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6105.0 - Australian Labour Market Statistics, Jul 2009  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 03/07/2009   
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UNDERUTILISATION IN THE ECONOMIC DOWNTURN


INTRODUCTION

The downturn in the Australian economy in 2008 and 2009 has had a noticeable impact on the labour market. The change in demand for labour during an economic downturn is most frequently measured with reference to the rising numbers of unemployed people. However, there is also another impact evident in an economic downturn - a rise in underemployment. In any analysis of underutilised labour it is therefore useful to examine both the unemployment rate and underemployment rate, and in addition the labour force underutilisation rate (LFUR), which is the sum of these two rates.

This article highlights recent changes in underutilisation to May 2009, from February 2009 and also from the previous May. It also explores changes in quarterly unemployment and underemployment for particular populations, in order to identify the underlying trends which have contributed to the recent increases in underutilisation.

The article presents data on both trend and original bases. While the ABS does not undertake time series adjustments for all underutilisation data, key underutilisation data, such as the labour force underutilisation rate, are available on a trend, seasonally adjusted and original basis. In this article trend data are presented wherever possible.

The data presented in this article relate to headcount measures of underutilisation, that is the proportion of people whose labour is underutilised. However, an alternative view of underutilisation is that which identifies the hours offered by these people. An hours based measure takes into account the fact that, while some people may offer a small number of hours, others may offer many more. In recognition of this the ABS produces annual volume measures, which provide hours based unemployment, underemployment and labour force underutilisation rates. The updated volume measures for 2008 will be released in the October 2009 issue of this publication.

As estimates in this article have been rounded, discrepancies may occur between levels and movements.


RECENT TREND

Information on underutilisation is available on a quarterly basis from the Labour Force Survey (LFS). Graph 1 presents data from May 2001 and illustrates the considerable increase in the LFUR in the 2008-2009 financial year, particularly between February 2009 and May 2009 (up 1.1 percentage points, from 12.3% to 13.4%). The two most recent quarterly increases, both up 1.1 percentage points, represent the largest quarter to quarter percentage point increases in the rate in the recent time series, and in the context of the broader historical series are the largest quarter to quarter increases since February 1991 which saw an increase of 1.2 percentage points. In year to year terms, the LFUR increased 3.4 percentage points, from 10% in May 2008 to 13.4% in May 2009.

1. Labour force underutilisation rate: Trend - May 2001 - May 2009
Graph: 1. Labour force underutilisation rate: Trend—May 2001 – May 2009



UNEMPLOYMENT AND UNDEREMPLOYMENT

Increases in both the trend quarterly unemployment rate and the trend quarterly underemployment rate contributed to the increase in the LFUR to May 2009. The trend quarterly unemployment rate increased by 0.6 percentage points from 5.2% in February 2009, to 5.7% in May 2009 (up 1.6 percentage points from May 2008), while the trend underemployment rate increased 0.5 percentage points, from 7.1% in February 2009 to 7.7% in May 2009 (up 1.8 percentage points from the previous May).

2. Changes in the components of the LFUR: Trend

May 2008
February 2009
May 2009
May 2008-May 2009 change
February 2009-May 2009 change

Unemployment rate (%)
4.1
5.2
5.7
1.6 pts
0.6 pts
Underemployment rate (%)
5.9
7.1
7.7
1.8 pts
0.5 pts
Labour force underutilisation rate (%)
10.0
12.3
13.4
3.4 pts
1.1 pts



In order to understand the increase in labour underutilisation in the year to May 2009, it is useful to identify the population groups for which the underutilisation measures have shown the largest increase.


