Examining the irreversibility of long-term unemployment in Australia
William Mitchell and Anthea Bill
Centre of Full Employment and Equity, University of Newcastle
Contact Email:   Anthea.Billnewcastle.edu.au

Within the unemployment pool, a distinction is made between short and long-term unemployment. Long-term unemployed are typically characterised as ‘trapped’ by generous income support policies, low motivation and poor skills. It is argued that while long term unemployment rises with actual unemployment it does not decline as readily in times of economic growth; it cannot be reversed by increasing labour demand, only by supply-side measures which improve ‘employability’. The notion that long-term unemployment is a function of personal characteristics which render the worker ‘unemployable’ has dominated policy makers (OECD, 1994).
The aim of this project is to determine whether long-term unemployment is essentially a problem of unemployment per se. This paper argues that spatial concentrations of long-term unemployment stem from inadequate employment growth or negative externalities between regions rather than supply side characteristics. The spatial distribution of unemployment data from the Department of Family and Community Services (FaCS) and Census data is examined to ascertain whether there are significant differences between characteristics of short and long-term unemployment pools (the ‘irreversibility hypothesis’). Separate regressions, controlling for average regional characteristics, will be conducted and tested for both groups across Australian postal areas. Spatial models, which allow for the impact of economic spillovers (negative externalities) between neighbouring regions, will also be estimated.

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