EXTENDED LABOUR FORCE UNDERUTILISATION RATE


INTRODUCTION

First released in 2002(end note 1), the ABS extended labour force underutilisation rate (ELFUR) provides the broadest measure of underutilised labour resources in Australia and has been published annually as a companion rate to the labour force underutilisation rate (LFUR).

The rationale behind the development of both the LFUR and the ELFUR was that no single measure, such as the unemployment rate, can fully capture the complexity of underutilisation in the labour market. The ABS therefore developed a number of supplementary measures of labour underutilisation, in order to better inform on the structure and dynamics of the labour market. These two measures were initially produced on an annual basis, in respect of September.

In the July 2008 issue of Australian Labour Market Statistics (cat. no. 6105.0) the ABS introduced, in the feature article 'Quarterly Labour Force Underutilisation Rate', a new quarterly LFUR to replace the annual LFUR. As noted in the article the new rate uses data from the Labour Force Survey (LFS), rather than data from both the LFS and the annual Underemployed Workers (cat. no. 6265.0). Due to a range of factors, which are discussed more fully in that article, this resulted in higher estimates of the labour force underutilisation rate.

The purpose of this article is to detail changes that the ABS has made to the annual ELFUR measures. The changes have included three elements:

• to ensure consistency with the LFUR, the ELFUR estimates are now primarily sourced from the LFS.
• the reference period of the ELFUR has been changed from September to August, to align with a LFUR quarter month.
• the definition of discouraged job seekers has been expanded.

ELFUR ELEMENTS

The ELFUR is expressed as the sum of the unemployed and underemployed, and two marginally attached groups (people not in the labour force), as a proportion of the labour force augmented by the number of people in the two marginally attached groups.

The marginally attached groups currently included in the ELFUR are:

• Marginally attached group 1: people actively looking for work, not available to start in the reference week, but available to start within four weeks; and
• Marginally attached group 2: discouraged job seekers.(end note 2)

These two groups of persons with marginal attachment to the labour force are each close to satisfying the ABS and International Labour Organization criteria for unemployment. Those in the first group would meet the definition of unemployment if the availability criterion were relaxed; while those in the second group would be classified as unemployed if the looking for work criterion were relaxed for persons who have given up looking because they believe they cannot find a job.


ELFUR DATA SOURCE AND REFERENCE PERIOD

Most components included in the ELFUR are currently available from the LFS, with the exception of Marginally attached group 2. The only regular source for discouraged job seekers data is Persons Not in the Labour Force (cat. no. 6220.0), which continues to be in respect of September. It is for this reason that the ABS has selected August as the new reference for the ELFUR, rather than February, May or November, due to its proximity to September.

For the purposes of compiling estimates as at August, the ABS has used the proportion of persons not in the labour force who are in Marginally attached group 2, from Persons Not in the Labour Force (cat. no. 6220.0) in September, and applied it to August LFS estimates of persons not in the labour force. This has enabled the ABS to create synthetic estimates for the Marginally attached group 2 population. Estimates on this basis have been compiled from August 1994 onwards.

Prior to the introduction of the new LFS questionnaire in April 2001 data for the Marginally attached group 1 population are also unavailable, and a similar methodology has been used for this group, to create estimates of the Marginally attached group 1 for August reference periods from 1994 to 2000.


DISCOURAGED JOB SEEKERS

An additional change has also been made to a component of the ELFUR. In 2008 the ABS undertook an assessment of the categories that are considered to be labour market reasons for not actively looking for work for those people who want to work and are available to start within four weeks, which constitutes the definition of a discouraged job seeker. The reported reason of 'no jobs in suitable hours' was previously not considered a labour market reason, but this has now been changed. As with people who report that there are 'no jobs in locality or line of work', those who report that there are 'no jobs in suitable hours' are also now considered discouraged job seekers, as the labour market is unable to provide a job which satisfies a relatively basic requirement.

This expansion of the definition of discouraged job seekers has now been applied to the ELFUR time series, from 1994 onwards, and will also be reflected in the 2009 results in Persons Not in the Labour Force (cat. no. 6220.0). The effect on the ELFUR is minimal, since the population is relatively small. For instance, in September 2008, 7,600 people indicated that they were not actively looking due to 'no jobs in suitable hours', compared to the 79,300 people who were classified as discouraged job seekers using the previous definition.


COMPARISON OF RATES



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, 'Labour underutilisation in the economic downturn', providing an analysis of the changes in components of underutilisation from February 2009 to May 2009, 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>).


END NOTES

1. Released in the information paper Measures of Labour Underutilisation, 2002 (cat. no. 6296.0).

2. As of this release, discouraged job seekers includes those people with marginal attachment to the labour force who wanted to work and were available to start work within the next four weeks but whose main reason for not actively looking for work was that they believed they would not find a job for any of the following reasons:

• considered to be too young by employers
• considered to be too old by employers
• lacked necessary schooling, training, skills or experience
• difficulties because of language or ethnic background
• no jobs in their locality or line of work
• no jobs available at all
• no jobs in suitable hours.