In a purely economic sense, unemployment in the Australian community is extremely costly. The costs of unemployment will be particularly pronounced if its social, psychological, and economic impacts are concentrated among long-term unemployed and if its effects spill over onto other family or community members. This paper analyses evidence from the 1994 National Aboriginal and Torres Strait Islander Survey (NATSIS) to illustrate the point that such effects are potentially very large in Indigenous households with a substantial concentration of unemployed residents. In spite of the fact that NATSIS is now somewhat dated, it provides a range of social, cultural and economic data that are not available from other sources.

This paper uses the international literature on social exclusion and social capital to analyse and interpret NATSIS data on several social indicators, including arrest rates, police harassment and being a victim of assault; being a member of the 'stolen generation'; civic engagement; the loss of motivation; and ill-health. The unprecedented range of social indicators included in the NATSIS allows the analysis to provide an insight into the likely social costs of unemployment in the population at large, not just among the Indigenous population.

While the meaning of the term social exclusion is appears to be intuitively fairly obvious, being closely related to its literal interpretation, 'social capital' needs to be carefully defined. The recent McClure Report on the direction of welfare reform provides a rudimentary definition: 'the reciprocal relationships, shared values and trust, which help to keep societies together and enable collective action' (McClure 2000: 32). Before uncritically importing terms such as these into an analysis of the costs of Indigenous unemployment, it is necessary to discuss how useful they are in a cross-cultural context. For example, not having any employment in the Australian labour market may actually empower many traditional Indigenous peoples to hunt, fish, paint, and live on the country. Indeed, the extra hours of 'spare' time may facilitate more extensive participation in ceremonial activities, thus increasing what may be defined in the Indigenous context as 'social capital'.

Nor should employment be viewed as automatically contributing to social capital. Some forms of employment actually diminish the extent of shared values and trust referred to above. Work which involves or leads to frequent movement of the workforce, such as some types of casual or seasonal work, could uproot the worker's family and thus weaken their links to the local community. Clearly then, the relationship between social capital and unemployment is not simple, even in a mono-cultural context.

The main finding of this paper is that the Indigenous unemployed, especially the long-term unemployed, fare worse than the non-Community Development Employment Projects (non-CDEP) scheme workers on a range of social indicators. Among Indigenous people, being unemployed is often associated with:

• social exclusion in the form of the high rates of arrest and police harassment;
• low levels of social capital and civic engagement;
• high levels of drinking related offences which may be an indication of a loss of traditional social values (although Indigenous cultural activities are also prominent among the unemployed); and
• relatively high motivation, as measured by plans for future study.

Also, there is little or no relationship apparent between ill health and labour force status.

The experience of unemployment not only affects the welfare of the individual concerned, but also adversely affects that of other residents in their households. Households where at least one adult is unemployed exhibit substantial spill-overs in all categories of social exclusion from the mainstream. Spill-over effects are particularly concerning since residents will have little control over what their unemployed co-residents do to find work. However, attachment to Indigenous culture remains unimpaired: failure to get employment may not be an impediment to participation in the Indigenous community. That is, the social exclusion of the Indigenous unemployed from mainstream society does not entail a general lack of social networks.

The evidence presented in this paper on adaptive behaviour and response, especially among long-term unemployed, whereby Indigenous unemployed become resigned to their circumstances, points to the possibility that the social costs are underestimated. The sense of fatalism cultivated by prolonged unemployment may itself be a major impediment to the efficacy of any policy proposal to lessen the effect of being unemployed.

One important issue for researchers is to attempt to identify the direction of causality between exclusion from the mainstream and unemployment. The inter-generational transmission of social pathologies resulting from Indigenous unemployment is almost impossible to separate from the effects of dispossession. While the use of a stolen generation proxy may partially capture the effects of both, it is not possible to discount either when trying to capture the influence of recent spells of unemployment. For example, almost one-half of Indigenous male youths have been arrested before they even enter the labour force. Thus historical factors and the family's socioeconomic circumstances undoubtedly dominate as effects in an individual's current employment status, yet they are difficult to tease apart in a causal sense.

The feedback between exclusion from the mainstream and unemployment means that Indigenous unemployment is likely to be particularly intractable. The case for policy intervention dealing directly with social exclusion, and the low levels of social capital, revolves around the point that unless Indigenous people are included in the social and economic processes of Australian society, it becomes increasingly hard to break the vicious circle of welfare dependency and unemployment. Indigenous unemployment cannot be addressed by relying solely on the economist's usual toolkit (for example, increasing the number of suitable jobs available in the local area or sending the unemployed back to school). Innovative policies must be found to deal directly with the root causes of social exclusion, whilst accommodating differences between Indigenous and other Australians.

ISBN: 0 7315 2639 2

ISSN:1036 1774