falls by more than consumption as unemployed persons attempt to cushion the impact of the loss of income;

* reduced taxation collection due to the fall in personal income and any reductions in total expenditure;

* increased government outlays on social security and other social welfare assistance; and

* increased private and government outlays resulting, for example, from the increased use of public services (particularly health, housing, and community services), crime and delinquency, and breakdowns in marriage and family support networks.

Overall, the impact on individuals and their families will be more severe and greater than the cost to the community, though the latter will also be significant. The loss in income due to unemployment directly places great pressure on individual or family income, straining people's ability to meet ongoing financial commitments. In families unemployment threatens the welfare and education of children, and the stability of marriage and other family relationships.

Unemployed people can also face major financial commitments such as mortgages and consumer debt incurred during more favourable economic times. These can result in recurring periodic payments which can create an immediate financial problem upon the loss of employment.

The response of individuals and families to unemployment depends upon their circumstances: some are able to call upon savings, redundancy, or other separation payments; others may belong to a two-income family. But by far the most significant group will rely on social security income support payments like Unemployment Benefits and Sole Parent's Pension. (On the loss of employment sole parents with at least one child aged under 16 can claim Sole Parent's Pension instead of resorting to the stricter unemployment system.)

The Australian system differs from the unemployment insurance systems adopted in many other developed countries. Our unemployment benefits are not geared to former levels of income. Instead they are paid as fixed amounts which only vary with age and family circumstances. Income from other sources is taken into account; applicants must meet both income and assets tests, so that not all unemployed people are eligible for benefits. The two major categories of unemployed persons not likely to qualify for unemployment benefits are those with substantial assets other than their family home and/or those with a working spouse.

Appendix I sets out current levels of unemployment benefits for designated categories of individuals as well as the applicable income and assets test. The Department of Social Security's Discussion Paper No 20 prepared for the Social Security Review also provides comprehensive information about the nature and composition of unemployment and unemployment benefit recipients since 1970 (Fisher 1987). This study utilises relevant data from that paper, updated to the present time.

All unemployed persons face major financial problems in moving to a lower standard of living, even when they have substantial savings. Continuing unemployment also presents major problems of motivation and maintaining self-esteem. Unemployment has widely varying consequences for different individual categories of social security beneficiaries.

Redundancy or separation payments provided by employers (for example in cases of major factory closures or retrenchments) can provide sufficient funds to meet current living expenses for a substantial period. In cases where the unemployed person soon obtains new employment, the short-term call upon the community will be confined largely to the cost of social security

4 Unempioyment: the economic and socia! costs

The impact of unemptoyment 5

benefits. With continuing unemployment, there will be a major cost to the community as the resources available to the individual diminish and their call on government support increases.

Total employment opportunities are inevitably limited and individuals must compete for a limited supply of available jobs. Each person who obtains a job reduces the opportunities for others. However, there is ongoing turnover in employment: with people voluntarily withdrawing from the labour force to retire or for other reasons. Individuals also change jobs, meaning that job vacancies exist even during sustained high levels of unemployment. Thus the efficiency of the labour market in matching demand with supply, and structural problems in the economy (such as a shortage of appropriate facilities for education and training) will affect the nature and cost of unemployment.

In recent years there has been a significant increase in the average duration of unemployment as well as in the total level of unemployment in Australia. Data is provided by both the ABS Labour Force Surveys and the DSS August Quarterly Surveys of Unemployment Benefit Recipients. Labour Force data shows that the mean duration of unemployment at all age groups is now 46 weeks for males and 39 weeks for females (Table 1).

Table 1 Unemployed persons: mean duration of current period of unemployment (weeks) by sex (alt age groups) Australia 1970-1991

Year (August) Mates Females

1970 7.5 7.11975 12.7 12.81980 33.1 30.81985 58.0 36.31986 56.4 38.11987 56.8 37.31988 58.6 42.21989 54.7 31.81990 49.4 36.01991 45.6 38.9

Source: Fisher, 1987 and ABS, 77te /ahour/brce Amlra/ia, (various years), Cat. no. 6203.0.

Social security data also shows a marked upward trend in the percentage of male and female recipients receiving benefit over longer periods of time. In 1977 28 per cent of males and 31.3 per cent of females received benefits for a period of more than six months. In 1991, the comparable figures were 47.4 per cent of males and 41.3 per cent- of females (Table 2). The number of unemployment benefit recipients exceeds 700 000 people (Table 3).


Tabte 2 Unemptoyment beneficiaries by duration of receipt of benefit (per cent) Australia 1970-1991

August Mates FematesUp to 5 3 tod Over 6 Total Up to 3 3 to 6 Over 6 Total

m ortf/ty m artfA y rwoHt/t /wowtA MtOHfA /HOMf/ty(%) f% ) w (%) (%) (%) (%) f % )

1970 73.1 17.1 8.9 100.0 66.9 19.2 13.4 100.01977 49.5 22.5 28.0 100.0 43.5 25.2 31.3 100.01980 37.7 21.7 40.5 100.0 35.0 21.9 43.1 100.01985 25.7 15.4 58.9 100.0 29.6 17.8 52.6 100.01986 28.2 16.2 55.6 100.0 30.6 18.7 50.7 100.01987 26.6 16.1 57.3 100.0 29.4 18.7 51.9 100.01988 25.9 15.9 58.2 100.0 29.7 19.2 51.1 100.01989 29.3 15.2 55.5 100.0 33.0 18.7 48.3 100.01990 35.9 18.9 45.2 100.0 38.5 21.2 40.3 100.01991 30.3 22.4 47.4 100.0 33.4 25.4 41.3 100.0

Source.' D epartm ent o f Social Security , Survey o/* unem ploym ent trene/iciari'ey (various years).

Tabfe 3 Number of unemployment beneficiaries Australia 1970-1991August Mates Femates Totat

f(W ) (%) ('000) (%) ('000)

1970 7.8 68.4 3.6 31.6 11.41980 198.8 67.9 93.8 32.0 292.61985 391.3 73.6 140.4 26.4 531.71986 412.3 73.1 151.6 26.9 563.91987 373.0 73.2 136.3 26.8 509.31988 326.2 73.1 119.8 26.9 446.11989 264.8 72.2 101.8 27.8 366.61990 326.4 74 114.9 26.0 441.31991 324.7 74.7 177.6 25.3 702.4

Source.* Department of Social Security, Survey <%f MMe/ntp/oy/nen; ^eMe/ic/jriej (various years).

These figures are significant because the cost of unemployment to individuals and the community increases with its duration. Short-term and transitory unemployment has a totally different impact from continuing long-term unemployment because the loss of income lasts only for a short period. Increasing levels of long-term unemployment as reflected in Tables 1, 2 and 3 suggest that the cost of unemployment has clearly risen at a faster rate than the level of unemployment.

chapters Tax CoHections and income Support Payments

It has long been recognised that a major impact of unemployment is to increase government outlays on unemployment benefits. These payments are now running at around 1.2 per cent of GDP compared with 0.8 per cent of GDP in 1977-78 (Table 4).

Tabfe 4 Federat government outtays on seiected sociai security benefits Australia 1977- 1991

FiscatYear

UemptoymentBenefit

( W j c% GDPj

S/cknessBenefit

GDP)

/nva/icfPens/on

f^M.) GDP)

Sole Parent's Pens/on

<9M) f% GDP)1977-78 794 0.8 148 0.2 598 0.6 192 0.21984-85 2984 1.4 365 0.2 1470 0.7 1066 0.51987-88 3347 1.1 511 0.2 2188 0.7 1525 0.51988-89 3092 0.9 553 0.2 2416 0.7 2132 0.61989-90 3026 0.8 611 0.2 2680 0.7 2334 0.61990-91 4493 1.2 651 0.2 3096 0.8 2686 0.7

Sowca: Australia, Bugger fap ^ rj H<M. 7 and 4 and ABS, Atutra/ian TVaii'ona/ Account; JVaiionai /ncome and Rc/Mnatara , (various years) Cat. no. 5206.0.

Other payments also cover individuals not in the labour force and they include sickness benefit, invalid pension and sole parent's pension. The overlap between such unemployment benefit is closest in the case of sickness benefit and sole parent's pension where some recipients of work force age are able to

use these benefits if they cannot find employment, providing they are either ill or a sole parent with a child under 16 years of age.

Australia does not publish any information about the cost of unemployment to the government. However, there has been some formal recognition in other countries of the impact of unemployment at a macro-economic level. Measurement of the hypothetical full-employment budget surplus in the United States for example, includes automatic calculations of the level of taxation and unemployment insurance compensation for variations in the level of economic activity (Dixon 1973). That model and many similar econometric models illustrate the point that the higher the level of unemployment, the higher will be the level of unemployment benefit payments and the lower will be taxation collections.

It would be possible to build new or utilise existing econometric models of the Australian economy to similarly compute the cost to the government of an increase in unemployment. The section which follows clearly demonstrates that the cost of unemployment would be a rewarding area for systematic econometric analysis.

The cost ot unemployment benefitsThe United States of America and many other developed countries have unemployment insurance schemes covering all workers previously employed. Australia assists the unemployed through the income and assets-tested unemployment benefits as part of its social security system. The income and assets tests preclude some unemployed Australians, who have previously been in employment, from receiving unemployment benefits. But unlike unemployment insurance schemes, the Australian system does provide unemployment payments to persons without previous employment, provided they meet income and assets test requirements. Eligibility depends solely upon whether employment is actively being sought and whether income is available from other sources, including the income of a spouse or from property. Persons below the age of 18 are also now subject to a parental income test.

