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6105.0 - Australian Labour Market Statistics, Oct 2003  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 03/10/2003   
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Feature Article - Technical report: New Labour Force Survey sample selections - analysis of the effect on estimates


INTRODUCTION

The Labour Force Survey (LFS) provides timely and reliable information on the labour market activity of the usually resident civilian population of Australia aged 15 years and over. The survey has been conducted on a monthly basis since February 1978, and on a quarterly basis since 1960.

Every five years, following the Census of Population and Housing, the LFS sample design is reviewed to ensure that the survey continues to accurately reflect the geographic distribution of the Australian population, and remains both efficient and cost-effective. Following the review based on the 2001 Census, new LFS sample selections were introduced progressively over the period November 2002 to June 2003.

The new private dwelling sample (houses, flats, etc.) in larger urban centres and in the less remote parts of the remainder of the country (representing 82% of the total sample) was phased in over the period November 2002 to June 2003, with 1/8th of this portion of the sample being introduced each month. The remainder of the new sample, which covers less settled areas of Australia and non-private dwellings (hotels, motels, caravan parks, hospitals, boarding houses, etc.), was introduced in two stages: in November 2002 for New South Wales, Victoria, Tasmania, the Northern Territory and the Australian Capital Territory; and in December 2002 for Queensland, South Australia and Western Australia. The Information Paper: Labour Force Survey Sample Design (cat. no. 6269.0) contains further details about the 2001 sample design.


IMPACT OF NEW SAMPLE

With this method of implementation, most of the changes to labour force statistics due to the introduction of the new sample should be spread over the eight months. This approach is broadly comparable with that adopted for the 1996 redesign. In contrast, the approach adopted for the 1981 redesign saw the new sample introduced in one month, while in the 1986 and 1991 redesigns, the new sample was introduced over four months.

The monthly growth in seasonally adjusted employment was higher than some commentators expected from November 2002 to January 2003, coinciding with the introduction of almost half of the new sample. In the remaining five months of the sample phase-in period, seasonally adjusted employment estimates fell by 68,300 persons.

CHANGE IN SEASONALLY ADJUSTED EMPLOYMENT ESTIMATES, November 2002 to June 2003
Month
Monthly change
Cumulative change
'000
'000

November 2002
+60.0
+60.0
December 2002
+52.0
+112.0
January 2003
+94.0
+206.0
February 2003
-12.3
+193.7
March 2003
-42.8
+150.9
April 2003
-14.3
+136.6
May 2003
+29.0
+165.6
June 2003
-27.9
+137.7

Source: Labour Force Survey.

The phase-in of the new LFS sample was undertaken with an overriding objective of maintaining continuity of time series for LFS estimates. The ABS undertook a number of investigations to evaluate whether the phasing-in of the new sample had an impact on LFS estimates. These investigations included:
  • analyses of operational procedures associated with the new sample implementation
  • analyses of sampling variability during the phase-in period for the new sample, and
  • analyses of data from the 2001 Census of Population and Housing to compare the characteristics of incoming and outgoing rotation groups during the phase-in period of the new sample.

The ABS also conducted analyses using two alternative estimation methods that place greater emphasis on the sample that is common between consecutive months of the survey.

In conclusion, these analyses and investigations indicated that the implementation of the new sample had no major effects on the continuity of LFS estimates. As expected, the relative standard errors of estimates of monthly movement increased during the phase-in period. The analysis of the characteristics of incoming and outgoing rotation groups suggests how this increased sample variability might have manifested itself in practice each month. Both alternative estimation methods produced estimates of change in employment over the eight month phase-in period that are similar to the published figure, although with a less volatile pattern. While increased volatility is unavoidable during a phase-in period, these studies have suggested some changes to operational arrangements which may enable the ABS to control elements of that volatility a little better in the post-2006 Census redesign.


ANALYSIS OF OPERATIONAL PROCEDURES

ABS investigations of the possible impact of operational procedures on LFS estimates took a broad focus and included issues relating to: sample design; sample size; survey scope or definitions; response rates; selection; derivation and weighting programs; interviewers; coverage of non-private dwellings; and field and office procedures.

These investigations found no errors that could have contributed to the high employment growth during the phase-in period. There were a number of improvements made to the operational procedures used for the new sample, but these did not have a significant impact on the survey estimates.


