In Debt and Out of Work

Abstract

This project was commissioned as a preliminary exploration of the connection between unemployment and debt. Using recipients of unemployment benefits as an indicator of unemployment, the paper suggests that unemployment and debt are linked via the intervening variable of inadequate income, whilst employment and credit are associated through the mediator of adequate income. The line between credit and debt is a very fine one and today's credit can be tomorrow's debt. Although in this preliminary study it has not been possible to elucidate the causal sequence relating unemployment to debt, there is some evidence that prolonged unemployment may exacerbate debt. From the preliminary screening study reported in this paper, it is possible to estimate that half the recipients of unemployment benefit at anyone time are in debt, that their major debts are for debts of rental and transport, power and telephone. Those who are unemployed and who are not in debt may have more protective factors, such as part time work and savings to back them up. It is not possible to review the question of unemployment and debt without drawing attention to the present national averages of consumer credit. In 1985 in Australia the estimated consumer credit net debt outstanding per head of population as a whole was $1,315 (compared with $290 in 1976). When one considers that the estimated average debt per respondent in the sample in this study of unemployment beneficiaries was said to be $737 and that the consumer credit net debt figure applies to the population as a whole, not just to those within the age limits of recipients of unemployment benefits, an appreciation of the relative scales of debt and credit can be understood. Whilst the two figures are not strictly speaking comparable, they do give an appreciation of the modest scale of debts of those on unemployment benefits. This paper introduces this complex subject and offers a series of hypotheses for other researchers to consider.