Government outlays on unemployment benefits vary with the age and family characteristics of the unemployed. Table 5 presents the age composition and marital status of the Unemployment Benefit recipients in August 1977, August 1987 and August 1991. In 1977, 55 per cent of the unemployed were aged under 25. By 1991, reflecting the trend to higher levels of unemployment among the older age groups, approximately 35 per cent of benefit recipients

8 Unemployment: the economic and social costs

Tax coHections and income support payments 9

Tabte 5 Age composition and marital status of unempioyment benefit recipients (000's) Australia 1977,1987 and 1991

August Under 25 years 25 to 34 years 35 to 44 years Over 45 yearsStftg/g Marrtetf Single Mvrigt? Single Mnrrieti Single Mnrrierl

Mates1977 85.3 7.3 16.0 16.3 11.8 14.9 10.6 18.91987 138.0 9.7 47.0 39.9 16.7 36.8 15.6 42.71991 154.3 19.4 97.8 61.1

Females40.8 92.2 36.5 99.9

1977 76.6 15.4 4.1 20.6 1.5 15.6 3.0 7.31987 107.2 15.2 25.4 36.1 14.5 32.5 6.0 3.81991 94.1 6.8 29.4 4.8 18.1 3.7 18.0 2.7

.Source; Department of Social Security, Survey q/une/np/oyrrtent hene/i'curriee, (various years).

were aged under 25. The majority of the young unemployed are single, reducing the average cost of benefits to the younger age group.

The unemployment benefit's income test exempts the first $30 of weekly income, for the next $40 of additional income it reduces the benefit by 50 per cent (of the income above $30 per week). Thereafter the income test operates on a dollar for dollar basis, reducing benefit by all income in excess of $70 per week. The assets test reduces payments for persons who may have no income but have substantial assets other than their own home. The income and assets test parameters virtually ensure that any unemployed person with substantial assets or a spouse earning a full-time income will not be eligible for benefits.

Tabie 6 Work force participation rates by age, sex and marital status at August 1991 (% of age group)

Age group Mates FematesMnrWetl No/ nMVrietf Total Morrietf Not ntarrieti Total

15-19 81.7 53.3 53.5 58.9 52.4 52.620-24 95.9 85.4 87.1 65.1 81.9 76.725-34 96.6 90.7 94.3 61.1 76.8 65.635-44 95.4 86.8 93.8 71.6 73.1 71.945-54 92.5 76.0 89.8 61.2 68.5 62.755-59 75.2 56.1 71.9 34.2 40.6 35.760-64 51.3 41.5 49.6 15.6 12.4 14.665+ 10.3 5.9 9.1 3.4 1.8 2.4

Source: ABS, 77ie /atour/orce Australia, August 1991 Cat. no.6203.0.

Table 6 sets out work force participation rates classified by age, sex, and marital status. As most married people either male or female participate in the work force, many married people will be precluded from receiving unemployment benefits because of their spouse's earnings from employment. Indeed, the

extent of two-income families ineligible for income-tested unemployment benefits when one spouse loses employment is a major reason for the high level of hidden unemployment identified by Strieker and Sheehan (1981) and other commentators. Because unemployed spouses are ineligible for benefits, there is little point in seeking employment when jobs are not available, particularly in areas of high unemployment.

Estimating the cost of unemployment benefits to the government requires knowledge about the composition of the unemployed eligible for benefit. The cost is greatest for a family breadwinner with a dependent spouse and children to support and less-though still significant-in the case of a single person over 18 (Appendix 1). Unemployment benefits are payable to two-income families where both earners are unemployed, but not when only one is unemployed. Table 7 shows the trend in the average level of unemployment benefits over the past decade. The average benefit payable was calculated by dividing total outlays by the average number of beneficiaries over the year. The estimated outlay per unemployment beneficiary in 1990-91 was $6617.

Average outlays on unemployment benefits have fallen because of reduced levels of payments to many people aged under 18 resulting from the introduction of a parental income test in 1987.


Tabte 7 Average per capita payment of unemptoyment benefits Austraiia 1978-1991

Fiscal Year Total outlaysw

Number recipients OM's

Average payment %

1978-79 910 306 2,9741981-82 1,224 332 3,6881984-85 2,984 582 5,1291987-88 3,347 503 6,6541988-89 3,092 429 7,2071989-90 3,026 384 7,8801990-91 4,493 679 6,617

Source: Australia, Papers nor. 7 ona 4.

Eli gibility for unemployment benefits has also been restricted over recent years by changes in the Department of Social Security's systems and administrative procedures such as increasing the waiting periods for initial payment of benefits and administering tighter work tests.

Taxation of unempioyment benefitsUnemployment benefits and most pensions (the major exception is the Disability Support Pension) are taxable in the hands of recipients. This reduces

Tax cottections and income support payments 11

the net cost to the government but only for people with some private incomes in addition to their benefit payment. Estimates of tax actually collected from these benefits are not readily available on an up-to-date basis. Taxation statistics for 1987-88 show that 376 000 taxpayers included $822 million of Unemployment and Sickness Benefit in their taxable income, with an effective estimated tax rate of around 30 percent. U sing that estimate, some $250 million or 5 per cent of the $5144 million Unemployment and Sickness Benefits paid in that year was recouped as revenue from tax collections.

This effective tax rate is relatively low because most beneficiaries have insufficient annual income to be subject to substantial tax, and the weekly benefit is less than the tax threshold (taking into account a special rebate for unemployment benefit recipients). Those who are liable for taxation however, pay it on some or all of their benefit because of part-time or casual earnings or income earned prior to becoming unemployed.

The taxpaying unemployed are thus generally those who are either unemployed for only part of the year or have significant casual earnings whilst in receipt of benefit. In many cases, the tax liability arises because income from previous employment fully exhausts the available annual tax threshold prior to becoming unemployed. Any income received thereafter would then be fully taxable.

With an annual tax threshold of $5400 for a single person, only a modest prior income from employment in some previous part of the year will result in a tax liability for an unemployment beneficiary. For taxpayers, the relevant tax rate will be 21.25 per cent of income in the range of $5400 to $20 700 and 39.25 per cent of income in the range of $20 701 to $36 000. In a small number of cases benefits would also be taxable at the highest marginal rates of 48.25 per cent and 47.25 per cent.

To sum up, actual rates of tax payable on unemployment and sickness benefits received vary from case to case. For determining aggregate cost, a reasonable assumption would be that the net cost to government of unemployment benefits after allowing for the taxation claw-back is not less than 90 per cent of gross payments. ,

Loss of taxation revenueThe second direct impact of unemployment on the budget is through the reduction in taxation collection. This takes the form of an opportunity cost, that is revenue forgone because of the loss of private income through

unemployment. As incomes fall, taxation collections fall automatically. Because of the progressive tax rate scale, the fall in tax payments is larger than the fall in incomes. Unemployment occurring some time during a tax year will thus result in a substantial reduction in tax collection from any taxpayer independently of whether the taxpayer is eligible for social security benefits or not.


Tabte 8 Loss of taxation revenue resulting from unemployment Australia 1991 -92 taxscale^

When unemployment occurs part way through year $20 000

$

Annua! previous wage Income $30 000

$$40 000

3

At beginning 3,102 6,902 11,147After 3 months 2,072 5,340 9,053After 6 months 1,381 4,117 6,796After 9 months 691 2,257 3,558After 11 months 230 752 1,299

% % %

At beginning 100.0 100.0 100.0After 3 months 66.8 69.0 81.2After 6 months 44.5 59.6 61.0After 9 months 22.3 32.7 31.9After 11 months 7.4 10.8 11.7

Tax loss as percentage of income

% % %

At beginning 15.5 23.0 27.93 months 10.4 17.8 22.6After 6 months 6.9 13.7 17.0After 9 months 3.5 7.5 8.9After 11 months n — :-------------- " 7 --------;-----

1.2 2.5 3.2

* Assumes payment of unemployment benefit at annual rate of $7,000 a year.

Table 8 illustrates the possible effects for a range of incomes, not taking into account the tax on unemployment benefits discussed previously. The table highlights the extent to which the consequent loss in tax revenue increases with the length of unemployment. For a person unemployed for 75 per cent of the year, tax collections fall by around 70 per cent or even more. Tax collected falls by as much as 60 per cent for pensions unemployed for half the year and by in excess of 20 per cent for people unemployed for 25 per cent of the year. The higher the annual income, the greater is the loss of tax revenue resulting from unemployment.


In this way, the government shares in the loss of private income resulting from unemployment. Table 8 suggests that the share of the present tax system in the loss of private income varies from 15 per cent to 30 per cent for full year unemployment to between 1 per cent and 3 per cent of income lost from unemployment for only one month of the year. These figures are striking and emphasise a previously neglected cost of long-term unemployment, the significant tax revenue lost.

Taxation of redundancy and separation paymentsFormer employees are frequently paid redundancy and separation payments in a lump sum on termination of employment. Such outlays are fully deductible to the organisation making the payment (generally at the 39 per cent company tax rate), but they are only lightly taxed in the hands of the recipient. Only 5 per cent of the payment received (other than accrued holiday pay or long service leave) is subject to tax in the hands of the recipient.

