Long-term unemployment damages Australia's wellbeing

The average rate of long-term unemployment has doubled since 2008. Picture: FILE

The average rate of long-term unemployment has doubled since 2008. Picture: FILE

A SHARP rise in long-term unemployment is taking a growing toll on Australia's collective well-being.

The Fairfax Lateral Economics Wellbeing Index - which uses a range of indicators to measure changes in national welfare - shows the cost of long-term unemployment to Australia's collective well-being has reached $3.3 billion a year.

The report says the average rate of long-term unemployment doubled since 2008 from an average of 0.6 per cent to 1.2 per cent. At the start of last year 120,000 people had been out of work for a year or more - the definition of long-term unemployment - but the number rose to 170,600 by the end of March, up more than 50,000.

One negative effect of long-term unemployment is skills atrophy. The longer a person is out of work, the more likely it is their skills will begin to deteriorate through lack of use and training. The index calculates the well-being cost of skills atrophy was $1.4 billion in the March quarter alone, 14 times higher than the average.

Long-term unemployment has been increasing at a faster pace than the total unemployment rate since the depths of the global financial crisis in 2008.

''The steady increase of long-term unemployment has not been receiving substantial attention,'' the report says.

The overall result of the well-being index - a broader measure of well-being than traditional economic indicators - was a decline of $1.2 billion in the March quarter. It was the index's third consecutive quarterly fall - the last time was during the global financial crisis.

While a strong rise in national income improved well-being in the quarter, it was offset by the worsening rate of long-term unemployment and proportion of adults with formal education. Although the report warned that recent data on adult education had been ''noisy''.

The index's decline suggests national well-being is lagging in gross domestic product. Official figures released on Wednesday showed GDP rose by 1.1 per cent in the March quarter for an annual growth rate of 3.5 per cent.

Index author Dr Nicholas Gruen said the true cost of long-term unemployment was not captured by traditional economic indicators such as GDP. ''Long-term unemployment causes huge social and economic damage,'' he said.

''This problem should be showing up on the dashboard more than it is.''

High rates of obesity and untreated mental illness have been drags on the index. The cost of obesity to the nation's well-being was $122.6 billion in the year to March 31, up 6.2 per cent. The annual well-being cost of untreated mental illness reached $192.4 billion, up 2.2 per cent on the previous year.

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