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6203.0 - Labour Force, Australia, Feb 2001  
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Special Article - Unemployment and Supplementary Measures of Underutilised Labour (Feb, 2001)


(This article is taken from Labour Force Australia February 2001 ABS Cat. Number 6203.0)

INTRODUCTION

The Australian Bureau of Statistics (ABS) collects and publishes a wealth of information about the labour market activity and aspirations of the working age population. Each month, the ABS releases the official measures of the number of employed and unemployed persons. These estimates come from the ABS Labour Force Survey which is conducted throughout the nation every month.

Many analysts monitor unemployment because of its role as an indicator of current economic conditions and of future economic performance. The number of unemployed people represents a measure of available labour resources which are not being utilised in the economy. However, there are different interpretations of what constitutes ‘underutilised labour resources’. Some commentators consider that the official measure of unemployed persons understates the full extent of unemployment, and point to the exclusion of people who want a job but are not currently looking for work, and part-time workers who would prefer a job in which they worked more hours. Recognising this interest in the broader concepts of underutilised labour, and to assist in understanding the structure and dynamics of the labour market, the ABS provides a range of supplementary measures of available labour resources and the extent of their utilisation.

This article describes three categories of people who are commonly regarded as being potential labour resources and part of the underutilised labour supply. The categories are: persons who are unemployed; persons who satisfy some, but not all of the criteria required to be classified as unemployed (persons with a marginal attachment to the labour force); and persons who usually work part-time and want to work more hours (underemployed). The article also describes the way the ABS measures these categories, and presents summary data about them. The data refer to September 1999, the latest period for which detailed information is available on underemployment and marginal attachment to the labour force.


LABOUR FORCE FRAMEWORK

The ABS conceptual framework for labour force statistics provides a comprehensive basis for systematically describing and measuring the labour market activity of Australia’s population. In this way, statistical measures can be developed to describe the diversity of the labour supply and the extent to which it is utilised.

The framework enables the classification of all people aged 15 years and over as being either in employment, unemployment or not in the labour force, based on information on their labour force activity and availability for work in a short reference period. Persons in employment can be further divided into those who are fully employed (these could be either in full-time or part-time employment), and those who are underemployed.


LABOUR FORCE FRAMEWORK STATISTICAL MEASURES, SEPTEMBER 1999 (See attached pdf file below)

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The conceptual framework can also divide persons classified as being not in the labour force into a number of categories based on their association with the labour force. Persons with the strongest links with the labour force are described as having a marginal attachment to the labour force. Within this group, people can be classified into various groups according to the relative strength of their attachment, based on criteria such as looking for work and availability to start work.


INTERNATIONAL DEFINITIONS

The ABS takes its definitions of employment and unemployment from the International Labour Organisation (ILO). The current ILO definitions were established in 1982, following a review of the previous definitions which dated from 1954. However, the underlying conceptual basis for measuring employment and unemployment has remained essentially unchanged since 1954, reflecting its continued acceptance by the international community.

The ILO concept of work for purposes of measuring employment is based on the concept of production as defined by the United Nations System of National Accounts (SNA). This means that any economic activity, of whatever duration, falling within the SNA production boundary is considered as work for the purpose of measuring employment. For practical reasons, the ILO standards specify that the concept should be interpreted as paid work for at least one hour in a short reference period such as one week or one day. This ‘one hour criterion’ in the definition of employment is also considered fundamental to the ILO definition of unemployment, which refers to a situation of being completely without work.

In common with many other national labour force surveys, the ABS has set one hour in a one week reference period as the minimum amount of work for deciding whether or not a person is employed. To select an alternative cut-off point, which inevitably becomes an arbitrary decision, would be contrary to international standards and practice.


THE EMPLOYED AND UNEMPLOYED

The way the ABS measures employment and unemployment has not changed markedly since the inception of the national LFS in 1964. The labour force status of a person is determined solely by their current work-related and job-search activity, and their current availability for work. The following concepts and definitions apply to employment and unemployment:

Employed persons comprise all those civilians aged 15 years and over who worked for one hour or more in the reference week or who had a job from which they were absent. Work is taken to mean work for one hour or more during the reference week, undertaken for pay, profit, commission or payment in kind, in a job, business or farm, or without pay in a family business or farm.