AGE

The LFUR has been considerably higher for people aged 15-24 years compared to the rate for all people. People in this younger age group are of particular interest from an underutilisation perspective, as they are often deemed to be a population group whose employment is particularly vulnerable to changes in the economic cycle, particularly as many are employed in part-time and casual work. The average underutilisation rate for people aged 15-24 years from May 2001 to May 2009 was 23.7% (varying from a low of 19.3% to a high of 27.4%), whereas the average rate for people aged 25 years and over for the same period was 12.2% (fluctuating between a low of 10% and a high of 14.2%). Graph 3 illustrates the increases in the underutilisation rate between February 2009 and May 2009 for 15-24 year olds, the 'youth' population, (up 2.1 percentage points, from 24.2% to 26.2%), compared to the increase for all people (up 1.1 percentage points, from 12.3% to 13.4%).

3. Labour force underutilisation rate, Youth and total: Trend - May 2001 - May 2009
Graph: 3. Labour force underutilisation rate, Youth and total: Trend—May 2001 – May 2009


Both component rates within the LFUR were considerably higher for people aged 15-24 years, as shown in table 4. The youth unemployment rate was 12.0% in May 2009, considerably higher than the rate for all people (5.7%). The youth underemployment rate was also markedly higher, at 14.3% in May 2009 (compared to 7.7% for all people). The high underemployment rate reflects the relatively high proportion of people in this age group who are employed part-time, often combining employment with education.

The increases in the unemployment and underemployment rates from February 2009 to May 2009 were also noticeably higher for 15-24 year olds than the change observed for all people. In contrast, the 55 years and over age group showed the smallest percentage point increase in the unemployment rate during the period (0.2 percentage points, from 2.7% to 2.8%), and the 35-44 year age group showed the smallest increase in underemployment for the period (0.3 percentage points, from 6.1% to 6.4%). This was also true for the year to year changes.

4. Components of the LFUR by Age groups: Trend

Unemployment rate (%)
Underemployment rate (%)
May 2008
February 2009
May 2009
May 2008
February 2009
May 2009

15-24 years
8.4
10.7
12.0
10.9
13.4
14.3
25-34 years
3.8
5.1
5.6
4.8
5.7
6.4
35-44 years
3.3
4.1
4.4
5.1
6.1
6.4
45-54 years
2.9
3.5
4.0
4.6
5.9
6.3
55 years and over
2.2
2.7
2.8
4.2
5.1
5.5
Total
4.1
5.2
5.7
5.9
7.1
7.7




SEX

The unemployment and underemployment rates rose for both men and women over the year to May 2009. There have been considerable differences between the rate of underemployment for men and women, as shown in table 5. As part-time employment has become more prevalent, so too has underemployment, since underemployment is largely associated with part-time work. Women maintain higher rates of part-time employment than men, and this is reflected in the higher trend underemployment rate for women.

However, over recent quarters men have experienced larger increases in both unemployment and underemployment than women. The trend unemployment rate increased more for men from February 2009 to May 2009 (up 0.8 percentage points, from 5.1% to 6.0%), than for women (up 0.2 percentage points, from 5.2% to 5.4%). The trend underemployment rate for men during this period rose by 0.7 percentage points, from 5.5% to 6.2%, compared to an increase of 0.3 percentage points for women (from 9.1% to 9.4%). Similarly, the underemployment rate for men rose at a greater rate then for women for the year ending May 2009.

5. Unemployment and underemployment rates by Sex: Trend

May 2008
February 2009
May 2009
May 2008-May 2009 change
February 2009-May 2009 change

Unemployment rate - Males (%)
3.8
5.1
6.0
2.2 pts
0.8 pts
Unemployment rate - Females (%)
4.5
5.2
5.4
0.9 pts
0.2 pts
Underemployment rate - Males (%)
4.2
5.5
6.2
2.0 pts
0.7 pts
Underemployment rate - Females (%)
7.8
9.1
9.4
1.6 pts
0.3 pts




STATES AND TERRITORIES

The recent changes in underutilisation experienced by each state and territory have generally followed the trend in the rate for Australia. The largest increases in labour force underutilisation rates from February 2009 to May 2009 were observed in Western Australia (up 1.4 percentage points) and Queensland (up 1.3 percentage points). The LFUR remained at 6.9% in the Northern Territory, the lowest of any state or territory.

