Unemployment Rate Vs Those on a Benefit

This post is by PaulL, regular commenter and sometime poster.

There is regular discussion on the gap between the number of people on a benefit and the number of people unemployed. Maggy Wassilief pointed to this paper from Stats NZ that provides some information (although perhaps not all the information we might desire).

This paper has matched the individuals in the Household Labour Force Survey (those counted as unemployed) against government data using the Integrated Data Infrastructure (IDI) that was created under Bill English to allow insight into social statistics. This data warehouse has a bunch of privacy restrictions around it – not just anyone can access it, and privacy of individual data is carefully preserved.

How can this be?

Some background first on each of these measures. Let’s start with the definition of unemployment as used in NZ (and internationally).

The number of unemployed is determined from the Household Labour Force Survey (HLFS). NZ Statistics run this survey every 3 months, surveying 15,000 households. To be counted as unemployed in that survey you need to:

• have no paid job
• be of working age
• be available for work, and
• have looked for work in the past four weeks or have a new job to start within the next four weeks.

The key elements here are a) that you need to be completely unemployed – someone working 20 hours a week won’t count as unemployed (although they may still be receiving a benefit), and b) that you need to be actually available for and looking for work. Someone who has given up looking for work or chooses not to look for work is not counted as unemployed under the official definition.

Note that this definition has been constant for decades, and is used by countries around the world, allowing NZ data to be reliably compared with other countries. There isn’t any suggestion that this definition has been manipulated by the current government (which is something that is often suggested in internet discussions that I see).

There are currently 99,000 people unemployed in NZ, as measured by the HLFS. This has been constantly falling since 2012, a reflection of the business cycle since then.

Next, let’s look at the number of people on a benefit.

The number on job seeker is substantially higher than pre-COVID, although again lower than during COVID. Job seeker has two categories – those who are “work ready” and those who have a health condition or disability. I presume that this second category are considered to have a temporary health condition, and that’s why they haven’t moved to the Supported Living payment (which I believe is intended for people who are longer term disabled).

The 71,000 Job Seeker – Work Ready people are the only people on this benefit roll that we would expect to be actually seeking a job, and that is the number we’d expect to see in the unemployment statistics.

So, today we have 99,000 people unemployed, and 71,000 people on the Job Seeker – Work Ready Benefit (and 350,000 total people on a main benefit).

Let’s now turn to the analysis by NZ Statistics on how these two numbers relate. As noted at the top, there are a lot of people on Job Seeker – Work Ready payments who are not considered unemployed, and there are a lot of people who are unemployed who are not on Job Seeker – Work Ready. What are the reasons for this?

As at December 2021 there were 125,000 people unemployed, and there were 127,500 people on the Job Seeker – Work Ready Benefit. However, there were only 40,000 people who were both unemployed and on the Job Seeker – Work Ready Benefit. Let’s examine this from both ends.

Start with those on the Job Seeker – Work Ready Benefit. Why weren’t they all unemployed?

• 40,000 of those people are categorised as unemployed
• 20,000 of them have a part time job. They’re receiving a top-up from the benefit, but they don’t count as unemployed
• 3,000 aren’t available for work, and 34,000 are not in the labour force. Presumably this total of 37,000 are people who have stopped looking for work either temporarily or permanently (and perhaps relate to the previous blog series on why people might not want a job when they’re on a benefit)
• 19,000 are otherwise employed, most of these appear likely to be full time employed but still with an income low enough to continue to receive a partial job seeker benefit.
• 11,000 are not actively seeking work but are available for work

Next, let’s look at the people who are unemployed, and why they aren’t on the Job Seeker – Work Ready benefit. Some people are ineligible for Job Seeker for multiple reasons – the total of these categories is more than the total number of people who are unemployed.

• 40,000 of these are on Job Seeker – Work Ready – they are both unemployed and receiving Job Seeker
• 18,000 are on another main benefit – this covers people on Sole Parent or Supported Living who are still seeking a job (and good on them)
• 6,000 are receiving other government support – Superannuation (people over the age cutoff who are still looking for work – and good on them) and Students
• 24,000 have other income, most likely from a spouse in work, that means they’re ineligible for a benefit
• 16,000 are non-citizens or non-resident
• 30,000 are only seeking part-time work. It’s not clear to me why that means they can’t receive Job Seeker, this group requires some further analysis
• 14,000 are aged 15-17, and therefore not eligible for Job Seeker (presumably living at home with parents)
• 17,000 aren’t receiving Job Seeker for unknown reasons – potentially they simply didn’t apply

Whilst this material provides a lot of insight into what’s going on, it doesn’t answer all of the questions. Alexandra (the author of the paper) has provided a link to a similar MSD paper, which I will review and post at a later time. Thanks also to Alexandra for answering questions from me about the content and interpretation (but all mistakes of interpretation my own).