The official unemployment rate released by the ABS hides the true impact of the lockdown measures on the economy and employment. In addition to the 823 thousand unemployed, there are 1.26 million Australians who have been forced out of work since March following the lockdown that are not included in the unemployment rate.
The unemployment rate for April jumped to 6.2 per cent, up from 5.2 per cent in March. The increase was substantially lower than many forecasts. Following the release of the unemployment rate Treasurer Josh Frydenberg stated the lower than expected rate “reflects the success of the JobKeeper program”.
The JobKeeper program has allowed many businesses to continue to operate and provide their employees with work, but it has also masked the true extent of unemployment by shifting people who are without work out of the unemployment number. The unemployment rate is the number of unemployed divided by the labour force consisting of both employed and unemployed. The rate, therefore, does not include employed people working zero-hours or those who have left the labour force altogether.
In March there were 13.7 million people in the labour force. This included 13 million people who were employed and 719 thousand people who met the unemployment criteria of actively searching for work and available to work in the reference week. In April the labour force fell to 13.2 million people with 12.4 million employed and 823 thousand unemployed.
This means an unprecedented 490 thousand people left the labour force since March, meaning that they are not employed and do not meet the unemployment criteria. A further 770 thousand people according to data released last week by the ABS have been classed as employed but for economic reasons are working zero hours. These individuals are reported by the ABS as having “no work, not enough work available, or were stood down” and are likely to be receiving the JobKeeper payment.
Including as unemployed the 490 thousand Australians who were part of the mass exodus of the labour force and the 770 thousand who are employed but working zero hours for economic reasons, in addition to the 823 thousand counted officially as unemployed, gives a staggering unemployment rate of 15 per cent with over two million people being without work.
JobKeeper should not be deemed successful because it has suppressed the official unemployment rate. The Commonwealth Government has, in effect, created a way for people to receive unemployment benefits without contributing to the unemployment rate. In effect, businesses who employ zero-hour staff have become a type of pseudo Centrelink. The only difference is a zero-hour employee may be eligible for a $1500 fortnight payment compared with around $1,100 from the JobSeeker unemployment payment.
There is no substantial difference between someone out of work receiving JobSeeker and someone out of work receiving JobKeeper. One is deemed to be unemployed and receives a government payment, while the other is “employed” but working zero hours and receives a “wage” fully subsidised by the government.
The real test for JobKeeper will come when the payments cease, with the program currently slated to end on 27 September, six months after it began. The purpose of the scheme is to keep businesses afloat through the lockdown so that they can employ in the future without government subsidised wages. At this stage, it is not known how many businesses are simply walking dead, maintaining a semblance of operation to allow their staff to access JobKeeper but with no prospect of being able to stand on their own feet after September when the JobKeeper payments end.
The momentous task of getting two million Australians back into work will not be achieved without the government undertaking serious economic reform. Lifting the lockdown measures will allow many people to return to work, but thousands of others will find that there is simply no job to return to.
To allow the private sector to rebuild, generate jobs, and provide the dignity of work, businesses need to be freed from excessive levels of red and green tape. Small businesses, that employ more than 40 per cent of Australian workers, need to be freed from the shackles of the Fair Work Act that destroys jobs and prevents hiring. And Australia’s crippling high energy costs caused by government schemes pushing renewables needs to be urgently addressed.
Aiming at simply returning to business, as usual, will ensure that thousands of Australians will find themselves out of work for a long time to come.