The emergence of vulnerable communities
The economic impact of this pandemic has widened the gap between the haves and have nots. Whilst there is plenty of commentary about a recovery, our analysis has found that this recovery is both mild and inconsistently distributed.
Key points:
- the recovery being discussed in the media is highly uneven, with an increasing gap between those with opportunity and those without,
- those that are not recovering as well, were already worse off financially, and
- numerous areas are at risk of increasing vulnerability if they are impacted by additional pressure.
At the end of December 2020, there were 660,000 more unemployed1 people than in December 2019 - an 81% increase in 12 months. This figure however does not include people who are unemployed but ineligible for JobSeeker. Despite some recovery, the level of unemployment is an ongoing concern.
We found that impacted Australian households also have levels of economic stress that are closing in without the necessary relief of new employment opportunities. This means there are certain communities around Australia that are entering a level of economic stress not seen before in our lifetime.
The Vulnerable Australia Model, which leverages multiple data sources including JobSeeker and Youth Allowance (Other), shows that over 670,000 of Australia’s 1.5m unemployed live in areas with significant economic stress, and will struggle to keep up with the recovery being experienced in mostly more traditionally affluent areas. A further 525,000 live in areas with moderate economic stress and may be at risk of falling further behind with the upcoming changes in government support.
The contrast in how Australia’s recovery is playing out can be traced through changes in unemployment, with Local Government Areas (LGAs) categorised into four groups3:
areas with increasing unemployment,
stagnant areas showing little to no change,
average recovery areas, and
those areas with above average recovery.
The stagnant areas
Whilst some areas are showing recovery in terms of decreasing unemployment figures, 35% (147) of Local Government Areas are showing little to no improvement in unemployment. These LGAs disproportionately represent the most economically vulnerable people. Analysis has shown that they have a high proportion of lone person or overcrowded households, high mortgages with low income levels, and homes with no cars or easy access to transport.
These areas are already at high economic vulnerability and additional pressure is likely to cause real lasting damage. Of the 540,000 unemployed people in the LGAs that show no recovery, 226,000 (or 42%) began receiving JobSeeker payments during the pandemic. At risk of becoming highly vulnerable are a further 90 LGAs (with 369,000 unemployed people) which are close to falling into high economic stress. Many of these LGAs such as Campbelltown, Fairfield (NSW), Melton, and Casey, have a large number of overcrowded homes, group homes, and public housing. People in these areas tend to pay between 34% and 45% of their incomes on rent and mortgage repayments. If people in these areas are faced with additional income stress, it may lead to people struggling to keep their home or put food on the table. It will also levy increased demands from social service organisations as they attempt to support people through the crisis.
Reliance on JobKeeper
Whilst the initial shocks of the pandemic may have passed, the impact on businesses and ultimately the people employed by those businesses is possibly yet to be fully understood. According to Treasury data, 941,951 businesses were making use of JobKeeper last September, which supported approx. 3.6m people.
Taking a more local perspective, there are a number of areas which are reliant on a single major industry within their local economy4. It is concerning that some areas which were identified as having high economic vulnerability, were supported by only one or two predominant industries. In the Armidale Regional LGA (NSW) for example, approx. 82% of the workforce is employed in the Agriculture, Forestry and Fishing industries. In this region, 2,126 of the nearly 3,000 businesses were receiving JobKeeper payments as at September 2020.
In more general terms, areas with a high proportion of employment being supported by a single industry, with a high number of businesses requesting JobKeeper support, it is highly likely that JobKeeper payments play a strong role in supporting the region. Furthermore, almost all of the unemployed people in these regions live in suburbs that are either continuing to increase in unemployment or show little recent improvement.
The Vulnerable Australia Model takes into account a multitude of factors from housing and health to industry and community. From this, we are able to move from answering “where are the unemployed people living” to more useful questions like “what would happen to people in this suburb if the hospitality industry shut down”. For a deeper look at the insights provided by the Vulnerable Australia Model, please contact us.
1 Unemployment is based on DSS provided figures and includes those receiving JobSeeker and Youth Allowance (Other) payments.
2 Economic vulnerability is a combined measure of unemployment, income and expenses,to household suitability and composition. In this analysis, areas in the highest risk deciles (8 - 10) are considered highly vulnerable to economic stress.
3 Areas with a negative unemployment change between May 2020 and December 2020 were placed in the increasing unemployment group. The stagnant group included areas with between 0 - 5% change in unemployment. Average recovery was set at 6% - 22% change (equivalent to 1 S.D. above the mean), and above average recovery included any areas with higher than 23% change.
4 Counts of businesses and their associated industry were taken from the ABS catalogue number 8165.0 (Counts of Australian Businesses, including Entries and Exists, June 2015 to June 2019).