157. CHAPTER EIGHT
UB KEiCIPIEKTS M D TOTAL UTiEMPLOYMENT
Over the preceding cliapters we have carried out tva^nover analysis for UB recipients. Results on the nature and behaviour of the stock of "beneficiaries are important because the numbei' of beneficiaries is an
important variable in itself. Payments to Unemployment Beneficiaries are expected to total about $100m. over 1979-80, or 3.H per cent of total Government expenditure (Budget Speech 1979-80). From a labour market perspective, UB I'ecipients are an important subset of total unemployment. The eligibility requirements for receiving Benefit payments suggests that the pool of UB recipients vill be a good measure of those experiencing unemployment-induced hardship.
It vould be interesting to apply the analysis of previous chapters to total unemplo;^'Tnent. However, a turnover analysis of total unemploj-Tnent cannot be carried out easily. For the m.ost comprehensive measure of
ujiemployment, ABS survey unemployment,"'' there are no inflow data and only 2
limited current duration intervals in the quarterly snapshot. The grid
approa,ch cannot be used without considerable data manipulation and interpolation. 3
For CES unemployi'nent, inflow data are available, but the current duration data are 2--monthly observations with 3-monthly duration intervals - the width of the duration intervals is not equal to the length of the accounting period. Again the grid approach cannot be readily applied.
1. A definition of this measure of unemploynient is contained in Appendix D. Hancock et al. (l973) recognise ABS survey unemployment as the most comprehensive measui-e of unemployment available in Australia.
2. Current duration intervals are restricted to the first 13 weeks of
unemployment up to 1973 for males and females and up to 1975 for Juniors and adults.
1 5 8 .
Rather than t a c k l i n g the d i f f i c u l t i e s o f cariying out tiirnover a n a l y s i s for the more comprehensive ip.easures o f miemployinent, at this late stage o f the t h e s i s we opt for an incomplete a n a l y s i s of two key issues a r i s i n g from our e a r l i e r work:
( i ) Does the strong e f f e c t o f the l e v e l o f Benefit pa^Tnents on "beneficiary numhers (Chapter S i x ) a r i s e from flows within the t o t a l unemployment pool?
( i i ) Do i n c r e a s e s i n the l e v e l of Benefit payments increase the size o f the t o t a l unemplo;vTiient pool?
The a n a l y s i s p r e s e n t e d i s to be i n t e r p r e t e d as i n d i c a t i v e o f the direction
in which our research w i l l proceed in the m_onths afber submission o f the t h e s i s . The f i r s t step i s to consider the proportion of t o t a l unemployment covered by B e n e f i t payraents. I f a l l the unemployed received B e n e f i t s , the answer to the above questions would be obvious. This is not the case, however, and we go on to the consideration o f the relationships between the level of Benefit pajnnents, the b e n e f i c i a r y pool and t o t a l unemployment.
^ • 1 UB R e c i p i e n t s as a Proportion o f Total Unemployment
I f a l l the unemployed received Benefit payments, then our results for UB r e c i p i e n t s would t e l l the t o t a l unemployment story exactly. However, not a l l the unemployed receive Unemplo^/ment Benefit paym.ents. The proportion of t o t a l unemployment r e c e i v i n g B e n e f i t payments has changed over time, and varies between age-sex gt'oups.
I n Figui-e 28 the t o t a l stock o f UB r e c i p i e n t s , the t o t a l stock of ABS unemployment, and the r a t i o of these two s e r i e s , are p l o t t e d . The proportion of the t o t a l unemployed who receive Benefits rises from less than 20 per cent in 1 9 7 0 to almost 70 per cent from 1975 onwards. This large increase in the proportion o f t o t a l unemployment receiving Benefits occurs
159. 1.00 0.75 0.50 0.25 0 '000 1+00 300 ,. UB:ABS Ratio » 1 1 1 1 1 1 i i 1 1 1
200
100 ABS Unemployment — UB Recipients _ ^ . . . I • • • I T T . I • ..I ... I • . . ] . . . I . . . I . . . f ... I 1 . 67 69 71 73 75 FIGURE 28l6o.
fo.r each of the age-sex groups. This is sho\m in Table 22.^' TABLE 22
IJfl RECJ:PiENTS AS A PROPORTION OF ABS SURVEY UNEMPLOYMEIW: 1970 and 1973 MALE <2h MALE MALE MALE 55+ May 1970
0.10
0.19 0.33 0.23 1978 0 . 8 1 0.96 1.02 1.02 P'EMALE <21+ F E M L E 25-141+ F E M L E FEMALE 55+ 0.12 O.OI+ 0.08 0.09 May May 1970 I97S 0.62 0.18 0 . 3 0 0.27Marked differences exist "between the age-sex groups in the proportion of the unemployed receiving Benefits, hut for each group the same large rise
2
in the "beneficiary proportion is present. For adul^t males from 1975 onwards, as many people received Unemployment Benefit payments as there were unemployed people.^ These shifts in the beneficiary proportions form the "basis of our examination of the inter-pool influence of increases in the level of Benefit payments.
