At last some serious talk on real unemployment figures. My book Your Future in Your Hands addressed this issue on publication in 1998. Using information on the population at that time and dissecting available working hours for the then population of 18 million less those under working age less the sick, old, imprisoned etc, an interesting graphic was produced showing an enormous gap between hours worked by those employed (in productive work, plus those in the public sector supervising the production of goods and services) and available man hours. Those deemed to be employed (productively and unproductively) are all imprisoned within a tax system which punishes employment. Fundamental tax reform is long overdue.

EMPLOYMENT: IS ONE HOUR ENOUGH?

The ABS defines people who work for at least one hour a week as employed. There are several reasons for including everyone who works at least one hour a week as employed; these include both economic and social reasons. From an economic perspective, time in paid work, no matter how small, contributes to economic production and is therefore included in the national accounts. Socially, it is recognised that employment is associated with improved psychological and social well-being. It is therefore important to distinguish between those who have work and those who do not. By applying the one hour definition, the ABS is also measuring employment in an internationally consistent manner, which enables governments and policy makers to draw on international comparisons.

However, an important consideration is whether or not people want to work more hours, i.e. whether or not they are underemployed. The ABS recognises the potential economic and social impacts of underemployment, which is why the ABS asks respondents who work fewer than 35 hours if they would like to work more hours. However, just because a person might work relatively few hours a week does not mean they necessarily want to work more. The graph below shows a breakdown for people who usually work 1 to 5 hours a week and whether or not they would like to work more hours or not. This graph shows two things:

most people who usually work 1 to 5 hours a week do not want to work more hours (32.7% want to work more hours versus 67.3% who do not want to work more hours); and
the number of people who work 1 to 5 hours a week and want to work more hours is very small: 82,000 or 0.7% of the total number of people who are employed.

Source(s): Labour Force, Australia

Furthermore, if instead of being classified as employed, these 82,000 underemployed workers were classified as 'jobless', the resulting 'jobless' rate for 2011 would only be on average 0.68 percentage points higher than the unemployment rate at 5.85%.

By looking at this group of people who work fewer than 35 hours and would like to work more hours, the ABS produces a series called the underemployment rate, and, when combined with the unemployment rate, produces estimates of the total potential labour supply, the labour force underutilisation rate. Like the other 'jobless' rates, users can customise these data by broadening or narrowing the definitions used to calculate estimates such as the underutilisation rate. For example, below is an alternative measure of available labour supply (JR3) which includes the group who are considered marginally attached to the labour force. Like the alternative 'jobless' rate JR2, the 'jobless' component of the JR3 includes all people who were looking for work regardless of whether they were actively looking for work or not, and does not exclude those that were not available during the specified time frame. This estimate is probably the broadest view of dissatisfaction with hours of work available from the LFS, looking at all people who are unemployed under the economic point in time definitions, plus the more broadly 'jobless' who are marginally attached and/or discouraged, as well as those who have found jobs but are dissatisfied with the number of hours they work. Currently, the official underutilisation rate is 13.4% (in original terms); JR3 is 1.1 percentage points higher and stands at 14.5% for February 2012.

all good points above. I was wondering whether the ABS exists to provide us with statistics or whether we exist to provide the ABS with data?

By that I mean that working one hour a week clearly cannot be defined as being employed. It might be handy for international comparisons and make the job of statisticians easier but as a definition, it is rubbish.

The data the public and the media need is the answer to the question: hands up all those who want a job? Hands up all those who are working one hour a week more and who want to work more? And hands up if you've given up looking for work?

I understand that it's not as simple as that but by reducing the unemployment figure to 5.4 percent by including all those who work only one hour a week is a fraud being perpetuated on the Australian people. How can we ever set policies with porkies like that?

Malcolm makes some valid points, but his analysis is flawed by some sloppy use of stats and rather tendentious reasoning.

First, he correctly makes the point that seasonally adjusted labour market data “bounce around” from one month to another, but then proceeds to use exactly this measure as the basis for a large chunk of his article. A former associate director at DEEWR Labour Market Strategy ought to know better. No serious labour market analyst would use the change in seasonally adjusted data over one month as the basis for analysing underlying labour market directions. The changes he discusses could be no more than statistical “noise”.

Using the trend series, and taking a longer period (the past year) paints a more representative and less alarming picture, though still with areas for concern. Both full-time and part-time employment are growing, but unemployment is nonetheless rising, because employment is growing less quickly that the adult population.

Second, while Malcolm is right to point out that the unemployment rate does not count under-employed workers, he is wrong to imply this represents some serious error or oversight on the part of the Australian Bureau of Statistics. The ABS is well aware of the problem of under-employment and reports on it annually, including detailed descriptions of who is under-employed (the largest group is part-time workers who would prefer more hours, but don’t want to work full time). 597's post above looks are some of the data.

If anyone really wants “just the facts” on under-employment, this might be a good place to start:

http://www.ausstats.abs.gov.au/ausstats/subscriber.nsf/0/255AB1F28902B347CA2579B4000FF0DB/$File/62650_sep%202011.pdf

Rhian is nit picking.Malcolm's general argument is valid.Under employment is being hidden for political reasons.Both parties do it.

There are 1.9 million public servants and many private ones that service the Govt.The real question is what productivity does Aust have in the private sector to back up all these micky mouse unproductive Govt Jobs? The money from the mining sector is being used to create artificial jobs instead of creating infrastructure that is debt free.Spain and Greece borrowed to create artificial employment and they are totally enslaved by debt.

If there are only 8.1 million full time jobs this means that there are less than 6 million real full time jobs in the private sector because there are many private sector companies servicing the Govt.

When the mining boom ends,we are stuffed.Lucky Country? No way.Stupid country.