The largest year to year increase occurred in the rate for Western Australia, which increased by 4.3 percentage points, from 7% to 11.3%. In contrast, the Northern Territory experienced the largest year to year LFUR decrease, down 3 percentage points, from 9.9% to 6.9%.

6. LFUR by States and territories: Trend

May 2008
February 2009
May 2009
May 2008-May 2009 change
February 2009-May 2009 change
%
%
%
pts
pts

New South Wales
10.8
13.3
14.3
3.5
1.0
Victoria
10.7
13.1
14.2
3.5
1.1
Queensland
9.0
11.5
12.8
3.8
1.3
South Australia
11.5
13.5
14.1
2.5
0.6
Western Australia
7.0
9.9
11.3
4.3
1.4
Tasmania
9.9
11.5
12.6
2.7
1.1
Northern Territory
9.9
6.9
6.9
-3.0
-
Australian Capital Territory
7.4
7.4
7.8
0.4
0.5
Australia
10.0
12.3
13.4
3.4
1.1

- nil or rounded to zero (including null cells)


As shown in table 7, Western Australia had the largest percentage point increase in unemployment rate from February 2009 to May 2009 (up 0.8 percentage points, from 4% to 4.8%), followed by Queensland (up 0.7 percentage points, from 4.6% to 5.2%). In contrast, the Northern Territory had a decrease in unemployment during the period (down 0.1 percentage points, from 3.7% to 3.6%).

Similarly, Western Australia had the largest increase in year to year movements in unemployment from May 2008 to May 2009 (up 1.9 percentage points, from 3% to 4.8%), followed by New South Wales, Victoria and Queensland (all up 1.7 percentage points). The Northern Territory unemployment rate remained at 3.6% in year to year trend terms.

Considerable changes in underemployment rates were also observed at the state and territory level over the period. The underemployment rate for Tasmania showed the largest quarter to quarter increase (up 0.7 percentage points, from 6.7% to 7.3%), followed by Western Australia, Queensland and Victoria (all up 0.6 percentage points). The Northern Territory was the only state or territory that did not record an increase during the quarter.

In year to year movements Western Australia had the largest underemployment rate increase from May 2008 to May 2009 (up 2.5 percentage points, from 4.0% to 6.5%), and the Northern Territory showed the only underemployment rate decrease for the period (down 3 percentage points, from 6.2% to 3.2%).

7. Components of the LFUR by States and territories: Trend

Unemployment rate (%)
Underemployment rate (%)
May 2008
February 2009
May 2009
May 2008
February 2009
May 2009

New South Wales
4.6
5.9
6.4
6.1
7.4
7.9
Victoria
4.2
5.3
5.9
6.5
7.8
8.3
Queensland
3.6
4.6
5.2
5.4
7.0
7.6
South Australia
4.7
5.5
5.7
6.8
8.0
8.4
Western Australia
3.0
4.0
4.8
4.0
5.9
6.5
Tasmania
4.4
4.9
5.3
5.6
6.7
7.3
Northern Territory
3.6
3.7
3.6
6.2
3.2
3.2
Australian Capital Territory
2.8
2.8
3.1
4.6
4.5
4.8
Australia
4.1
5.2
5.7
5.9
7.1
7.7




INDUSTRY

In order to understand underutilisation in an industry context it is necessary to use a different approach. While it is possible to determine the industry of an unemployed person's last job, it does not necessarily provide an indication of the industry in which they will next work in. This article therefore uses a combination of changes in employment, together with the proportion of employed people in the industry that are underemployed, to identify changes in labour demand and underutilisation within industry divisions. The analysis also employs year to year comparisons, given the variability in original quarterly industry employment estimates.

Table 8 shows that between May 2008 and May 2009 there were relatively small changes in total employment in most industries. In contrast, the change in the percentage of employed people within those industries who were underemployed was considerably more pronounced over the period, with an increase in the proportion of employed people who were underemployed increasing from 6.3% to 8.2%.