SAMPLING VARIABILITY DURING PHASE-IN PERIOD

The ABS analysed sampling variability during the phase-in period of the new sample, focussing on standard errors for estimates of monthly change of employed, unemployed and not in the labour force.

The average sampling variability of level estimates (as measured by standard errors) associated with the new LFS sample design were expected to be broadly comparable to that of the previous sample. The same is true for movement estimates, once the phase-in is complete. However, standard errors of monthly movements were expected to be higher during the sample phase-in period, particularly for the months of November and December 2002.

In the LFS, households are interviewed each month for eight months, with 1/8th of the sample being replaced each month. The replacement (or rotation) of a sample is usually achieved by selecting another cluster of dwellings, generally in close proximity to the dwellings leaving the sample. As a result, the incoming rotation group is likely to possess similar socioeconomic and labour force characteristics to the outgoing rotation group.

The main difference during a phase-in period is that the outgoing rotation groups are not replaced by nearby dwellings. The incoming rotation groups are therefore more likely to exhibit different labour force characteristics to outgoing rotation groups while the new sample is being introduced.

There is no systematic difference between the outgoing and incoming groups. They are both 'random probability' samples of the Australian population, and they both create unbiased estimates of labour force characteristics.

The ABS estimated that the standard errors on estimates of monthly movements during the phase-in of the new sample, compared to estimates based on the old sample, would be increased by 5% for employed persons, 1% for unemployed persons and 3% for persons not in the labour force. The increase in standard errors was expected to be higher still for movements in November and December, as a result of the higher proportion of the new sample being introduced in November and December.


ANALYSIS OF CENSUS RESULTS

Sampling variability occurs because one group of respondents is randomly selected instead of another. It is possible to gain some insight into the specific differences between the outgoing 1996 sample and the incoming 2001 sample by using Collection District (CD) data from the 2001 Census of Population and Housing. While this does not provide information on the differences that existed during the phase-in period, it does shed some light on the types of differences that existed between those CDs in 2001.

For example, the following table shows the employment to population ratio (EPR) for August 2001, for the CDs in the incoming rotation groups and for the CDs in the outgoing rotation groups, for each of the eight months of the sample phase-in period. Differences between the estimated EPRs for the incoming and outgoing rotation groups will contribute to sampling variability.

ESTIMATED EMPLOYMENT TO POPULATION RATIO (a), Collection Districts (b), of outgoing and incoming LFS rotation groups, August 2001
Reference period of rotation group
CDs of outgoing LFS rotation group
CDs of incoming LFS rotation groups
Difference (c)
%
%
% pts

Oct 2002-Nov 2002
57.08
57.54
0.46
Nov 2002-Dec 2002
57.29
58.41
1.12
Dec 2002-Jan 2003
57.33
57.52
0.19
Jan 2003-Feb 2003
58.09
56.87
-1.22
Feb 2003-Mar 2003
57.51
56.99
-0.52
Mar 2003-Apr 2003
56.85
58.21
1.36
Apr 2003-May 2003
57.17
57.07
-0.1
May 2003-Jun 2003
57.18
57.33
0.15
Average
57.31
57.49
0.18

Footnotes
(a) Employed persons as a proportion of the population aged 15 years and over. Estimates have been adjusted to allow for the differing probabilities of selection for CDs within the LFS.
(b) Due to difficulties in matching LFS selections to specific collection districts, excludes selected dwellings in Hobart and Darwin, Indigenous strata and more remote areas.
(c) Differences shown in this table refer to only one rotation group. The difference across all eight rotation groups would be approximately 1/8th of this.

Source: 2001 Census of Population and Housing.


The EPR was chosen as a measure to enable comparison of the level of employment between groups of different sizes. The EPRs for the CDs in incoming rotation groups were higher than those in outgoing rotation groups for the first three months (i.e. in November, December and January), lower for the following two months, higher again for the sixth month and quite similar for the last two months. Since the rotating sample moved, in the first three months, to geographic areas with higher EPRs at the time of the 2001 Census, there is a possibility that these rotation groups contributed to the growth in the LFS employment estimates in these months.


ALTERNATIVE ESTIMATION METHODS

Another way of examining the impact of the sample change is to use the information reported by respondents during the phase-in period, but use alternative estimators that are less sensitive to the sample rotation effects. Note that, while these estimators produce more stable estimates of monthly movement in situations like this, they have other properties that make them less attractive in the usual situations.