This concessional taxation treatment results in a major direct cost to revenue when there are major factory closures or large scale retrenchments. Taxation statistics do not identify what percentage of lump sum payments (now running at levels in excess of $ 10 billion annually) attracting the 5 per cent concessional taxation treatment were associated with the termination of employment.

ExamplesWith the cost of unemployment to government varying with the categories of unemployed people, it is useful to consider some examples. Table 9 presents examples including single and married persons with and without employed spouses. For simplicity, the data does not cover families with children or people in private rental accommodation, the costs are higher in these situations. For example each dependent child under 13 increases the government benefits payable by $29.50 per week or $1534 per year. (Children over 13 attract an addidonal benefit of $41.65 per week.) No account is taken of lump sum or other termination payments which would substantially increase the cost to government because of the favourable tax treatment attached to these payments.

The examples cover the direct and immediate costs to the Commonwealth of Unemployment Benefits and loss of taxation revenue, taking into account the taxation of Unemployment Benefits. Female earnings are generally lower than male earnings. Thus it is assumed that adult males earn $30 000 per annum

and females $20 000 per annum. The male earning approximates average weekly earnings while the lower female earnings is an appropriate estimate of the usually lower level of female earnings.

Unemployment is assumed to be involuntary so that unemployment benefit is payable no later than five weeks following unemployment. (This allows for the normal waiting period of one week and the maximum four week waiting period because of the liquid assets and/or recreation leave test.) Unemployment benefit is assessed on a family income basis and the examples thus use the combined income of the spouses.

Table 9 assumes that no tax is paid on unemployment benefit because unemployment is for the full year. Relaxing that assumption and incorporating the analysis of Table 8 would change the costs shown but not the general order of magnitude of the results presented in Table 9. On average the tax payable by those receiving unemployment benefit in Australia does not exceed 5 per cent of benefits received. Using that figure to recalculate Table 9 would increase tax payable if unemployed and reduce the cost of unemployment to the government by between 2 per cent of the private income lost through unemployment.

14 Unemployment: the economic and sociai costs

Table 9 Net cost to government of unemployment Australia 1991 -92 fiscal year.Married Married

Single Single spouse spouseperson person not employed employed

# F F F

Annual income 20,000 30,000 30,000 50,000Tax Payable Unemployment Benefit:

3,102 6,902 5,503 10,004

If unemployed Tax payable

7,220 7,220 13,078 0*

if unemployed** Total net cost

0 0 0 6,902

to government*** Cost as % of income

10,322 14,122 18,581 3,102

lost by unemployment 51.6 47.1 61.9 15.5

* Only one spouse (the lowest paid) loses employment.** Assumes unemployment for the full year, dependent spouse rebate payable to married taxpayer.*** Equals loss of tax revenue previously payable plus unemployment benefit payable less any tax payable when

unemployed.

Table 9 obviously does not encompass all levels of income and all categories of unemployment benefit recipients. Nevertheless the data presented is sufficient to demonstrate that the cost to the government of unemployment is substantial at all income levels. Because of the flat rate unemployment benefit


payment arrangements and the progressive income tax rate scale, that for incomes higher or lower than those used in Table 9, the cost to the government will be higher rather than lower than those presented in Table 9.

The progression in the tax system increases the loss in revenue from unemployment in the highest income groups, while the flat rate unemployment benefits system provides greater benefits (expressed as a percentage of income prior to unemployment) to the lowest income groups. Both these factors combine to increase the cost to government of unemployment.

For that reason, Table 9, even though simple in concept and design, is sufficient to support the very important conclusion that the Australian government directly loses a minimum of 15 per cent and a maximum of more than 60 per cent of the loss in personal incomes which result from unemployment. Where there are children, the cost to government can even be higher than these estimates. The lower figure of the potential loss covers cases where unemployment benefit is not payable. The higher figure covers cases where both tax revenue is lost and unemployment benefit is payable.

Based on the present proportion of the unemployed who receive benefits and the average rate of unemployment benefits payable, the direct cost to the government of unemployment will range from as little as 15 per cent to as much as 60 per cent of the loss in private incomes resulting from unemployment. Thus, the community directly shares in a major part of the reductions in individual incomes caused by unemployment.

This estimate of the cost to the community is expressed as a percentage of the reduction in total private incomes caused by unemployment. There can be cases where unemployment rises but community income does not fall, for example, where unemployment is part of a process of income redistribution. Increased unemployment resulting from the diversion of a greater share of national income from wages to profits would be one possible example requiring different calculations from those presented in Table 9. Indeed a variety of alternative calculations could be undertaken using different assumptions about the process of income redistribution associated with increased unemployment and the resulting impact on taxation collections and unemployment benefit payments.

Macro-economic considerationsThis study does not attempt to quantify important macro-economic costs of unemployment such as the reduction in work force participation rates

associated with the discouraged worker effect. One important issue, for example, is the increasing trend to early retirement on a service pension at age 60 instead of 65, the normal Age Pension retirement age. The loss to the community is the potential production from continued employment of these age groups.

The reduction in private savings caused by unemployment as people attempt to maintain their previous standards of living will also result in major future costs to the community (for example where people lose their house or use up their superannuation savings), in the form of long-term claims on unemployment benefits or the Age Pension.

Similarly, because high levels of unemployment reduce the expectation of finding new employment, unemployment will reduce the mobility of the labour force and thus the scope for improvements in productivity and related gains. The dynamics of unemployment also raises important issues.

Because of ongoing labour replacing business investment and increases in labour productivity, unemployment can increase even when total community income is growing. Okun's Law for example describes that total output will grow at a rate equal to the labour force growth rate and the growth rate of output per worker (average labour productivity). If output grows at a faster rate, unemployment will fall and if it grows at a slower rate, unemployment will rise. If unemployment rises, part of the gains from the growth in productivity will be required to meet the costs of unemployment described above. Conversely, when unemployment falls the reduced costs of unemployment supplements the income gains from the growth in productivity.

This argument suggests also that the significant rise in unemployment commencing in mid-1990 can be attributed to a decline in output growth rather than productivity and work force growth. That argument, if correct, points to the need to consider the cost of unemployment and the benefits from reducing the level of unemployment, when demand-management and national savings policies are being determined. Unemployment depresses investment and activity because of the actual or potential loss of income and the impact on government finances.

A strong trend in employment growth will, by lowering the costs of unemployment, help ensure the achievement of budgetary targets. Conversely, slow employment growth and increasing unemployment would frustrate the achievement of budgetary targets or, if they are to be achieved, necessitate fiscal restraint to offset the increased budgetary costs of the increased unemployment.

16 Unemployment: the economic and sociat costs

Tax cottections and income support payments 17

Tabe! 10 Labour force status of civilian popuiation aged 15 and over Australia 1970-1991

August Totalemployed

MW's

Unemployedpersons

MW's

Total

MW's

Unemploymentrate

Participationrate(%)

1970 5,395.6 78.2 8,950.9 1.4 61.21975 5,841.3 278.4 9,935.9 4.6 61.61980 6,281.3 394.5 10,940.7 5.9 61.01985 6,646.1 571.1 11,979.7 7.9 60.21986 6,885.7 595.6 12,226.9 8.0 61.21987 7,073.2 601.9 12,503.2 7.8 61.41988 7,330.1 538.8 12,759.6 6.8 61.71989 7,727.6 469.4 13,075.4 5.7 62.71990 7,825.0 587.4 13,296.2 7.0 63.31991 7,669.2 806.0 13,296.2 9.5 62.7

Source.- ABS, TAe fofwMr/brce AMsfru/m (various years) Cat. no. 6203.0 and Fisher, 1987.

Table 10 shows a rapid increase in both the labour force and total employment in Australia in recent years. Over the longer term, the participation rate has fluctuated but remained relatively constant over a period when the average unemployment rate has increased substantially. Until 1983, the growth in employment was not sufficient to maintain employment levels and the average unemployment rate rose dramatically. Between 1983 and 1990, however, the growth in total employment exceeded the growth in the labour force and the average level of unemployment fell from its 1983 high. This data suggests that the improved budgetary performance of the Hawke Government culminating in a balanced budget in 1987-88 may have been very greatly assisted by the reduced budgetary costs associated with reduced levels of unemployment.

More recently, the level of unemployment has again risen as the impact of the current recession has worsened. As predicted by the above analysis, the federal government's budgetary situation has again deteriorated in 1991 and 1992 as the level of unemployment has risen.


Chapter 4 T t lO C O S t O f

GovernmentServices

This chapter covers the additional costs to the government of the operation of ongoing programs and the provision of government services. Unlike taxation and income support payments, these costs can not easily be quantified, primarily because of the difficulty of determining the relationship between unemployment and increased demand for government services. There are also major conceptual issues including how to deal with increased demand for government services for programs where total outlays are fixed annually by government through the budgetary process. Several major programs fall into this category and only allocate fixed amounts to meet whatever demand there may be. These include major outlays on social programs like health and housing.

Increased demand for such services will increase queues and waiting lists for access to them rather than increase government outlays. Any demand for such services resulting from unemployment will not necessarily affect government but obviously imposes costs on the community. These costs will be reflected in increased private outlays (for example in private markets) or unsatisfied consumer demand. Even though these costs do not affect government outlays in the short term, they may in the longer term, because of the political and social pressures to reduce such excess demand for services (for example hospital queues).

