Fiddling with criteria to hide unemployed

During recessions and financial crises, governments have a habit of manipulating unemployment figures to make the unemployment rate appear to be lower than it really is.

The manipulation typically involves pushing long-term unemployed people with a minor impairment on to the disability pension, which not only takes them off unemployment benefits but also reduces the unemployment rate because they no longer have to look for work and are no longer counted in unemployment statistics.

However, the government has been too clever by half in portraying itself as good economic managers following the global financial crisis because it has been fiddling with the eligibility criteria and hiding the unemployed on unemployment benefits such as Newstart Allowance (NSA). It has done this by turning more than 110,000 people on unemployment benefits classified as jobseekers (people who have to look for work as a condition of receiving their welfare payments) into non-jobseekers (people who no longer have to look for work to receive welfare payments).

In July 2009, 613,000 people were receiving unemployment benefits: 427,500 were classified as jobseekers and 185,500 as non-jobseekers.

Just three years later, in June last year, there were 632,000 people on unemployment benefits, but the number of jobseekers had fallen by 22 per cent to 332,000 and the number of non-jobseekers had increased by 62 per cent to more than 300,000.

Following reforms to Parenting Payment, 760,000 people have been receiving unemployment benefits as of May this year, but only 400,000 of them are jobseekers and the remaining 360,000 are non-jobseekers.

The main reason for the skyrocketing number of non-jobseekers on unemployment benefits is that NSA recipients are required to enter into work experience activities (including education and training) after 12 months, and early school-leavers are required to complete Year 12 or its equivalent to receive Youth Allowance (Other) (YAO) instead of looking for work.

As a result, the number of people on unemployment benefits undertaking education and training has skyrocketed by 138 per cent across the past three years, from 62,500 in July 2009 to nearly 150,000 in June last year.

This is not necessarily a good thing: if people on welfare do not have to look for work, they will stay on welfare for longer. For example, the proportion of long-term YAO recipients has increased from 49 per cent in July 2008 to 59 per cent in June last year.

It also means that tens of thousands of people who would otherwise be counted by the Australian Bureau of Statistics as unemployed are not because they are not looking for work.

My estimates show that the government has managed to reduce the unemployment rate in Australia by between 0.2 per cent and 0.5 per cent since July 2009 because of these policies. This also means the government's claims to being a good economic manager following the global financial crisis are overblown because the government artificially lowered the unemployment rate by pushing tens of thousands of people who otherwise would be unemployed out of the workforce and into education and training.

The problem here is that more education and training is not always better for everyone.

Generally, people are better off by upskilling or reskilling (particularly new mothers returning to the workforce) to improve their employability, but there are marginal diminishing returns from more education and training, and sometimes people are worse off.

If you haven't learned to read, write or count after 10 years of school, another two aren't going to do you much good. That time would be better spent working or at least looking for work.

Rather than hiding the unemployed on unemployment benefits and pushing tens of thousands of people out of the workforce, the government should ensure that everyone on unemployment benefits who is capable of working is required to look for work in addition to fulfilling mutual obligation requirements such as work-for-the-dole.

Even the OECD has said: "The non-jobseeker population (in Australia) on unemployment benefit is so large that it needs more analysis and attention."

The rapid increase in the number of non-jobseekers on unemployment benefits from July 2009 is a scandal and evidence that the government has been manipulating unemployment data and the lives of the unemployed for its own political benefit.

The government has not been honest with the Australian people. Every time they point to Australia's relatively low unemployment figures, remember that 360,000 people receiving unemployment benefits are not required to look for work.

Andrew Baker, research fellow at The Centre for Independent Studies, is author of Not Looking for Work: The Rise of Non-Jobseekers on Unemployment Benefits, released today.