1. The LIB recipient age groups less than 21 years and 21 to 2l| years are surmried to match the sum of the ABS age groups less than 20 years and 20 to 2I+ years.
2. These differences between age-sex groups reflect, at least in part, differences in access to Benefits due to the eligibility requirements. 3. This implies that for this group, our UB recipient results for the 1975-78
period can be carried over directly to total unemplo^'Tnent. The same is probably true for males less than 2l+ years.
Ibl.
® * ^ ^^^oportion of the Unemployed. Pe^nj;^:^^ Increased? In this section we consider why the proportion of the unemployed receiving Benefits was low in the early 19TOs , and why this proportion increased. This is done with the question posed above in mind:
- does the effect of Benefit p.ayments on beneficiary numbers arise from flovrs within the unemployment pool?
Unemployed workers not in receipt of Benefits either ai-e ineligible for Benefit receipt or do not bother to apply. Thus changes in the proportion receiving Benefits come about from variations in the eligibility status of the uneiuployment pool aiid/or changes in the 'take-up rate'.
UB recipient eligibility requirements are documented in Appendix A. UB recipients are required to be registered for emplojinent with the Comjnonwealth Employment Service, and meet the CES definition of unemployed (Appendix D). This means Unemployment Benefits are available only to those seeking full-time jobs. Therefore as a first step towards taking account of the Benefit eligibility requ-irements, the nixmber of beneficiaries should be related to the number of the unemployed seeking full-time work.
Also of relevance for our consideration is the requirement of being unemployed at least one week. In times of low ujiemployrnent, a significant
proportion of those entering miemploym_ent may leave within a week and thus never become eligible for Benefit pa.yraents. As the economy slumps and unemployment increases, fewer people will leave the unemplo:,rment pool within a week of entering, so more become eligible for Benefit receipt. Thus the proportion of the unemployed receiving Benefits should increase. To take account of this effect, we consider only those in the total unemplojTiient pool longer than one week.
If these two eligibility-related effects were the only cause of the observed increase in the proportion of total vmemployment receiving Benefits, then the ratio of UB recipients to that part of ABS survey unemployment in the
162.
pool longer than 1 veek and seeking full-time work would not increase over t i m e . Table 23 contains these r a t i o s for Tnales and feiiia-les,
TABLE 23
UB RECIPIENTS AS A PROPORTION OF ' E L I G I B L E ' ABS UNEJvrPLOYMENT
TOTAL ABS LT^IEMP. F-T 2+ WKS ABS UNEMP.
R a t i o UB/ABS May 7 0 Ratio UB/ABS May 78 P r o p ' a l Change in Ratio Ratio UB/ABS May 70 Ratio UB/ABS May 78 P r o p ' a l Change , Ratio MALES 0 . 1 7 0 . 9 0 /o h29 0 . 2 5 1 , 0 5
%
320 FWALFS 0 . 0 9 0.1f3 378 0 . 1 9 0 . 6 U 237This t a b l e shows that the changing proportion o f unemploi'Tiient in receipt of B e n e f i t s i s not e x p l a i n e d by the requirements of seeking a full-time job and unemployed longer than one week. Although the increase in the UB
r e c i p i e n t : ABS unemployment r a t i o between 1970 and 1978 i s not as great with these e f f e c t s taken i n t o account, the r i s e is s t i l l large (a threefold increase for males and a t w o f o l d increase for f e m a l e s ) . Even i f we were to r-llow for some dela,y i n applying for B e n e f i t s once unemployed and take ABS imemployed in the pool weeks and l o n g e r , a strong r i s e i n the Benefit proportion would stii.l be apparent. I t seems the eligihili-by requirements of seeking a full-time job, and u^.employed longer than one week, have had only a limited effect on
the proportion of the unenrployed receiving Benefits.
The f a i l u r e o f the e l i g i b i l i t y e f f e c t s to account for the change in Benefit r e c i p i e n t : ABS unemployment r a t i o i n d i c a t e s that the proportion of the unemployed r e c e i v i n g B e n e f i t s was low at the start of the decade because people
1 . This r a t i o cannot be c a l c u l a t e d for the age groups as no suitable age- s p e c i f i c duration data for ABS unemployment are available prior to 1975-
163.
did not bothei' to apply for Benefits, and increased from a rise in the propensity to take np Bene fit . The 'take-np rate' was previously low, luit has increased o>/er time.