There are other conceptual problems in detailing costs, like identifying the causal relationship between unemployment and the demand for government services. In some cases, such as the provision of housing, education, and health assistance, services are made available on an income-tested basis. Unemployment, by reducing individual and/or family income will directly increase the demand for such services, by swelling the number of eligible applicants for these programs.

State public housing programs, assisted by federal subsidies, are an excellent example. They provide income-tested rental assistance to eligible persons (as determined by an income test). Unemployed persons will generally satisfy the income test, and any increase in unemployment will push up the demand for these services and increase the level of rental subsidies payable under these programs. Similarly, the children of unemployed families will be eligible for education grants such as AUSTUDY, also provided on the basis of an income test. In other cases, such as health care, special benefits for the unemployed are provided directly by the federal government.

In other countries studies have calculated the cost of the additional outlays caused by unemployment-induced increases in the demand for services. For example, Lister (1979, p.106) examines the health cost to the community and refers to a report to the U.S. Congress in 1976 which estimated that a 1.4 per cent increase in unemployment cost Americans 7 billion dollars in income lost through illness, mortality, and mental disorders. To prove a similar relationship for Australia would require detailed information about the increased burden upon social and health services resulting from unemployment; this data is just not available.

The costs of social problems associated with unemployment are even more difficult to quantify when there is no straightforward causal relationship. For example the emergence of high levels of youth unemployment in the mid-1970s has corresponded with its emergence as a major social problem, now requiring considerable levels of government expenditure. Brotherhood of St Laurence research has demonstrated that while unemployment can not be said to cause youth homelessness, the two are closely linked, particularly through the major social role employment plays in young people: transition to adulthood (Boyce 1991).

Similarly unemployment is associated with increasing demand on other government funded programs, such as family support services and law enforcement and correction services. Collecting such data is beyond the scope

20 Unemployment: the economic and sociai costs

The cost of government services 21

of this paper. The bibliography at the end of the report refers to a small but significant body of literature on the impact of unemployment in Australia. There has however been little analysis of the impact on the demand for government services (see for example Blakers 1984).

This paper can therefore only list the major federal and state programs which are likely to be affected by unemployment. The impact on individual programs will vary with the nature of unemployment and the people affected by it. In certain regions of high unemployment, the impact of unemployment can be all-pervasive, even affecting the finances of local authorities. This is because of the increased demand for services and subsidies and the reduced capacity to raise revenue to finance those services.

Through the operation of the Commonwealth Grants Commission and the special assistance to local authorities, Australia attempts to compensate for such differences in financial capacity. General revenue assistance, in the form of equalisation payments, is designed to off-set the unequal fiscal capacities of different states and local authorities. Equalisation payments however, are paid out of a limited pool of funds. As a consequence, it is unlikely that unemployment will increase such assistance. Instead, its major impact will be on the funds' allocation between states and local authorities.

Consequently, equalisation payments are not considered here, even though they may be very important in ensuring the adequate provision of services required by the unemployed and other low-income groups. Instead each of the major programs and services likely to be affected by unemployment are considered in turn. These include housing, education and training, health, community services, and law enforcement and correction services. Earlier studies have identified that the demand for all of these services is greatly influenced by unemployment.

Housing represents a major component of the private cost of living. Low-income people, including the unemployed, face great difficulties in getting access to private sector housing. As a consequence, government programs and subsidies have been established to assist them, to make home ownership or other housing affordable. Unemployment has two major effects. It reduces the capacity of households to buy suitable accommodation in the private housing market and as a result it increases the demand for government-provided or subsidised assistance.

The unemployment benefits system recognises these problems by providing additional payments to beneficiaries in the private rental market. These

payments are $36.75 per week for a beneficiary with a child under 16 and $31.45 per week for beneficiaries over the age of 18.

State governments also provide housing assistance, for example through the joint Commonwealth-State Housing Agreements. A comprehensive analysis of relevant programs and outlays affecting the unemployed and other low-income groups is to be found in the recent International Year of Shelter for the Homeless (IYSH) publication (Kendig & Paris 1987).

The most relevant aspect for this study is the increased costs bome by state government housing programs because of unemployment. Access to public housing is controlled and the level of rents charged via an income test, which almost all unemployed persons in receipt of benefits are able to meet. Priority access is given to families and sole parents and their children, though all states have long waiting lists. The immediate impact of increased unemployment is to add to these queues rather than to government outlays. Nevertheless, because rental charged is related to individual incomes (generally around 20 per cent of family income) increased tenancy of State Housing Commission homes by the unemployed and other social security recipients can have a substantial impact on housing revenues because of the tenants' low income.

This indeed is a universal complaint by the states in support of their repeated requests for additional federal funds or other financial assistance for public rental housing. Unemployment is also assuming greater importance for Australia's private housing markets. As the level of unemployment remains high and as average duration increases, unemployed families face major difficulties holding on to their private houses. The high cost of housing loans exacerbate the problems caused by unemployment and add to the financial problems of the unemployed.

Often there is more than one mortgage to be serviced at unsubsidised interest rates. Unemployment for any substantial period will then force people to sell their house. Such financial pressures also place great strain on many marriages. Marriage breakdown frequently results, which adds to the cost to government (for example by requiring the payment of additional sole parent pensions) as well as increasing the demand for subsidised public housing.

These housing-related outlays cannot be accurately costed, but they are substantial. This is especially true for sole parents and married couples who experience unemployment before they have been able to obtain significant equity in their homes. The dimensions of these housing problems are explored in the IYSH publication by Kendig & Paris (1987).



Education and training

Unemployment affects outlays on education and training by Commonwealth and state governments in a variety of ways. These include the demand for additional places at educational and training institutions and through student assistance and direct expenditure on training programs. Primary and secondary education is theoretically provided free of charge. Thus, increased unemployment amongst parents will not significantly increase the demand for education services, although school finances may be affected to a limited extent by the reduced capacity of families to meet school fees and charges (which are limited in magnitude in the state school system).

Some states such as Victoria provide an income-tested small payment to students, but the only major financial assistance available to low-income school children is through AUSTUDY grants provided to qualifying secondary or tertiary students aged over 16. Unemployment among breadwinners will substantially increase outlays on AUSTUDY grants, which provides assistance up to $77.10 per week for secondary and tertiary students living at home, and up to $138.85 per week for those who are independent, depending on the age of students.

Given the limits of the applicable income test, a large percentage of the recipients o f AUSTUDY grants are the children of unemployed people and other social security recipients. In aggregate, approximately 20 per cent of all children come from the families of social security income support recipients. This suggests that the aggregate cost of education income support payments resulting from unemployment is significant. Further research would clarify this issue.

The impact of unemployment on training and education outlays for unemployed people themselves is also important. The higher the level of unemployment, the greater the pressure on school leavers to remain in the education system and improve their qualifications. Similarly, unemployment increases the demand for retraining by people with difficulty in re-entering the work force. Even though increased school retention and retraining are major policy initiatives o f the Government, the additional cost of increased numbers in the education system is still significant. Nevertheless, it is difficult to identify any specific increase in education costs resulting from unemployment other than through particular education and training programs.

In the 1991-92 Budget, Federal Government estimated outlays on training and education programs for the unemployed amounted to some $514 million. A small proportion of these outlays would be ongoing outlays on employment and training likely to be undertaken in any event. To separate out these outlays from those resulting directly from unemployment would require more detailed information than is publicly available.

Heatth outlaysUnemployment can have a significant impact on the health status of people and their demand for and use of health services. The available literature suggests that unemployment undermines mental health and causes an increase in mortality rates. According to Whiteside (1985), 'unemployment levels are easily the best predictor of changing trends in the first admissions to mental hospitals and suicide rates'.

Finlay-Jones & Eckhardt (1981) suggested on the basis of a sample of young Canberra-based CES clients, that similar results would be valid for Australian youth generally. They found that in a sample of 16 to 24-year-olds seeking full time work, 49 per cent had severe psychiatric disorders. Cases of depression accounted for three-quarters of these. The problem followed the onset of unemployment in 70 per cent of cases (Harris, Merrett & Radford 1986).

Quantifying these and other consequences of unemployment on Australian health outlays would be a difficult if not impossible task. It is clear that some component of the growth in aggregate Australian health outlays results directly from unemployment. Mental health is largely the responsibility of state governments and it is in this area that there would be the greatest possibility of identifying direct causal relationships. Several states have embarked on policies of de-institutionalisation in mental health care and direct identification of the cost of unemployment, even as an average per case cost, presents major problems.

Federally, the direct health outlays due to unemployment can be quantified, but the indirect cost due to increased use of health services may be more significant. The direct costs arise from the provision of the Health Care Card to unemployment benefit recipients. The health benefits offered through this card are similar to those provided under the Pensioner Health Benefit Card system though there is a modest charge for pharmaceutical prescriptions.

With the re-introduction of Medicare in 1983, the cost of the Health Benefit Card to the Commonwealth was substantially reduced because all Australians

24 Unemptoyment: the economic and socia! costs


- including the unemployed - now have access to free hospital services in public hospitals and direct payment by the Commonwealth of bulk-billed medical fees. While these changes did not reduce the cost of provision of the Health Care Card, it did remove the special advantages previously available to the Pensioner Health Benefit Card and Health Care Card holders. As the health system now operates, increased unemployment will only increase total Medicare and hospital outlays if it results in increased utilisation of services.