Unemployed persons are those aged 15 years and over who satisfy all three of the following:

a) The person must not be employed, i.e. they must be ‘without work’.

b) The person must be ‘looking for work’. A person must have, at some time during the previous four weeks, undertaken specific ‘active’ steps to look for work, such as applied to an employer for work, answered an advertisement for a job, visited an employment agency, used a touchscreen at Centrelink offices, or contacted friends or relatives. The search may be for full-time or part-time work. In either case, however, the person must have done more than merely read job advertisements in newspapers.

c) The person must be ‘available to start work’. This is taken to mean that they were available to start work in the survey reference week (i.e. the week before the interview).

The criteria used to define a person as being unemployed are criticised by some analysts as being too stringent, and not reflecting the full extent of unemployment. In particular, there is a view that the unemployed should also include those persons who, as an alternative to being without work, accept jobs which offer only a few hours a week, while continuing to look for full-time work.

To help analysts look more broadly at measures of employment and unemployment, the ABS publishes a wide range of information from its labour force surveys. For example, statistics on the number of hours worked by part-time workers can be used by analysts to include persons working for only a few hours a week (say 10 hours or less) within a broader measure of underutilised labour resources.


BROADER MEASURES OF UNDERUTILISED LABOUR

To help analysts look at the broader concepts of underutilised labour and to assist in understanding the structure and dynamics of the labour market, the ABS provides a range of supplementary measures of the available labour supply and the extent of its utilisation. Two important areas of concern are in relation to underemployment and marginal attachment to the labour force. Information about these two areas is collected in September each year. Statistics on underemployment are published in Underemployed Workers, Australia (Cat. no. 6265.0), although summary measures are available from the Labour Force Survey each quarter. Statistics on marginal attachment are published in Persons Not in the Labour Force, Australia (Cat. no. 6220.0).

Underemployment

As previously stated, a person is classified as employed if they work one hour or more in the reference week. However, persons who usually work part-time (i.e. less than 35 hours per week), and who want to work more hours, can be regarded as persons whose labour is underutilised, and the people themselves may be considered as being underemployed. In some respects, this form of underemployment is similar to unemployment, in that they are both about people wanting work.

The labour force framework provides the conceptual basis for classifying employed people as either fully employed workers or as underemployed workers. The definition of underemployed workers is consistent with the ILO’s definition of time-related underemployment. The ABS provides a number of statistical measures of underemployed workers, based on the number of employed workers who usually work part-time and who indicate that they would prefer to work more hours. Some of these part-time workers may want to work full-time, others may want to remain part-time. In September 1999, there were 471,300 part-time workers who wanted to work more hours, representing 20% of all people who usually worked part-time. Of these, 291,500 were wanting to work full-time hours.

The criteria associated with measuring underemployed workers are more subjective than those used to define unemployment. Not all underemployed workers, as defined above, are looking for more work or available for more work. In September 1999, there were 211,400 part-time workers who wanted to work more hours who, at the time of the survey, were actively looking for, and available to start, extra work. A further 43,500 people were actively looking for extra work and, although not currently available, would be available to start extra work within four weeks.

Persons who usually work full-time but worked part-time in the survey reference period for economic reasons (e.g. due to being stood down, on short time or with insufficient work) form a special category of underemployed worker. In September 1999, there were 36,200 persons who usually worked full-time but worked part-time hours in the reference week due to economic reasons.

Persons with marginal attachment to the labour force

Another, broader, measure of underutilised labour resources could reflect not only those officially classed as unemployed but also persons who would like to work, but for a variety of reasons are not actively looking for work or are not currently available to start work. Many of these people could enter the labour force in the short term, or could do so if the labour market conditions improved. The labour force framework shows a number of detailed categories which classify people by the strength of their attachment to the labour force, in terms of the criteria used to establish labour force status (i.e. whether they were looking for work or available to start work).

The ABS classifies these people as having a marginal attachment to the labour force. The concept of marginal labour force attachment is very broad. It includes people who have a strong likelihood of joining the labour force in the near future as well as some who have little or no commitment to finding employment. Unlike the objective criteria for determining employment and unemployment, which are based on actual labour market activity and current availability for work, the criteria associated with marginal attachment to the labour force are more subjective, and the measurement against these criteria may be affected by the interpretation by survey respondents of the concepts used. For example, students may indicate that they want to work, but may have no firm intention of joining the labour force before completing their studies.

Persons with marginal attachment to the labour force can be broadly summarised as those who:

i) want to work but are not actively looking for work, and are available to start work within 4 weeks (818,000 persons in September 1999);

ii) want to work, are actively looking for work but are not available to start work in the reference week (65,200 persons in September 1999).

