Gerard Henderson has a bit of a spray at “Labor… the Coalition… the Greens… government-appointed tribunals such as Fair Work Australia and the Fair Work Ombudsman… the trade unions… academics and journalists” in his column in today’s SMH. His complaint is that everyone (bar Henderson, of course) is silent about long term unemployment. He claims that the Fair Work Act and associated reforms (like the creation of modern awards) has led to an increase in the number of long term unemployed people. He’s wrong.

His first mistake is this:

The Australian Bureau of Statistics recently published a report titled Labour Markets and Related Payments.

No, they didn’t. The Department of Education, Employment and Workplace Relations (DEEWR) did. I’m nitpicking here, clearly, but Gerard Henderson has never been one to let a trivial point go through to the keeper.

It revealed that in January this year 349,806 Australians were long-term recipients of the Newstart allowance, meaning they have been on unemployment benefits for a year or more. In January 2009 the relevant figure was 258,403. That is an increase of about 90,000, or more than 33 per cent, in two years.

True enough. What happened in late 2008/early 2009 that might have led to an increase in long term unemployment? A global recession happened. But that’s not where Henderson pins the blame.

The Fair Work Act has disadvantaged the long-term unemployed. This is partly due to decisions by Fair Work Australia to increase hourly rates in the hospitality industry at weekends, thus discouraging small businesses from operating in the seven-day economy.

He cites no evidence to support his claim that the Act and the modern awards (the source of those alleged increases in weekend hourly rates) have “disadvantaged the long-term unemployed”.  He merely points to a rise in the number of long term unemployed people since January 2009, and concludes that the Act and the tribunal must be to blame.

The problem is that the timing is all wrong. By definition, it takes a while for a downturn to start to affect long term unemployment. You’re only long term unemployed if you’ve been out of work for a year or more, so you generally see long term unemployment rise about a year after the overall unemployment rate starts to rise. That’s exactly what the data show.

In January 2009, as Henderson points out, there were 258,400 long term Newstart recipients.  By July 2009, the month that the Fair Work Act took effect, there were 270,978. By January 2010, the month that the modern awards came into effect, featuring the provisions that Henderson partly blames for the increase in long term unemployment, the number had risen to 311,843. Bear in mind that a person who becomes long term unemployed has been out of a job for a year or more, so those 311,843 people had been searching for work since at least January 2009. For this rise to be attributed to the creation of modern awards would require a somewhat elastic view of the space-time continuum.

And yet, Henderson’s case is even weaker than it appears. Why? Because DEEWR itself (the publisher of the data) cautions that:

There is a break in the series between June and July 2009. Post July 2009 job seeker data is not wholly compatible with previously published data.

So, you can’t really use the DEEWR data to make a long term comparison. What we can use is the ABS Labour Force data.

Using this data we can look at the number of long term unemployed people as a proportion of the labour force. On this measure, graphed below, the level of long term unemployment is actually lower now than it was when the modern awards came into effect!

Ratio of long term unemployed people to all persons in the labour force (%): April 2001 to January 2011 (seasonally adjusted)

Unemployment started to rise from February 2008, slowly at first. Around a year after unemployment began to rise, long term unemployment began to rise. Some of the people who lost their jobs (or entered the labour force and couldn’t find work) from early 2008 moved into the ‘long term’ column. Since early 2009, the number of long term unemployed people as a proportion of the labour force has not risen significantly.

Bear in mind the year-long lag between in long term unemployment’s response to an event: if the modern awards had created a long-term unemployment spike, we’d expect to see it from January 2011. We don’t. Instead, long-term unemployment fell in January in both absolute terms (2 300 fewer LT unemployed people) and relative terms (as a proportion of the labour force).

The ratio has now fallen for three months in a row (remember these data are seasonally adjusted). It is difficult to understand how you could infer from the data that the Fair Work Act and/or the creation of the modern awards has resulted in an increase in long term unemployment.

Note: I work in the union movement, but the views expressed in this blog are not necessarily those of my employer.

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