Unemployment also contributes to an increase in hospital care in an indirect manner. Unemployment is likely to force individuals to terminate their private hospital insurance, thus increasing the demand for public care in public hospital accommodation and services. Unless this increased demand merely increases the length of hospital queues or leaves some of the demand for health services unsatisfied, the net impact will be an increase in aggregate health outlays. Families and the older unemployed people are more intensive users of health services than single young people, although overseas studies suggest that unemployment will increase the aggregate use of health services by young people (see for example Ashby 1985).

Despite the lack of data, the cost to our health system is clearly one of the major direct costs of unemployment. Research on possible magnitudes should be given a high priority.

Community servicesUnemployment increases the demand for a variety of community services including family support, and emergency support programs. The cost of other income support programs, including family and emergency assistance provided by state governments with some contribution from the Commonwealth, will also be directly affected by unemployment.

Law enforcement and correction servicesHigh and continuing levels of unemployment have a direct impact on the level of crime and the demand for correctional and other rehabilitation services. For example, Taylor (1982) argues that 'unemployment provides the time, opportunity and ... in some cases the actual motive for crime'. The South Australian Working Party into Unemployment (1976) linked the juvenile offence rate to the unemployment rate. It found that there was a 238 per cent increase in unemployed offenders while the average increase in the number of offenders was only 58 per cent. This then leads to increased demand for

correctional services. One United States' study showed (without necessarily providing a causal relationship), that a 1.4 per cent increase in the level of unemployment corresponded with a 5.8 per cent increase in prison admissions (Smith 1977).

Given the high cost of correctional services and the lifetime impact of becoming a convicted offender, the aggregate costs of unemployment-induced criminal behaviour could well be a major component of the cost of unemployment. The consequences of increased crime for private outlays on household insurance and crime prevention are also significant. There is however no method of determining the direct relationship between such expenditure and unemployment.

26 U nempioymerit: the econo mic and socia! costs

chapters Summary and Concisions

Because of its magnitude, this paper has concentrated on the direct cost of unemployment to government. Nevertheless while it is not possible to quantify the cost of government programs and services provided to individuals, in aggregate these costs will also be a large part of the total cost of unemployment.

Apart from these costs, the cost of unemployment includes lost opportunities and failure (to obtain employment). With continuing unemployment comes an alarming change in attitude as opportunities for skill use, contact with others, control and social position diminish. As a result, the individuals affected can feel hopeless and helpless. Stress, depression, and anxiety can set in. In turn, this causes strains in family relationships, leading to tension and break-ups. The impact of such developments on government outlays and programs in the longer term can only be significant though precise costings may not be possible.

The opportunity cost of unemployment is greatest with long-term unemployment. Lowered aspirations are characteristic of the longer-term unemployed which can only be described as a serious impairment of mental health (see for example Finlay-Jones & Eckhardt 1981). As illustrated in the study IVnMppy F reeJ to exist in a stable and isolated environment is 'fundamentally harmful' to the individual and a fortiori to society. Yet, ironically, although this problem is serious and worsening with levels of unemployment increasing in all Western countries, there is not the outcry one

might expect, as the unemployed just give up or 'drop out'.

Hence it is obvious that the long-term unemployed need more than just income support. They need to be kept active and involved, if they are not to lose their social and work skills for ever. The unemployment 'trap' is both cause and effect: the longer people are unemployed the less likely they are to find employment (Mackay 1986, p.18). The Economist (November 21,1987) has highlighted the success of Swedish education and training in reducing the level of unemployment in that country.

Thus, although it has not been possible to quantify all of the costs of unemployment, there can be no doubt that the actual and potential cost of unemployment is very large indeed not only from the major losses in taxation revenue and the huge costs of direct income support payments. Self-interest alone should prompt governments to explore all possible methods of reducing unemployment.

Chapter 3 demonstrated that the government on average is likely to forgo an amount equal to some 15-60 per cent of the private income lost through unemployment. While no attempt has been made to quantify the direct cost to government of additional outlays on direct programs and service provision resulting from unemployment, in aggregate these are likely to amount to more than 10 per cent of the private incomes lost through unemployment. Using that 10 per cent figure, would suggest a total cost of unemployment to government of between 25 and 70 per cent of the private income lost.

In certain cases the cost of services is likely to be much higher than 10 per cent of the previous income of unemployed people (especially in the case of families with children or people with inadequate access to housing or with major health problems). Thus more detailed and precise information of aggregate costs would be useful. Such information however, would not, change the major conclusions of this study.

The high cost of unemployment to government is an important reason why policies which maximise employment growth and available job opportunities deserve the highest priority. This study supports policies (especially in the education, training, and industrial relations areas) which generate employment, even if this objective is only achieved by re-allocating existing government budgetary outlays.

28 Unemptoyment: the economic and sociai costs

Summary and conclusions 29

There is scope for further research on various topics, including:

* econometric and other macro-economic analyses of the cost to the government of unemployment, using alternative assumptions;

* investigation of alternative uses of income support payments for the unemployed, and the dimension of lost taxation revenue resulting from unemployment;

* methods of reducing the level of unemployment associated with any given level of reduction in community incomes (e.g. job sharing, part time incomes);

* cost-benefit analysis of alternative employment and training programs; and most importantly

* systematic and detailed review of the impact of unemployment on the demand for and cost of major government services.

This paper has emphasised the high costs to government resulting from unemployment. To stand by and accept those high costs of continuing levels of long-term unemployment may well prove not to be the optimal economic policy, even if a hard-headed attitude is taken to the personal and community benefits of reducing levels of unemployment.

Policies involving major reductions in government programs and services, especially those directed to assisting the unemployed, should be viewed with skepticism. Apart from the adverse social impact of such policies, there is a real possibility that they could add to unemployment. The resulting cost of such increased unemployment would frustrate the achievement of the very budgetary objectives given as the raf-MM d'etre of the expenditure cuts.

A comment on the aggregate cost of unemploymentThe aggregate cost of unemployment can be determined by estimating the reduction in private incomes through unemployment. The difficulty is that one cannot envisage a situation where all the people presently unemployed are employed. That would require substantial changes in policy and in the structure of the economy.

The thrust of this study has been to highlight the benefits of reducing unemployment. In that context, using March 1992 jobless figures (about 990 000 unemployed persons and 820 000 beneficiaries), the total direct cost to government of unemployment (i.e. income support payments and taxation foregone) would be between $10 and $18 billion. A 10 per cent reduction in

unemployment would certainly improve budget outcomes by at least $ 1 billion.

These estimates are based on the estimated addition to private incomes that would result from full employment or the designated reduction in the level of unemployment.


Appendixi Unemployment Benefits: Conditions and Features: Aprii 1992

1 To be eligible for benefits a person must be aged between 16 and 64 (male) and between 16 and 59 (female).

2 Applicants must be:* unemployed,* capable of undertaking work,* available for work,* actively seeking work,* registered for employment with the CES.

3 Applicants must be Australian residents.4 Basic rates of fortnightly payments are:

Single 16 to 17 (at home) Family income tested to a maximum of $62.05 per week

Single 16 to 17 (independent) $102.40 per week

Single 18 to 20 (at home) $74.55 per week

Single 18 to 20 (independent) $113.25 per week

Single 21 and over $140.95 per week

Single any age plus children $153.05 per week

Married couple (combined) $255.30 per week

Each child under 13 $30.40 per week

Each child 13 to 15 $42.95 per week

Each non-prescribed student 16 to 24 $17.00 per week

5 The income test allows a free area of $30 per week, subjects the next $40 per week to a 50% reduction, and further reduces benefits on a $1 for $1 basis for all income which exceeds $70 per week.

6 Unemployed persons are also subject to an assets test with the following limits:Allowable assets

Single homeowner $110 750

Single non-homeowner $190 250

Married homeowner (combined) $157 500

Married non-homeowner $237 000

All access to benefits is lost if assets exceed these levels.

7 Rental Assistance of up to $31.45 per week is available to unemployed persons without children renting in the private rental market. The amount increases to $36.75 per week for those with one or two children and to $42.95 per week for more than three children.

8 The normal waiting period for unemployment benefits is one week but this period is extended for up to a further four weeks for persons with liquid assets and/or receiving recreational leave payments at the time of termination of their employment.


Appendix2 Additions! TsbiosTable 11 Numbers unemployed and unemployment rates by sex Australia 1970-1991

August Males FemalesNion&er Ntvn&er

tMMfwployerf Kwe/np/oyed("COO) f%) C000) c%)

1970 36.7 1.0 41.5 2.31975 138.8 3.5 139.7 6.51980 209.6 5.0 184.9 7.41985 348.1 7.8 223.0 8.01986 348.0 7.7 247.6 8.41987 347.0 7.5 254.9 8.31988 305.6 6.5 233.2 7.31989 260.6 5.5 225.8 6.61990 338.0 6.9 249.5 7.11991 502.6 10.2 303.4 8.6

Source: ABS, 7*Ae /o&OMr/orce A ^ ro /to , (various years) Cat. no. 6203.0 and Fisher, 1987.