Discouraged jobseekers

Among people with a marginal attachment to the labour force, a group of special interest is discouraged jobseekers. These are people who want to work, who could start work within four weeks if offered a job, but who have given up looking for work for reasons associated with the labour market. This group (105,800 in September 1999) includes people who believe there are no jobs available, or that there are no jobs in their locality or line of work. It also includes people who believe they cannot get work either because employers would consider them to be too old or too young or to lack skills and experience; or because of difficulties with language or ethnic background.

While discouraged jobseekers are of particular interest, they represent only a small proportion of persons who want to work, are without work, are available to start work within four weeks but are not actively looking for work. The majority of these people (712,200 in September 1999) are not looking for a job for other reasons such as: wanting to complete an educational course; looking after children or other family members; and ill health or physical disability. While these persons may not be as closely attached to the labour force as discouraged jobseekers, they do represent potential labour resources in that they would be available to start work within 4 weeks.

UNEMPLOYMENT AND SUPPLEMENTARY MEASURES

The following table provides statistics of unemployment, and supplementary measures on underemployment and persons with marginal attachment to the labour force.


TABLE 1. UNEMPLOYMENT AND SUPPLEMENTARY MEASURES, SEPTEMBER 1999(a)

Males
('000)
Females
('000)
Persons
('000)

Unemployed
403.8
309.2
713
Looking for full-time work
331.3
187.7
519
Looking for part-time work
72.5
121.5
194
Underemployed workers
173.5
297.8
471.3
Wanting full-time hours
131.8
159.6
291.5
Wanting more part-time hours
41.7
138.1
179.8
Part-time workers looking for and available to
87.7
123.7
211.4
work extra hours
Marginal attachment to the labour force
267
616.2
883.2
Actively looking but not currently available
27.8
37.4
65.2
Discouraged jobseekers
36.9
68.9
105.8
Other
202.2
509.9
712.2

(a) Persons aged 15-69 years.
Source: Labour Force, Australia, September 1999 (Cat. no. 6203.0); Underemployed Workers, Australia, September 1999 (Cat. no. 6265.0); Persons Not in the Labour Force, Australia, September 1999 (Cat. no. 6220.0).


UNEMPLOYMENT ALLOWANCE RECIPIENTS

Two other measures of the number of people seeking employment, which are commonly referred to by commentators, are based on labour market income support payments administered through Centrelink. These are the number of unemployment allowance recipients (i.e. Newstart Allowance or Youth Allowance (other) recipients), and the people the Department of Family and Community Services (DFaCS) refers to as jobseekers. This information is published monthly by DFaCS in Labour Market and Related Payments - a monthly profile.

In September 1999, the average number of unemployment allowance recipients was 713,948 persons. Of these, 575,708 people were engaged in jobsearch activities and were classified by DFaCS as jobseekers. The remaining 138,240 people either did not receive a payment, or were not required to seek work because they were undertaking training or voluntary work, or were temporarily incapacitated.

The DFaCS measures differ from the ABS measure of unemployment. In particular, unemployment allowance recipients may be employed part-time while continuing to receive the allowance, providing their income falls within an income test limit. The ABS classifies a person who worked for one hour or more during the survey reference period as employed. Other persons may be classified by the ABS as unemployed but not be included in the DFaCS measure of jobseekers - for example, those who do not apply for an allowance, or those who do not receive an allowance because their income and/or their partner’s income exceeds the income test limit.

Included in the number of unemployment allowance recipients are people on the Work for the Dole scheme. While on the scheme, a participant continues to be registered as unemployed, is required to continue actively looking for work, and continues to receive an unemployment allowance.

The ABS considers participants in this scheme to be undertaking unpaid work and does not classify them as employed (unless they undertake other paid work during the reference period). Since they are not employed (under the ABS definition), want to work, are actively looking for work, and are available to start work, scheme participants would be considered by the ABS to be unemployed.


CONCLUSION

The ABS official measure of unemployed persons continues to play a valuable role as an indicator of current economic conditions and of underutilised labour resources. The objective criteria used to define unemployment are based on international standards, and have been in place for many years. However, the unemployment measure does not capture the full extent of underutilised labour. This requires a more comprehensive range of measures.

The ABS provides a range of measures to supplement statistics on unemployment. These measures include persons with a marginal attachment to the labour force (in particular, discouraged job seekers) and persons who are underemployed. In this way, the ABS provides a broader view of the existing and potential labour resources and the extent to which they are being utilised.


FURTHER INFORMATION

For further information on this and other labour related topics, contact Harry Kroon on (02) 6252 6753, or email harry.kroon@abs.gov.au.


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