If unemployment is the cure for inflation, who pays the price?

In recent weeks, economists have argued that a certain level unemployment is a necessary condition for the economy to function. They have argued that the Reserve Bank of Australia may need to raise interest rates higher, to increase unemployment, which is currently too low, in order to bring inflation under control.

The technical economic term for this is NAIRU: the non-accelerating inflation rate of unemployment.

But what does NAIRU or “necessary unemployment” look like in practice? And what happens when the income support system people are pushed onto is already too low to meet basic needs, especially as living costs rise?

JobSeeker remains inadequate

Despite modest increases in recent years, JobSeeker, the payment on which many unemployed people rely, remains well below the poverty line. At the same time, the cost-of-living has continued to grow. Housing is part of this puzzle. Anglicare Australia’s latest Rental Affordability Snapshot finds that there are effectively no rental properties anywhere in Australia affordable to a single person relying on JobSeeker.

As part of our Australian Research Council funded research, we have been speaking with people living with low or no income in Central Western Sydney about how they survive in one of the most expensive cities in the country.

Their stories are the frontline of “necessary unemployment”. They reveal the human costs of pushing people into income support systems that are already structurally incapable of supporting a dignified life.

Stuck in survival mode

Living below the poverty line, it is nearly impossible to afford even the most basic necessities. People we spoke to routinely struggled to afford essential daily expenses like food, housing, energy bills, transport and communication. Accounts of going without meals and medication were widespread.

Maria’s story puts a human face on this experience. It shows that piecing together essential needs within Australia’s tattered safety net involves a lot of work without guaranteed payoff.

Maria is reliant on JobSeeker. She pays more than 90% of this allowance on rent, leaving her with less than $50 a fortnight to live on. She has lived like this for three years and sometimes goes days without food.

Maria must seek support from a patchwork of services to survive, including food hampers and occasional supermarket vouchers, reduced price groceries at a charity food store and church food pantry and assistance paying bills.

Yet growing community need means that more services are rationing support. As one worker, Susan, told us, emergency relief is supposed to be for an unusual event, but in reality people are just regularly not able to make ends meet. Growing waiting lists means services are reducing how often and how much help people can get.

For example, Maria is only eligible to apply for emergency relief at one service every six months, even though she is missing out every day.

Without the resources to address protracted financial stress, services report using food relief as a stopgap measure. People that we spoke to reported being offered food parcels in place of other assistance like rent or bill support.

Maria patches food relief together from a range of organisations so that she can prioritise paying her rent, but asking services for help is time consuming and unpredictable. Trying to get help can take an entire day and doesn’t always deliver.

Like many we spoke to, Maria makes compromises and thinks creatively to survive. Housing repairs and improvements are one way she uses her time and labour to compensate for lack of income. She rents a rundown house that is “unliveable, basically” and does repairs the landlord refuses to do.

Many we spoke to used ‘Return and Earn’ as an ad hoc infrastructure to supplement insufficient income. Maria’s neighbours often bring her their plastic bottles, even though she hadn’t asked them. Sometimes she asks local pubs to set their bottles aside.

The financial payoff of practices like Return and Earn or participating in market research, which others in our study highlighted, is meagre and not sufficient to allow people to meet all their essential needs. People should not have to work so many hours for so few dollars just to survive.

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Time to invest in Australia’s care infrastructures

Maria’s story is not an exception. Her struggle is the result of deliberate policies to keep unemployment below the so-called NAIRU point, while failing to invest in support systems for those who are unemployed.

Survival in this patchwork system of support is getting harder and pushes people to their limits. We saw extraordinary acts of creativity and mutual care, neighbours and housemates sharing meals, families pooling resources, communities stepping in where formal systems fall short. But individual ingenuity and solidarity cannot substitute for Australia’s critical care infrastructures.

The people we spoke to did not ask for extravagance. They asked for the basics: a liveable income, affordable and secure housing, and reliable access to nutritious food. If macroeconomic policy accepts a certain level of unemployment as “necessary,” then it must also reckon with the costs for people who are unemployed. A society that cares does not leave survival to improvisation. It invests in the care infrastructures — including welfare, housing and essential services — that allow people not merely to endure economic cycles, but to live dignified and fulfilling lives.

Associate Professor Emma Power is a social urban geographer at Western Sydney University. Her research develops insights into the caring potential of cities, asking how the capacity of people to meet their needs can be better supported within cities and through housing and welfare systems.

Dr Emma Mitchell is a Macquarie University Research Fellow (MQRF). Her research focuses on culturally and linguistically diverse contexts of poverty, welfare, and housing and the care configurations that enable survival and make life liveable in hardship.

Professor Ilan Wiesel is a social urban geographer at The University of Melbourne. His work addresses questions of social diversity and inequality in cities, including housing affordability, social inclusion of people with disabilities and the infrastructures that can promote more caring, inclusive cities.

Illustrations in this article are by Jess Harwood, and the report referenced can be found here: Surviving in a Cost-of-Living Crisis: Australia’s Fraying Care Infrastructures