Tabie 12 Unemployment rates by age and sex (per cent) Australia 1970-1991

August73-79 20-24

Age group 23-34 33-44 43-34 33 & over

1970 2.9 1.3Males0.8 0.6 0.7 0.9

t 1975 10.8 5.2 2.4 2.3 2.2 2.51976 12.7 6.5 2.8 2.3 2.3 1.9

* 1977 15.8 7.2 3.2 2.9 2.5 2.51978 16.4 8.8 3.8 3.3 3.3 3.31979 14.6 8.4 3.7 2.4 2.4 2.71980 14.7 8.5 3.9 2.5 2.8 2.91981 11.2 8.3 4.1 2.4 2.8 3.51982 16.3 11.2 5.5 3.6 3.6 3.31983 23.0 17.2 9.1 6.0 5.9 6.51984 22.1 14.3 7.5 5.0 5.7 5.71985 19.3 12.5 7.1 4.4 4.9 6.71986 18.7 12.3 6.8 4.6 5.5 5.51987 18.1 12.6 7.0 4.8 4.2 5.51988 15.2 10.9 5.6 3.8 4.5 7.31989 12.9 8.0 5.1 3.5 3.0 5.91990 16.6 12.1 7.0 3.8 3.2 9.11991 21.8 16.3 9.9 7.4 6.0 10.6

1970 3.6 2.0Females

2.2 2.8 * *1975 15.1 6.9 5.5 4.5 3.6 *1976 15.8 6.3 5.1 4.0 3.2 *1977 20.3 8.0 5.3 4.5 3.2 *1978 17.2 9.6 6.3 4.2 4.0 *1979 20.4 8.0 6.5 4.2 3.8 *1980 18.8 9.1 5.7 4.3 3.4 *1981 17.0 8.7 6.3 4.4 3.11982 17.0 8.8 6.9 4.8 3.6 *1983 22.2 11.5 9.5 6.8 4.7 *1984 19.7 10.3 7.0 5.6 4.6 *1985 17.1 10.5 7.5 5.3 4.4 *1986 19.5 9.9 7.6 6.0 4.5 3.01987 19.4 10.5 7.5 6.1 4.5 2.21988 16.0 10.9 6.6 4.8 3.9 8.31989 14.6 7.9 5.8 3.9 4.1 2.61990 16.5 9.6 7.1 4.7 4.0 2.51991 20.2 12.9 7.8 5.5 5.7 3.8

3

* Numbers too small for reliable estimates.3aarce : ABS, 77ie /aboar Jorce Aartra/ia, (various years) Cat. no. 6203.0 and Fisher. 1987.

Additional tabies 35

August Age Group73-79 20-24 23-34 33-44 43-34 33-39 33 <& 69 & Tota/

over ° over

Tabie 13 Unemptoyed persons by age (percent) Australia 1970-1991

1970 26.21973 28.51976 30.31977 32.81978 29.61979 30.01980 28.91981 22.41982 24.31983 20.21984 22.41983 21.31986 21.61987 21.01988 20.01989 21.21990 20.31991 16.1

1970 27.21975 37.01976 38.91977 43.21978 35.91979 39.91980 38.31981 34.31982 31.81983 31.01984 31.11985 27.61986 29.51987 27.71988 26.41989 27.51990 25.51991 23.2

16.9 17.419.4 17.521.6 18.820.1 18.121.2 19.023.5 20.723.0 21.324.5 23.724.3 23.723.9 25.222.3 24.121.3 24.720.9 23.921.5 25.021.3 23.318.3 25.721.8 27.520.0 26.1

16.4 18.618.5 19.617.9 19.119.1 17.321.7 20.818.8 21.121.8 19.421.9 22.621.2 23.921.0 24.422.0 21.822.7 24.719.4 23.920.3 24.123.1 23.619.3 25.120.3 25.922.5 23.6

Males13.3 12.512.7 12.011.6 11.112.3 9.611.8 10.610.2 8.610.2 9.410.6 9.712.5 9.313.7 9.613.4 10.413.3 9.914.3 11.415.4 9.014.4 10.915.9 9.013.7 8.018.2 10.5

Females23.4 *13.5 9.112.6 8.611.7 6.910.9 8.211.1 7.411.8 6.512.9 6.214.1 6.915.4 6.615.4 7.715.7 7.417.5 7.718.4 7.817.0 7.816.1 9.817.4 8.717.2 10.8

13.610.06.57.1

4.74.53.65.33.44.64.15.85.04.75.74.94.04.7

**

******

*

*

**

1.3 1.5 2.02.4

100.0100.0100.0100.0

3.1 100.02.5 100.03.6 100.03.8 100.02.6 100.02.7 100.03.3 100.03.7 100.03.0 100.03.3 100.04.5 100.05.0 100.04.7 100.04.4 100.0

100.0100.0100.0100.0

* 100.0* 100.0* 100.0* 100.0* 100.0* 100.0* 100.0* 100.0* 100.0* 100.0

0.8 100.00.6 100.00.2 100.00.3 100.0

* Numbers too small for reliable estimates.* Persons aged 55 and over until 1978..Source; ABS, 7Ac labour/orce Australia (various years) Cat. no. 6203.0 and Fisher, 1987.


Tabie 14 Unemptoyed persons: duration of current period of unemptoyment by sex (per _________cent) Australia 1970 to 1991_______________________________

Augustunder 4 4

under ## and

under 7 J

Duration (weeks) 73 and 26 and

under 26 under 3232 and 63* and

under 63 under704gn<% 7oia/

Males1970 57.5 16.6 19.1 X 100.01975 29.8 23.8 17.9 13.3 15.2* 100.01976 23.5 18.2 16.4 14.9 27.0* 100.01977 18.0 17.0 16.0 19.1 29.8* 100.01978 18.7 13.6 13.7 18.7 20.1 7.8* 3.1* 4.3 100.01979 18.1 14.7 12.4 16.1 19.3 9.1* 4.3* 5.9 100.01980 18.8 13.5 11.4 16.3 19.8 6.5* 3.9* 9.7 100.01981 18.0 16.5 11.2 13.6 16.9 8.2* 2.9* 12.8 100.01982 19.5 16.6 11.6 13.5 19.3 6.4* 2.9* 10.0 100.01983 9.4 9.7 9.5 15.4 27.3 11.9* 4.7* 12.2 100.01984 12.6 10.4 9.2 13.6 19.5 10.4* 7.3* 17.0 100.01985 13.5 9.3 7.5 13.7 19.3 9.5* 4.3* 22.8 100.01986 14.7 11.2 8.7 14.1 19.4 7.8* 4.4* 19.6 100.01987 13.6 10.4 8.9 13.7 20.0 8.9* 4.5* 20.0 100.01988 14.9 10.7 9.2 14.8 18.1 6.6* 5.8* 20.0 100.01989 18.5 14.8 8.5 13.2 16.9 5.4* 4.6* 17.9 100.01990 15.8 14.9 12.0 14.8 18.1 6.1* 4.1* 14.2 100.01991 11.5 10.8 10.5 16.1 25.3 8.8* 6.5* 10.6 100.0

Females1970 47.5 29.7 25.1 100.01975 30.1 23.3 15.6 13.6 17.4* 100.01976 27.8 16.8 17.0 15.9 22.5* 100.01977 18.8 19.7 16.8 15.5 29.2* 100.01978 24.7 14.4 9.7 16.1 19.4 5.8* 4.2* 5.7 100.01979 22.4 12.8 11.0 16.6 20.5 7.4* 2.6* 6.6 100.01980 19.7 14.8 10.4 15.2 20.3 7.4* 3.8* 8.3 100.01981 21.9 14.1 13.0 14.1 19.1 6.3* 3.1* 8.4 100.01982 23.0 14.4 10.9 12.9 20.4 6.9* 3.0* 8.5 100.01983 16.2 12.6 9.8 14.4 21.7 9.0* 4.0* 12.4 100.01984 19.3 10.9 10.7 12.8 21.0 8.3* 4.5* 12.5 100.01985 21.1 11.1 9.6 13.5 22.6 7.4* 3.2* 11.4 100.01986 21.0 11.3 11.2 14.5 20.7 6.8* 3.2* 11.2 100.01987 21.1 12.3 10.0 14.4 ' 20.0 8.5* 3.2* 10.5 100.01988 21.4 11.9 9.6 13.3 20.5 5.7* 5.1* 12.4 100.01989 25.8 14.2 10.7 14.0 18.3 4.6* 3.5* 8.9 100.01990 22.1 15.0 10.8 13.2 21.0 4.6* 4.3* 8.9 100.01991 16.1 11.0 9.8 16.0 23.7 8.2* 5.7* 9.6 100.0

* 77:6 previous duration was 7# wee%s.Source. ABS, 7*Ae /ahour/dree Australia, (various years) Cat. no. 6203.0 and Fisher, 1987.