The two alternative estimation methods used (matched rotation group, and composite estimation) place greater emphasis on the sample that is common between consecutive months of the survey. See Note on Methodology at the end of this paper for more detail about these estimators.

One drawback to the matched rotation group method is that over time the resulting level estimates drift away from the true level. In addition, the seasonal adjustment process used for both of these analyses was only approximate because the seasonal adjustment was applied to 'hybrid' series. These 'hybrid' series were formed by appending the matched rotation group series (or composite estimation series) for November 2002 to June 2003, to the published employment series for the period to October 2002.

The following graph compares the seasonally adjusted matched rotation group and composite estimation employment series with the published series. The cumulative change in employment over the eight months of the sample phase-in for both alternative methods is similar to the published figure, although the matched rotation group series (and, to a lesser extent, the composite estimation series) has a less volatile monthly pattern than the published series.

Graph: Alternative estimation methods: estimates of employment during phase-in



IMPLICATIONS FOR 2006 LFS SAMPLE PHASE-IN

Alternative matching of rotation groups

Rotating in groups from different geographic areas during the phase-in period can have an impact on the sampling variability of the estimates. This is particularly the case when rotation groups with relatively high EPR are replaced by groups with relatively low EPRs, and vice versa.

This phenomenon can be alleviated somewhat by matching outgoing rotation groups with incoming rotation groups with similar EPRs (as measured in the most recent census), and thereby reducing the volatility in survey estimates. The graph below shows how a matching of incoming and outgoing rotation groups could have been used to reduce the differences between the EPRs of these groups.

Graph: Estimated employment to population ratio



Investigations for the phase-in of the 2006 LFS sample redesign will look at more closely matching outgoing rotation groups with incoming rotation groups, based on employment characteristics from the 2006 census. This may lead to smaller differences between the old and new samples, and to a smaller contribution of the sample phase-in to LFS sampling variability.

Timing of phase-in period

The 2001 sample redesign was phased in over a period of eight months from November 2002 to June 2003, with around 1/8th of the new private dwelling sample being introduced each month under existing sample rotation arrangements. This reduces the likelihood of dramatic movements directly due to the new sample phase-in, as well as providing operational advantages and helping to minimise sampling error. This strategy, and the timing, will be reviewed for the 2006 sample redesign, drawing upon experiences gained during the 2001 phase-in.


FURTHER INFORMATION

For further information about the analyses in this article please contact Bill Allen on Canberra 02 6252 6302, or via email at bill.allen@abs.gov.au. For information about the Labour Force Survey please contact Craig Blair on Canberra 02 6252 6565, or via email at craig.blair@abs.gov.au.


NOTE ON METHODOLOGY

Matched rotation group method

The matched rotation group method calculates monthly movements using the 7/8ths of selected dwellings that are common between consecutive months under the LFS rotation scheme (i.e. the incoming group of dwellings is dropped from the current month's estimate, and the outgoing group is dropped from the previous month's estimate).

The matched rotation group series shown in this paper has been derived by adding successive estimates of monthly movement (beginning with November 2002) to the published level estimate for October 2002, and then seasonally adjusting the whole series (as if it were a continuous time series). Hence the seasonally adjusted series is only approximate, because the matched rotation group estimates may have different seasonal characteristics from the published estimates. Also, analysis has shown that there is a small systematic difference in responses between the outgoing and incoming groups of dwellings in the LFS, related to the length of time that respondents have been in the survey. This results in a small bias in the matched rotation group estimates of monthly movement, which will accumulate over time as successive monthly movements are added to the employment estimate for October 2002.

In addition to accumulating bias, the matched rotation group method has higher standard errors than the published series, for estimates of employment change over periods longer than six months.

These deficiencies render the matched rotation group method inappropriate for other than short-term comparisons.

Composite estimation method

The composite estimation method calculates an unbiased estimate of the employment level for any given month. It gives most weight to the dwellings in common with the previous month, but also gives some weight to the outgoing and incoming dwellings. The composite estimation series shown in this paper has been derived by combining original estimates for the period November 2002 to May 2003 with published (original) estimates for the period to October 2002, and then seasonally adjusting the whole series (as if it were a continuous time series). Hence, although the composite estimation method is sound, the seasonally adjusted series is only approximate, because the composite estimates may have slightly different seasonal characteristics from the published estimates.

Further information

Further details of the matched rotation group and composite estimation methods can be found in an article in the May 1998 issue of Australian Economic Indicators (cat. no. 1350.0).


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