As at May 2009, people working in the Accommodation and food services industry reported the highest rate of underemployment, reflecting the relatively high proportion of part-time workers in the industry. People employed in Mining, an industry with relatively little part-time employment, maintained the lowest rate of underemployment. The largest year to year change in underemployment (an increase of 3.6 percentage points) occurred amongst people working in Information media and telecommunications, an industry where employment increased by less than 1%.

8. Components of underutilisation by Industry: Original

Employed ('000)
Underemployed (% of employed)
May 2008
May 2009
May 2008
May 2009

Agriculture, forestry and fishing
368.1
348.1
3.4
4.1
Mining
164.5
152.3
*0.9
*0
Manufacturing
1 070.0
993.5
3.1
5.5
Electricity, gas, water and waste Services
125.3
136.7
*1.2
*3.9
Construction
975.7
984.1
4.2
7.0
Wholesale trade
398.6
399.2
3.4
4.7
Retail trade
1 227.1
1 209.5
11.3
13.7
Accommodation and food services
712.1
721.2
14.0
17.1
Transport, postal and warehousing
566.8
599.2
5.6
7.9
Information media and telecommunications
222.5
224.3
4.0
7.6
Financial and insurance services
406.6
391.6
1.5
*1.5
Rental, hiring and real estate services
198.9
181.8
3.3
5.5
Professional, scientific and technical services
781.3
762.4
2.8
5.9
Administrative and support services
339.3
340.4
11.5
14.7
Public administration and safety
628.1
693.1
3.7
3.3
Education and training
825.7
808.8
7.2
6.9
Health care and social assistance
1 109.2
1 189.4
7.3
9.1
Arts and recreation services
178.1
204.6
11.9
14.5
Other services
446.8
441.5
7.0
8.4
Total
10 744.8
10 781.6
6.3
8.2

Note: * estimate is subject to sampling variability too high for most practical purposes.



OCCUPATION

As with industry, it is useful to assess changes in employment in each occupation major group, together with the proportion of employed people in the groups that are underemployed, to identify changes in labour demand and underutilisation. Table 9 provides a summary of total employment for each occupation major group, with the corresponding proportion of underemployment. Labourers reported the highest incidences of underemployment in both the May 2008 and may 2009 quarters.

The largest increase in the rate of underemployment from May 2008 to May 2009 (an increase of 4.8 percentage points) was reported by Machinery operators and drivers (up 3.4 percentage points), followed closely by Community and personal service workers (up 3.3 percentage points). As with industry, high incidences of underemployment relate to the high proportions of part-time employment within particular occupations.

9. Components of underutilisation by Occupation: Original

Employed ('000)
Underemployed (% of employed)
May 2008
May 2009
May 2008
May 2009

Managers
1 388.9
1 408.6
1.4
2.0
Professionals
2 227.1
2 211.0
3.6
4.4
Technicians and trades workers
1 616.7
1 623.8
3.2
5.9
Community and personal service workers
947.8
1 000.6
12.1
15.4
Clerical and administrative workers
1 632.1
1 679.6
4.4
5.5
Sales workers
1 028.5
1 012.5
12.9
15.4
Machinery operators and drivers
724.2
692.2
4.9
8.3
Labourers
1 179.4
1 153.3
14.1
17.2
Total
10 744.8
10 781.6
6.3
8.2




RELATED RELEASES

A number of recent articles providing further analysis of labour underutilisation are available as follows:
  • an article in the May 2009 issue of Labour Force, Australia (cat. no. 6202.0)
  • the feature article, 'Historical labour underutilisation', providing an analysis of historical underutilisation, which can also be found in this issue (July 2009) of Australian Labour Market Statistics (cat. no. 6105.0).
  • the feature article, 'Quarterly Labour Force Underutilisation Rate', published in the July 2008 issue of Australian Labour Market Statistics (cat. no. 6105.0).


FURTHER INFORMATION

For further information, please contact Bjorn Jarvis (ph (02) 6252 6552 or email <bjorn.jarvis@abs.gov.au>).


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