Additions! tabies 37

Tabie 15 Unempioyed persons: proportion married within age group by sex (per cent)Australia 1978 to 1991

AugustH -7P 20-24 23-34

Age group33-44 43-34 33-39 60-64

unemployed

7ofa/em

ployed

1978 0.4 15.2 49.5 66.2Males

64.5 60.4 # 32.1 69.21979 1.0 16.9 49.1 77.8 65.0 76.4 . * 32.9 68.81980 0.4 13.2 52.8 71.9 70.0 67.2 * 33.5 68.11981 1.2 13.2 48.7 60.7 70.2 70.6 * 34.5 66.61982 1.5 15.3 44.4 67.4 72.8 81.9 76.4 34.8 67.21983 1.5 14.7 53.4 74.6 78.3 79.1 4! 40.6 67.81984 1.4 15.6 52.0 65.3 71.6 75.4 81.6 38.2 67.01985 0.3 15.5 44.6 71.7 73.3 74.0 66.0 37.8 66.11986 1.9 16.9 50.4 71.5 66.0 70.0 75.7 39.4 65.81987 * 12.9 45.9 68.8 68.5 78.2 79.6 37.6 65.41988 1.6 21.4 54.4 67.9 68.9 69.0 79.6 42.4 65.61989 1.6 17.6 50.1 68.8 72.6 63.0 80.0 41.2 64.61990 3.2 16.1 51.0 70.8 75.9 60.9 72.6 39.7 66.11991 2.0 15.7 50.0 69.3 67.5 83.8 78.5 43.7 66.2

1978 5.8 35.6 70.9 84.9Females

60.9 * * 40.1 61.41979 4.3 31.4 71.0 74.1 68.9 * * 36.6 60.81980 3.8 30.0 62.4 74.0 59.1 * * 33.4 59.81981 4.3 26.6 65.3 75.2 66.2 * * 36.9 59.11982 2.9 23.7 60.4 74.4 68.0 * * 36.5 58.81983 5.4 20.8 64.8 72.7 64.2 * * 38.5 59.31984 5.0 27.1 67.6 73.8 57.7 * * 38.3 59.21985 6.1 26.7 65.1 72.1 62.5 * * 40.7 58.91986 4.4 27.6 59.2 62.9 57.0 * * 37.2 61.11987 * 29.3 58.7 69.2 69.4 * * 40.4 61.21988 6.8 28.1 59.2 62.5 68.0 36.7 42.1 39.0 61.31989 5.6 22.1 61.8 61.8 57.6 41.9 53.8 38.0 61.11990 8.6 26.3 54.5 62.2 55.6 44.9 33.3 38.4 61.11991 6.3 23.8 57.6 66.5 64.6 52.1 60.0 40.3 61.7

* Number too small for reliable estimate.Soiirce: ABS, 77:e labourybrce Au^tra/ia, (various issues) Cat. no. 6203.0 and Fisher, 1987.

38 Unemp!oyment: the economic and sociai costs

Tabie 16 Numbers of unemployment beneficiaries Australia 1970-1991

August Males('000) %

Females('000) %

Total persons('000)

1970 7.8 68.4 3.6 31.6 11.41975 102.6 66.4 51.8 33.5 154.41976 133.5 70.0 57.1 30.0 190.61977 175.9 70.4 73.9 29.6 249.81978 202.6 72.1 78.2 27.9 280.81979 204.4 68.6 93.6 31.4 298.01980 198.8 67.9 93.8 32.0 292.61981 214.3 69.6 93.5 30.4 307.81982 306.0 72.7 114.6 27.2 420.61983 465.7 76.2 145.1 23.8 610.81984 418.6 74.7 141.7 25.3 560.31985 391.3 73.6 140.4 26.4 531.71986 412.3 73.1 151.6 26.9 563.91987 373.0 73.2 136.3 26.8 509.31988 326.2 73.1 119.8 26.9 446.11989 264.8 72.2 101.8 27.8 366.61990 326.4 74.0 114.9 26.0 441.31991 324.7 74.7 177.6 25.3 702.4

Source: DSS, Survey unerwp/oy/werU herte/lf recipients (various years) and Fisher, 1987.

Additions) tabies 39

Tabte 17 Unemployment beneficiaries by age Australia 1970-1991August

76-79 20-24 25-34Age group35-44 45-4P 50-34 33 pluj

Total("000)

1970 12.8 12.1 16.8Males (per cent) 18.8 11.0 9.8 18.6 7.8

1971 14.8 16.0 18.4 17.6 9.4 8.6 14.9 13.91972 16.5 19.7 19.3 15.7 8.8 7.4 12.4 32.81973 20.6 17.4 16.7 13.6 8.1 8.1 15.3 20.91974 22.2 19.5 18.7 13.2 7.5 7.1 11.8 33.71975 25.5 21.7 20.2 11.9 6.0 5.7 9.0 102.61976 24.5 21.7 20.7 12.3 6.0 5.9 9.0 133.51977 22.5 23.1 22.6 12.3 5.6 5.5 8.3 175.91978 20.9 23.5 23.8 12.4 5.5 5.6 8.3 202.61979 21.3 23.8 24.4 12.2 5.1 5.3 7.7 204.41980 21.0 24.4 25.3 12.1 4.8 5.1 7.3 198.81981 18.5 24.3 26.8 12.8 4.9 5.0 7.7 214.31982 17.2 25.2 28.0 13.5 4.7 4.6 6.9 306.01983 16.0 24.1 28.2 14.9 5.0 4.7 7.2 465.71984 16.0 23.4 27.7 15.0 5.1 4.7 8.0 418.61985 15.3 23.0 27.9 15.3 5.3 4.7 8.5 391.31986 15.4 23.0 28.3 15.3 5.1 4.5 8.4 412.31987 14.2 22.1 28.8 15.7 5.2 4.7 9.3 373.01988 15.0 16.7 30.0 16.9 5.5 5.1 11.0 326.21989 14.0 15.7 29.9 17.1 5.5 5.1 12.8 264.81990 15.7 16.7 30.3 16.9 5.1 4.5 10.9 326.41991 15.8 17.3 30.3 17.6 5.3 4.4 9.3 524.7

1970 48.2 21.6 9.6

Females (per cent) 8.3 5.2 3.0 4.1 3.6

1971 50.3 22.7 9.1 6.9 4.8 3.0 3.1 5.31972 47.0 24.8 9.7 6.9 5.1 3.2 3.2 10.41973 57.2 21.0 7.9 5.1 3.8 2.3 2.6 11.51974 57.6 22.1 8.0 5.0 3.5 2.1 1.7 15.61975 55.2 22.5 9.7 5.4 3.4 2.2 1.6 51.81976 58.1 21.5 8.5 4.9 3.2 2.1 1.7 57.11977 54.5 24.1 9.5 5.0 3.2 2.0 1.7 73.91978 51.5 26.2 10.3 5.1 3.3 2.0 1.6 78.21979 52.0 27.2 10.2 4.8 2.8 1.6 1.4 93.61980 50.6 28.7 10.8 4.8 2.5 1.4 1.3 93.81981 45.6 31.4 12.4 5.1 2.8 1.4 1.3 93.51982 41.8 33.6 13.7 5.6 2.8 1.4 1.2 114.61983 38.8 33.5 15.1 6.7 3.2 1.4 1.2 145.11984 37.8 32.9 15.8 7.3 3.5 1.5 1.3 141.71985 36.0 32.0 16.9 8.1 3.9 1.7 1.5 140.41986 35.2 30.8 17.7 8.9 4.0 1.8 1.6 151.61987 33.1 30.4 18.4 9.8 4.4 2.1 1.7 136.31988 34.7 22.6 20.1 12.4 5.4 2.8 2.0 119.81989 33.7 21.4 20.3 12.8 5.9 3.5 2.3 101.81990 34.5 21.5 20.1 12.4 5.8 3.6 2.0 114.91991 35.0 21.9 19.2 12.3 6.0 3.8 1.8 177.6

&7Krce.* DSS, SMrvey hene/ir recipient and Fisher, 1987.


Tabte 18 Mate unempioyment beneficiaries: mean and median duration of benefit by age Austraiia 1983-1991

August Age group

7S-20 27-24 25-34 33-44 43-34 33-39 60+ 7bfa/

Mean duration (weeks)1983 23.2 35.7 41.0 47.8 51.0 59.3 63.5 66.5 46.01984 24.1 40.4 49.2 59.7 66.8 75.2 80.4 84.5 57.11985 24.2 41.7 52.4 66.9 78.5 88.2 95.1 99.5 64.61986 23.4 39.6 50.0 66.3 81.4 94.8 102.8 109.9 65.31987 24.2 39.8 52.1 67.8 84.8 98.8 108.1 114.7 68.71988 23.4 39.3 53.9 70.2 88.2 102.1 117.0 122.3 73.81989 20.0 35.0 51.0 69.6 89.8 106.7 127.9 136.6 76.41990 16.6 22.6 35.4 49.9 64.0 83.7 119.4 140.1 57.11991 19.2 25.1 34.9 43.8 50.1 62.0 92.6 123.6 47.9

Median duration (weeks)1983 18.8 26.6 28.3 31.4 31.7 36.6 38.7 40.7 29.71984 18.1 26.4 28.6 35.4 41.6 50.7 58.6 66.7 33.61985 17.7 26.1 28.6 37.3 46.4 56.8 67.1 77.7 35.61986 17.4 23.7 25.3 32.7 41.7 56.6 69.6 83.4 31.71987 18.8 24.4 27.3 33.6 41.7 54.7 66.7 80.4 33.11988 14.5 21.6 27.8 34.2 42.5 54.6 74.7 84.9 35.41989 12.5 17.4 23.0 30.5 40.5 55.3 84.0 97.0 33.11990 11.2 13.9 18.3 21.1 24.5 33.0 66.1 97.2 21.91991 14.2 17.8 22.8 24.4 24.7 26.9 37.8 65.8 23.7

Source.* DSS, Survey of unerwp/oymenT henefir recipient and Fisher, t987.

