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David Uren, Economics correspondent | March 31, 2009
Article from: The Australian

THERE could be one person of working age on welfare for every three people with a job by the time the recession ends, according to one of Australia’s leading economists, Bob Gregory.

The welfare blowout, with more than a million more people likely to be relying on benefits, will far exceed the threat posed by an increasing aged population and has so far been overlooked by federal Government and Treasury. Professor Gregory has modelled the changes in the welfare population following the 1990-92 recession, and says the rise in unemployment is likely to be followed by increases in the number of people on disability, carer and sole-parent pensions.

A paper to be presented by Professor Gregory to a Victoria University conference next month shows the full-time male workforce never recovered from the 1990-92 downturn, when it dropped from a historic average of about 62 per cent to 54 per cent of the male working-age population.

“What happens is that male unemployment goes up, and then, as time goes by, the unemployment rate comes down, not because there are more jobs but because the unemployed gradually seep into disability payments,” he says.

Professor Gregory says that a year or two after a recession, half the men on disability benefits have come from the unemployment pool, where they have been in and out of jobs for some time. It is usually men aged over 55 years.

The rise in the number of women on welfare during a recession is more likely to be an indirect result of male unemployment.

“For women, because the men didn’t have jobs, they took up welfare as partners, carers or as lone parents,” he says in the paper.

He says the Government and Treasury have not yet started to calculate the effect of what could prove to be an additional million people on welfare, sustained for six or seven years.

“The only budgetary implication that the Government has consciously faced has been around what to do about old-age pensioners, where they seem to have taken a gulp and decided to go ahead anyway.”

Any decision to raise the age pension is likely to spill over to the disability, carers and sole parent pensions, which are all based on the same formula.

The paper says the worst outcome for men during recessions partly reflects their employment in sectors such as manufacturing, which is subject to structural change, and construction, where the cyclical reversal when conditions improve takes a long time to filter through.

It was only in the last two or three years of the boom that men did well because of construction, much of it related to mining.

“Just before the end of the boom, construction was very big, but it was also state specific, focused on Western Australia and Queensland, also at the lower end of the skill spectrum,” Professor Gregory says.

Women, by contrast, have done better in the services sector of the economy, which is not as severely affected by recessions as manufacturing.

“The women’s labour market was not adversely affected in a permanent way by the 1992 recession,” Professor Gregory writes in the paper.

“They lost some full-time positions, but clawed them back quickly.”,25197,25267133-5013404,00.html


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