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1301.0 - Year Book Australia, 2005  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 21/01/2005   
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Contents >> Labour >> Underutilised labour

The extent to which the available supply of labour is utilised is an important social and economic issue. The number of unemployed people and the unemployment rate are well known measures of labour underutilisation. In addition to information about unemployment, the ABS provides a wide range of data on available labour resources and the extent of their utilisation. These include data on persons with a marginal attachment to the labour force (in particular, discouraged jobseekers) and persons who are underemployed.

Headcount measures of labour underutilisation

The ABS has developed a series of supplementary measures of labour underutilisation which were formed by combining information on unemployed persons with that of other groups whose labour is underutilised. There are five measures - the unemployment rate, the long-term unemployment rate, the underemployment rate, the labour force underutilisation rate and the extended labour force underutilisation rate. These are headcount measures and provide an indication of the proportion of the population affected by labour underutilisation.

The underemployment rate is the number of underemployed workers as a proportion of the labour force. Underemployed persons include part-time workers who want and are available to work more hours, and full-time workers who worked part-time hours in the reference week for economic reasons (i.e. involuntarily). In September 2003 there were 567,400 underemployed people (table 6.40). The underemployment rate was higher for women (7.4%) than men (4.1%). This is related to the higher proportion of women who are in part-time employment.

The labour force underutilisation rate is the sum of the unemployment rate and the underemployment rate. In September 2003 the labour force underutilisation rate was 11.5%. Women have a higher labour force underutilisation rate than men, reflecting their higher rate of underemployment.

The extended labour force underutilisation rate is the broadest of the ABS measures of underutilised labour and is the sum of the unemployed, the underemployed, and two groups of persons marginally attached to the labour force, as a proportion of the labour force augmented by those two groups. The two groups of marginally attached persons are: (1) persons actively looking for work, not available to start work in the reference week, but available to start within four weeks; and (2) discouraged jobseekers. The extended labour force underutilisation rate was 12.5% in September 2003. The extended labour force underutilisation rate for women was higher than that for men, not only because women had a higher rate of underemployment, but also because women were more likely to be in the marginally attached populations that contribute to this rate.


6.40 LABOUR UNDERUTILISATION - September 2003

Units
Males
Females
Persons

Unemployed
'000
321.0
275.2
596.3
Long-term unemployed
'000
84.0
45.1
129.1
Underemployed
'000
230.5
336.8
567.4
Marginally attached to the labour force(a)
Actively looking for work, not available in reference week but available to start work within four weeks
'000
17.1
22.3
39.4
Discouraged jobseekers
'000
26.6
53.2
79.8
Labour underutilisation rates
Long-term unemployment rate(b)
%
1.5
1.0
1.3
Unemployment rate(c)
%
5.7
6.0
5.9
Underemployment rate(d)
%
4.1
7.4
5.6
Labour force underutilisation rate(e)
%
9.8
13.4
11.5
Extended labour force underutilisation rate(f)
%
10.5
14.9
12.5

(a) In this table, marginal attachment to the labour force includes only a subset of the groups usually included.
(b) The long-term unemployment rate is the long-term unemployed (persons unemployed for 12 months or more) expressed as a proportion of the labour force.
(c) The unemployment rate is the unemployed expressed as a proportion of the labour force.
(d) The underemployment rate is the underemployed expressed as a proportion of the labour force.
(e) The labour force underutilisation rate is the unemployed, plus the underemployed, expressed as a proportion of the labour force.
(f) The extended labour force underutilisation rate is the unemployed, plus the underemployed, plus a subset of persons marginally attached to the labour force, expressed as a proportion of the labour force augmented by the marginally attached persons.

Source: Australian Labour Market Statistics, July 2004 (6105.0).


Overall, movement in unemployment is the primary driver of movements in the headcount measures, although underemployment has been increasing in relative importance in recent years, particularly for women. Levels of unemployment, and the unemployment rate, fluctuate with the economic cycle. In the decade to 2003, the trend unemployment rate almost halved, from 10.6% in September 1993 to 5.9% in September 2003 (graph 6.41).

Graph 6.41: LABOUR UNDERUTILISATION RATES



Differences in labour underutilisation between states and territories are primarily driven by differences in unemployment rates. In September 2003, Tasmania (13.5%), South Australia (12.5%) Queensland (12.3%) and Western Australia (11.5%) all had labour force underutilisation rates equal to or above the national average (11.5%) (table 6.42).


