Implications of COVID-19 for the Indigenous labour market

Abstract

The medical and policy response to COVID-19 has focussed on the containment of the virus, including active surveillance, contact tracing, quarantine, and early strong social distancing efforts needed to limit transmission. The response to the virus has led to a substantial economic disruption. The net effect on the Australian economy has been a sharp decline in national economic activity, which is likely to be exacerbated by the inherent uncertainty of the health crisis and the ongoing need for further containment for a second wave of outbreaks. This ongoing uncertainty will amplify the economic uncertainty inherent in recessions. The global nature of the pandemic and the evolving geopolitical environment may affect international trade for a number of years. Macroeconomic shocks can affect the Indigenous labour market in a number of ways. The primary effect is through the depressed aggregate demand that leads to fewer jobs. Labour market scarring that occurs in a recession may lead to atrophying of skills through the lack of use in the workplace and the poor quality of matches between job seekers and jobs as some workers stay in jobs to which they are unsuited. However, Indigenous workers also experience racial discrimination and historical social exclusion, which reduces the prospect of re-entry into the labour market following a recession and increases exits from employment and turnover between jobs that reduce the ability to build up labour market experience. It is reasonable to anticipate a substantial increase in the number of discouraged Indigenous workers after a COVID recession.