Thursday, November 04, 2021

Relationship between unemployment rate and unemployment benefits

Graphs are great tools for getting the big picture. Here I have plotted the unemployment rate against 'unemployment' benefits:

The heavy blue line is a combination of unemployment and sickness benefits. In 2013 the two benefits were combined into the single Jobseeker benefit (heavy brown line) but still with two categories - JS Work Ready and JS Health Condition and Disability.

The broken line is the official unemployment rate BUT expressed as a percentage of 18-64 year-olds, not 15+. Thats why in Sept 2021 it's 4.4% - a point higher than the rate announced yesterday of 3.4%

The vertical lines mark the changes of government.

Points of note:

1/ The bottom line shows sickness is increasing. This is being driven primarily by increasing  psychiatric and psychological conditions. When National became government they believed not enough attention was being paid to those people on a sickness benefit. So they abolished it, intending case managers would put as much employment effort into that group if they were part of the overall jobseeker group. It appears that the line was arrested for a time but after Labour came back in in 2017 the line started to trend up again.

2/ During Labour's 1999-2008 term the heavy blue line is thereabouts the unemployment rate. During National's term 2008-2017 the heavy blue/brown line is consistently under the unemployment rate. This probably reflects at tougher, more effective approach to benefits (which some would describe as 'punitive').

3/ Covid is largely responsible for the late steep upward trajectory of the heavy brown line BUT is was trending up before March 2020. My last post explained why the line has crossed the unemployment rate line and there is now a large gap between the two.

4/ The covid upturn is very similar to the GFC onset in magnitude. Lockdowns (policy within control of government) caused as much job loss as the global financial crisis (outside of government control).

5/ Another observation some would make is the gap between the unemployment rate and unemployment benefit lines during National's term is now being corrected by Labour. Labour is more generous with benefits. The gap right now is a reversal of the period 2011-17.

There's another line.

It's the very fine line between being generous with benefits and entrenching dependency and all the misery that entails.

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