6.42 LABOUR UNDERUTILISATION, By states and territories - September 2003

Long-term unemployment rate(a)
Unemployment rate(b)
Underemployment rate(c)
Labour force underutilisation rate(d)
Extended labour force underutilisation rate(e)
%
%
%
%
%

New South Wales
1.3
5.7
5.2
10.9
12.0
Victoria
1.2
5.5
5.7
11.3
12.2
Queensland
1.3
6.2
6.1
12.3
13.3
South Australia
1.4
6.1
6.4
12.5
13.5
Western Australia
1.3
6.4
5.1
11.5
12.5
Tasmania
2.0
7.3
6.1
13.5
15.4
Northern Territory
0.5
6.1
3.8
10.0
11.0
Australian Capital Territory
0.6
3.9
4.5
8.5
9.1
Australia
1.3
5.9
5.6
11.5
12.5

(a) The long-term unemployment rate is the long-term unemployed (persons unemployed for 12 months or more) expressed as a proportion of the labour force.
(b) The unemployment rate is the unemployed expressed as a proportion of the labour force.
(c) The underemployment rate is the underemployed expressed as a proportion of the labour force.
(d) The labour force underutilisation rate is the unemployed, plus the underemployed, expressed as a proportion of the labour force.
(e) The extended labour force underutilisation rate is the unemployed, plus the underemployed, plus a subset of persons marginally attached to the labour force, expressed as a proportion of the labour force augmented by the marginally attached persons.

Source: Australian Labour Market Statistics, July 2004 (6105.0).


Volume measures of labour force underutilisation

Labour underutilisation can also be measured in terms of the number of hours of labour that are unutilised. Such 'volume' measures represent the quantity of underutilised labour (rather than the number of people affected) and may be more relevant for analysing the spare capacity of the labour force than measures based on the number of people whose labour is underutilised. The volume of underutilised labour in the labour force is derived as the number of hours of work sought by unemployed persons plus the number of additional hours of work offered by underemployed workers. The volume labour force underutilisation rate is the ratio of the number of hours that are unutilised to the total number of utilised and unutilised hours in the labour force.

Table 6.43 shows experimental volume measures of labour force underutilisation for September 2003. Separate rates relating to the volume of unemployment and the volume of underemployment can also be calculated from the way the volume labour force underutilisation rate is derived. For all three underutilisation measures (i.e. unemployment, underemployment and labour force underutilisation), the experimental volume rates were lower than the corresponding headcount rates.

6.43 VOLUME MEASURES(a) OF LABOUR UNDERUTILISATION - September 2003

Units
Males
Females
Persons

Volume of potential labour in the labour force
Unemployed persons (hours of work sought)
'000 hours
10,924.5
7,822.8
18,747.3
Underemployed workers (additional hours of work offered)
'000 hours
4,203.3
4,806.3
9,009.6
Employed persons (usual hours of work performed)(b)
'000 hours
218,127.6
130,761.2
348,888.8
Total(c)
'000 hours
233,255.3
143,390.3
376,645.7
Experimental volume measures of labour force underutilisation
Volume unemployment rate
%
4.7
5.5
5.0
Volume underemployment rate
%
1.8
3.4
2.4
Volume labour force underutilisation rate
%
6.5
8.8
7.4

(a) Experimental estimates, based on the number of hours of work sought and offered.
(b) Actual hours worked in the reference week for underemployed full-time workers and usual hours worked for all other employed persons.
(c) The volume of potential labour in the labour force is equal to the hours of labour sought by unemployed persons, plus the hours of labour offered by underemployed workers (both utilised and unutilised), plus the hours of labour usually provided by employed persons who are not underemployed.

Source: Australian Labour Market Statistics, July 2004 (6105.0).


In September 2003, hours sought by the unemployed (18.7 million hours) formed the largest component (68%) of the volume of underutilised labour in the labour force. Additional hours offered by the underemployed (9.0 million hours) formed the remainder. Table 6.44 shows the average number of weekly hours sought or offered by the two population groups included in the volume measures. On average, unemployed people sought 31 hours of work a week, with men seeking 34 hours compared with 28 hours for women. In contrast, underemployed people offered an average of 16 hours of additional labour, with men again offering more hours (18 hours) than women (14 hours).

6.44 UNDERUTILISED LABOUR(a), Average weekly hours sought or offered by selected groups - September 2003

Males
Females
Persons

Unemployed
34.0
28.4
31.4
Seeking full-time work
37.8
33.6
36.1
Seeking part-time work
17.4
18.7
18.2
Underemployed
17.7
14.2
15.6
Seeking full-time work
21.0
17.5
20.1
Seeking part-time work
17.1
14.1
15.2

(a) Experimental estimates.

Source: Australian Labour Market Statistics, July 2004 (6105.0).


Unlike the headcount measures of underutilised labour, the experimental volume measures take into account the number of hours worked or sought by individuals and this has the effect of weighting people according to the number of hours that they either worked or sought. For example, the large difference between the headcount and volume underemployment rates (5.6% and 2.4% respectively) reflects the large difference between the additional hours offered by the underemployed (15.6 hours a week) and the hours worked by the employed (36.5 hours).

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