Additionaitabies 41

Tabte 19 Female unemployment beneficiaries: mean and median duration of benefit by age Austraiia 1983-1991

August

Under 73 73-20 27-24

Age group

23-34 33-44 43-34 33+-3P Tor of

Mean duration (weeks)

1983 22.7 37.4 49.1 51.6 51.9 63.7 70.1 42.71984 23.0 39.4 53.6 59.9 61.6 74.4- 85.0 47.51983 23.3 40.3 54.4 63.2 65.6 80.4 87.6 50.01986 23.3 39.5 52.7 62.4 65.4 82.8 86.2 49.81987 23.7 38.3 52.4 62.9 65.9 84.8 90.6 50.81988 23.3 37.9 53.0 64.0 63.1 82.3 93.0 53.21989 19.9 35.4 52.1 65.1 63.4 82.1 95.6 53.11990 17.3 23.5 38.2 49.6 50.2 68.8 98.8 40.01991 19.3 24.6 35.4 41.4 42.9 55.1 82.1 36.0

Median duration (weeks)

1983 18.3 26.7 29.7 29.4 30.1 37.6 40.7 27.11984 17.7 26.7 29.3 31.6 35.3 47.3 57.1 27.71985 18.3 26.7 28.6 31.4 36.7 48.0 53.3 27.71986 17.7 25.6 26.7 29.3 32.7 47.7 51.1 26.61987 19.3 25.6 27.7 29.7 34.4 49.6 60.6 27.41988 14.5 22.4 28.6 30.2 35.0 44.2 56.1 26.91989 13.0 19.3 25.8 28.4 32.3 43.7 58.7 24.71990 12.2 15.0 20.3 22.3 24.3 33.9 58.3 19.31991 14.7 17.7 22.8 22.4 23.3 26.9 38.8 20.7

ScKrce.' DSS, Storey o/unem/t/oywett/ benefit recipienrs and Fisher, 1987.


Bibtiography

Ashby, P 1985,7'i:e long term unemployed: action/or aforgotten million, NCVO Policy Analysis Unit, London.

Australia, Budget papers noj. 7 and 4, AGPS, Canberra.Australian Bureau of Statistics Tize labour /orce Australia, (Series), Cat. no. 6203.0), ABS,

CanberraAustralian Bureau of Statistics Australian National Accounts; National /ncome and EjrpenditMre,

Cat. no. 5206.0, ABS, Canberra.Balloch, S et al. 1985, Caring/or Mngmpioyedpeople, Bedford Square Press, London.Blakers, C 1984, 'The effects of unemployment: a summary of the research', Toutiz Studies

Bulletin 5 (4), Youth Studies, ANU, Canberra.Bosanquet, N 1987, A generation in limbo; government, tize economy and tize 53-65 age group in

Britain, Public Policy Centre, London.Boyce, J 1991, Out of work out of home: unemployment and youth homelessness (unpublished

paper), Brotherhood of St Laurence, Melbourne.Bull, D & Wilding, P (eds) 1983, Tbatcizerism and tize poor, Child Poverty Action Group, London.Castle, R & Mangan, J. (eds), 1984, Unemployment in tize ez'gizties, Longman Cheshire,

Melbourne, pp.3-23,204-224.Crossley, L 1990, Cizildren and tize future o/*work, Child Poverty Policy Review 3, Brotherhood

of St Laurence, Melbourne.Department of Social Security 1970-1990, Quarterly survey qf unemployment benqii'ciaries',

AGPS, Canberra.

Department of Social Security 1990, Survey of Mnetnp/oyfMenr Aene/i't recipients., AGPS, Canberra.

------ 1991, Survey ofToA SearcA andNE1VS7'APTAllowance recipients, AGPS, Canberra.Dixon, D A 1973, 'The full employment budget surplus concept as a tool of fiscal analysis in the

United States', in Papery, Vol. 20, no. 21, pp.203-226,1.M.F.EcowowHyf 1987, 'A job for everyone who wants one' 21 November, pp.5-6.Edgar, D 1988, TAe social coy? of poverty, paper presented at the Child Poverty in Australia

Conference, April 1988, Melbourne.Evason, E 1985, On ?Ae edge.* a study ofpoverty and long term anewip/oywien? in NortAern /reiand,

Child Poverty Action Group, London.Pinlay-Jones, R & Eckhardt, B 1981, 'Psychiatric disorder among the young unemployed', in

Australian andNew Zealand Journal of PsycAiatry, 15, pp.265-270.Fisher, E 1987, 'Occupation: unemployed trends in unemployment in Australia 1970 to 1986',

Social Security Review, Background Discussion Paper No.20, Department of Social Security, Canberra.

Geldens, 1984, 'Towards fuller unemployment,' Economist 28 July, pp. 17-20.Griffiths, D 1972, Unemployment.' ?Ae facts and ofects, Brotherhood of St Laurence, Melbourne.Harris, R D, Merrett, S & Radford, A J 1986, 7'Ae ejects of Mnemployment.* pAyylcal and

psycAological AealtA, Flinders University, Adelaide.Hart, R E ed. 1986, Unemployment and laAour market policies, Gower, England.Hesson, J E 1978, 'The hidden psychological costs of unemployment' in Jnteiiect, April, p.389.Kcndig, H & Paris, C 1987, Towards fair sAares in Australian Ao using, A Report to the IYSH

National Committee of Non-government Organisations, Canberra.Kerr, C 1983, 'Does unemployment cause ill health?' in New Doctor, September/October, pp.3-7.Lister, R 1979,7'Ae no-cost no-Aenefit review, Child Poverty Action Group, London.Lister, R & Burghes, L (eds) 1981, Unemployment; wAo pays ?Ae price? Child Poverty Action

Group,London.MacKay, H 1983, 'Social impact of unemployment' in Perception, 6 (5), pp.32-34.Mackay, K 1986, 'Long Term Unemployment' in Bulletin of LaAour MarAe? BesearcA, no. 19,

p.18.McClelland, A & Sheen, V 1988, Unemployment; ?Ae re/orm of Aene/its and training. Policy in

Practice No.3, Brotherhood of St Laurence, Melbourne.Mukherjee, S 1976, 'Unemployment costs' PEP Vol. XLII no. 561, London.New Society 1987, 'Discriminating employers' Vol. 82, no. 1300, p.14.OECD 1984, /VigA unemployment; a cAallenge for income support policies, Paris.OECD 1985, Employment growtA and structural cAange, Paris.Piachaud, D 1986, 'A family problem' New Society, 13 June, p.15.'Psychological aspects of long-term unemployment' in 7'Ae PsycAoiogicai Components in

Long-Term Unemployment, Training Paper 23.


Bibliography 45

Saunders, P 1987,TAe social security review - grow?/: in Australian social ̂ cHrl/y Expenditures, 7959-60 to 79BJ-B6, Department of Social Security, Canberra.

Seabrook, J 1987, 'Human sacrifices' New Society, Vo!. 82, no. 1296, p.29.Sheehan, P & Strieker, P 1981, T/idtien unemployment.* tAe Australian experience, Institute of

Applied Economic and Social Research, Melbourne.Sheen, V 1992, Policy prescriptions for unemployment in the 1990s, forthcoming, Brotherhood

of St Laurence, Melbourne.Sheen, V 1992, Region in recession; a case study ofregional e?np/oy?nenf anti ttnentp/oynient in

Geelong, Brotherhood of St Laurence, Melbourne.Sheen, V 1988, A/air chance in education, Policy in Practice No. 1, Brotherhood of St Laurence,

Melbourne.Sheen, V & Trethewey, J 1991, Gnetnpioytnenf in tAe recession.* policies /or re/orm, Brotherhood

Comment No. 1, Brotherhood of St Laurence, Melbourne.Sinfield, S & Fraser, N 1985, 7*Ae real cosf of unemployment, Department of Social

Administration, University of Edinburgh.Smith, P 1977, Unemployment.* costs anti casualties, Australian Council of Social Service,

Sydney.Taylor, L 1982, Unemployment, crime anti young people, KeepOut, London.Unemployment Bulletin 7937, 'Research and campaigning for the unemployed', Issue 23,

London. Warr, P 1987, 'This Unhappy Breed' New Society, 10 July, pp.16-18.Whiteford, P 1987, 'Unemployment and families' Australian Bulletin ofLabour, Vol. 14 no.l,

pp.338-357.Whiteside, N 1985, 'Social consequences of unemployment - the question of health', Bulletin of

labour market research No. 16, p.10.Wilkins, S (ed.) 1980, 'Jobless marriage breakers' TAe Age, 23 April, p.36.

L/HcmpEn/menf; fEe Economic anti Social Costs

Unemployment in excess of 10 per cent is costing the government between $10 and $18 billion.* 990,000 Australians are out of work and 829,000 are receiving

unemployment benefits.* Add to this the hidden unemployment reflected in declining work

force participation.

Through lower tax collections and higher welfare outlays, up to 60% of private income is lost to government.This study highlights the benefits of reducing unemployment — a 10% reduction in unemployment would improve budget outcomes by a minimum of $1000 million.

NEW REVISED EDEEfON

Brotherhood of St Laurence Melbourne 1992

ISBN 0 947081 57 7

Date post:	10-Aug-2020
Category:	Documents
Upload:	others
View:	0 times
Download:	0 times

RESEARCH FOR ACTION Unemployment: the Economic and Social...

Documents