Tlie 'take-up rate' of Unemployment Benefits will be affected by several factors. Amongst these is the variable of interest to us, the level of Benefit payments. With higher Benefit payments, unemployed persons should be more inclined to pursue Benefit receipt.
The influence of Benefit i^aym.ents has been examaaed by estimating some take-up rate regression equations. Quarterly time series of the ratio of UB recipients to ABS unemployed in the pool longer than 1 week and seeking a full-time job are regressed on the level of Benefits deflated by the Consumer Price Index. Also included, in the eq.uation is the expected duration of
Benefit receipt. This variable is included as an indicator of the e:<:pected duration of all unemployed - we have not estim.ated completed duration for ABS unemployment. It is anticipated that the take-up rate will depend on the
eiraected duration of unemployment as well as the level of Benefit payments. If people anticipate being unemployed only a short time they m.ay not bother to
apply for Unemploym.ent Benefit payments . But with the likelihood of a long spell of unemployment confronting the new entrant, they may go to the trouble of registering. These regression results are presented in Table 2h. The estimiated equations are specified as having a linear functional form, and are estimated using Ordinary Least Squares.
The positive and significant coefficient on the Benefits variable for both males and females shows that as real Benefit payments increase, the rate of take-up of Benefits rises. This indicates that as the level of Benefit payments rises relative to the cost of living, unemployed workers are more inclined to avail themselves of these payments. The large effect of the level
of Benefit payrneyits on the number of beneficiaries arises at least in -part from flows within the total unemployment pool.
The estimated coefficients on the expected duration variahle are also positive and significant. This sxiggests that the longer people expect
to stay unemployed, the greater propensity they have to take up Benefits.
TABLE 2h
WIEI-IPLOYMEKT BENEFIT TAKE-UP RATE REGRESSION RESULTS^
BEN/CPI D R-^ D.W. MALES F E M L E S 0.028 (6.06) 0.017 (8.67) 0.027 (It.82) 0.009 (3.38) 0..
0.86
- 9 6 1-79 a BEN/CPI D D.W.~ level of Benefit payments deflated by the CPI (May 1.967 - 100.0)
- exi)ected completed duration
- coefficient of detennination adjusted for degrees of freedom - Durbin-Watson Statistic
S e a s o n a l duimiiy variables , and a variable representing the
introduction of the 6 weeks eligibility requirement in January 1976, were tried in the equation. These proved to be insignificant and were not used in the final equation.
The estimates in Table 2h have been adjusted to remove serial
correlation from the r e s i d u a l s . Serially correlated residuals in the original estimates may indicate a mis-specified equation, as some influences that may affect the take-up rate could not be included. The Benefit take-up rate might be influenced by economic necessity brought on by the lanemployment of other members of the family. A measure of economic necessity, however, would be closely related to the expected duration of unemployment, and therefore was not included. P e o p l e s ' p r o p e n s i t y to apply for Unemployment Benefits will be affected by community attitudes to Benefit receipt, but this cannot be
165.
I n t h i s s e c t i o n we have j u s t made a "beginning on the analysis o f B e n e f i t talte-up r a t e s . There is much work s t i l l to be done. In p a r t i c u l a r , a n a l y s i s of v a r i a t i o n i n take-up rates needs to be extended across groups. The information i n Table 22 i n d i c a t e s that the proportion of the unemployed r e c e i v i n g B e n e f i t s v a r i e s markedly between age and sex groups. S u f f i c i e n t data are a v a i l a b l e to consider v a r i a t i o n i n t h i s proportion for single and married workers, but t h i s i s not done h e r e .
8 . 3 The E f f e c t o f the Increase i n B e n e f i t Payments on Total Uneinplo3ment I n the p r e v i o u s section we showed that the l e v e l of Benefit payments has had an e f f e c t on inter-pool f l o w s . With increases in the level of real Benefit payments, the rate o f take-up o f B e n e f i t s by those already -onemployed r i s e s . An i n t e r e s t i n g question we have not yet answered is whether all the large response o f i n f l o w s into the b e n e f i c i a r y pool comes from these inter- pool flows , or whether the t o t a l pool o f unem^ployment increases when Benefit payments i n c r e a s e . We now turn to t h i s i s s u e .
To t e s t for the e f f e c t o f Benefit payments on the total unemplowient p o o l , quarterly i n f l o w s into CES unemploym.ent are regressed on the same set o f v a r i a b l e s as used i n the UB r e c i p i e n t i n f l o w equations in Chapter Five (Table 1 2 ) ^ . The estimated equations are p r e s e n t e d in Table 2 5 .
These estim.ates i n d i c a t e that for only junior males does the Benefit