Marching orders for middle income exiles

Cracks in Sydney and Melbourne's middle class employment are starting to emerge, in the foretaste of a wider trend that could be a boon for Julia Gillard.

The Eastern suburbs of Sydney and the inner city areas of Melbourne – both high to middle income havens – are showing signs of cracking. As we discussed yesterday, while most of the of the escalating middle income unemployment is hidden (Invisible cuts to the middle class, September 18), some clear surface signs are emerging.

The eastern suburbs of Sydney have one of the highest proportion of people employed in the finance and professional services sectors in the country – around 80 per cent of households. Research by Brian Redican and Macquarie Bank shows that in this white collar middle class ghetto unemployment is rising rapidly while participation in the labour force has fallen sharply – down from 70.9 per cent two years ago, to 67.8 per cent.

In late 2011, unemployment along the lower North Shore of Sydney had not recorded the same deterioration as the Eastern Suburbs. But now it is following the same trend.

Last year, while there was rising unemployment in Sydney affluent areas, it was not obvious in Melbourne. But in the last six months unemployment in the inner suburbs of Melbourne has risen, although it is still substantially below the level reached in 2009-10.

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Other states do not have the same clearly defined demography.

And so those who retrenched last year appear to have started to show up in unemployment. The ex-middle income avalanche will follow next year.

Nevertheless those that have escaped the axe and remain part of middle income Australia are starting to feel more confident. In addition very often couples are helped because only one partner has lost their job.

An important part of middle income Australia is the small business community. Large areas, particularly in manufacturing and construction, are bleeding. Retail is holding up remarkably well.

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For many years Morgan Research has been critical of the ABS labour calculation figures. Morgan figures use a different basis of calculation. In recent months Morgan has suddenly been picking up middle Australia unemployed and margin between Morgan unemployment estimates and the statistician has blown out.

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In time the statistician will catch up.

In theory the suffering by those in middle income Australia should help the Coalition. But once you are no longer earning a "middle income” a whole new dynamic develops. You have seen what state governments have done and you fear that the Coalition will do the same thing should it gain power in Canberra. That will make it even harder for you to gain employment.

Whereas while you were still employed you might have been a Coalition supporter, now in self-interest you may be voting for Julia Gillard.