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.

...The problem is not unemployment, it is the unemployable!

Very good article, but unfortunately it will most likely fall on deaf ears on this site, as most here still think labor are doing a grand job.

As for women falling behind in the workforce, I have three words for it, it's called paid maternity leave, as from an employers point of view, it's much easier to avaoid conflict, or workforce disruption, than it is to deal with it.

With regards to the useless means used to formulate employment, neither government is game to change it as if the real figure was ever publicized, the opp, who ever they may be at the time, would have a field day with the numbers.

However, as I have said both here and before, many here on OLO are in denial.

After all, when the party they worship and can see no wrong are themselves in denial, what else do you expect.

However, a bigger problem looming is that while wages are crippling many businesses, both large and small, they (wages) are usually not enough to live on, let alone provide savings for ones future.

Add this to the increasing handouts we see, most of which are from borrowed money, I would suggest we be very worried, as there is nothing I can see that is a likely game changer in the short to medium term future.

What borrowed money is supporting welfare, lets remember money is reusable, what goes out this week comes back next week.
The unemployment and other statistics are a world standard. We can-not have our own system.
Why does everything you come up with have to have political slants attached.

579, last time I saw we were borrowing about $100 million a day. I guess this has increased given the ongoing illegals debacle.

So you can sit there and say we spend our own taxes on welfare, then borrow for other things if you wish, as I guess from where you see things it simply supports your state of continued denial.

As for employment figures being a global issue, I can't dispute that as I don't know, but what I do know is that just because the other guy does it, doesn't mean we need to follow, as two wrongs don't make a right.

I say to you again, wake up and smell the roses mate, as despite what you choose to believe, the future is looking grim, but as always, you are welcome to keep dreaming.

...The problem is not unemployment, it is the unemployable!
diver dan,
add to that the employed who don't work & whose wages are literally paid for no visible product.
Then there are those who show up for work at smoko time & disappear again after lunch. No-one can dock them because if anyone attempted to they'd either be physically assaulted or just plain & simply shafted by those who demand everyone should abide by LG protocol. The wrong-doers literally get away with it because of the wrong-doing of high ranking Public Servants & integrity devoid Legal Aid officers. We have plenty of work to be done but because all the funding is spent on the non-performing no real workers can be employed.
Peter Beatty & Anna Bligh set this up so that Campbell Newman won't have a hope in hell of sorting it out.

...I am not surprised to hear (by your description Individual), that some of the unemployable I refer to, actually arrive at work!

The unemployment figures are a global standard, it is that way so when figures are stated every one knows any where in the world what the situation is. If we had a different system as before, we will be one out. Howard changed it to conform to world standard.
Borowing money is very complex, it's a matter of who wants the money, with our top rating it is cheaper for business to borrow through the govt; than borrow them self. With big projects going on the deficit is going to be there for many years to come.
The govt actually gets income from the deficit, by selling it off.

But that's entirely the problem 579. The figures are not representative of the true picture of unemployment/under employment in OZ.

They are the product of a statistical methodology used to satisfy an international standard. If the media got wind that this is not a real reflection of the state of affairs, then the Government would be more 'motivated' to do something about it. Most of use think 'wow, 5.4%, that's low - but the real measure is closer to 10-12 percent.

The measure of one working hour per week to satisfy being 'employed' is ridiculous. I'm not against having an international measure but we need a real domestic measure to set domestic employment policy. Anything else is a form of political deception.

Cheryl Read the rules of unemployment again + the public opinion of how the rules are justified.
Some want more hours and some don't.
Which way would you sort it out.
What ever the figure, remember it has to be done every month.
It's no good us going one way and the rest going the other.
We have to have a world wide way of calculation. It is only a figure.

It is a matter of continual amazement that the work presented in my book Your Future in Your Hands (1998) about taxation, employment and the economy in general has never been challenged nor disproved. The concept of a simple and fair tax inspired the Small Business Association of NSW to fund an exhaustive analysis of the tax system in Australia. Unisearch operating out of QUT in Brisbane produced an economic model of the Australian economy broken out State by State, Industry by Industry, Tax by Tax over two, three year periods. It proved a simple 2% spending tax on every exchange of ownership of goods, services, property and labour would not only be enough to fund good government, but would stimulate the motivation to produce and exchange by eliminating the dead hand of bureaucracy and churning taxes, by eliminating the farce of accounting for 'profits' earned in an artificial tax year, by encouraging the secret ingredient called MOTIVATION to grow the economic cake. If the buyer pays the seller the asking price plus a 2% tax for the use of a stable currency, and the seller remits this to the government in the simplest of BAS forms, what a country we could have - freed of the nonsense of accounting for the unaccountable - a continent-sized tax haven. Treasury deliberately obfuscated this proposal by confusing it with a Bank Transactions Tax, with which it has nothing in common. How long can we endure a 20,000 page tax act regime? Time to clean out the Augean Stables. Is there a politician named Hercules?

John mcrobert. Start a new thread about your ideas.

Australia’s labour market continues to perform well in comparison with other major developed countries. The unemployment rate, at 5.1% in May 2012, is among the lowest in the OECD. By contrast, nine OECD countries had double-digit unemployment rates, including Greece and Spain where more than one in five of the labour force are unemployed. Structural unemployment, as measured by the non-accelerating inflation rate of unemployment or NAIRU, is largely unchanged in Australia, whereas for the OECD as a whole it has started to edge up. There is also little evidence of growing mismatch between available job vacancies and the number of unemployed looking for work. These are promising signs that Australia seems to have weathered the global financial crisis without significant long-term labour market consequences.
Nevertheless, underemployment continues to be a significant problem, particularly for women. More than 12% of the labour force are now either unemployed or working part-time and would like to work longer hours, an increase of two percentage points since 2007. At 7.2% in the fourth quarter of 2011, Australia’s rate of underemployment is much higher than the OECD average of 5.0%, so that total labour underutilisation in Australia is close to the OECD average, despite much lower unemployment. While underemployment is not as potentially damaging to workers as unemployment, it can have long-term consequences for career progression, earnings potential and retirement income. This is of particular concern as the majority of Australia’s underemployed workers are women, who already suffer from lower earnings and retirement income than men.

Copies of my book Your Future in Your Hands, proposing a simple tax system which would remove the disincentives to employment of our existing dreadful tax system are available free to anyone who drops by to our office in Brisbane. Am happy to post copies to anyone for a nominal handling charge. Tax is like the weather, everybody complains about it but nobody does anything. Here is something everybody can do. We cannot change the weather but we can create a prosperous community which can cope with the demands of extreme weather events.

John M, your comments woukd be better suited back in the 80's, however nowadays, more and more finacial transactions are cashless, meaning a financial transaction tax would be far better today, than back then.

Having said that, a financial transaction tax is far better an option than a 2% sales tax, as money can be used many times over, but only ever spent once by any one person.

Bring it on I say, because blind Freddie can see that the tax systems we have today are past their use by dates and, if some very serious tax reform is not implemented sooner, rather than latter, it may simply be a case of too little too late.

The secrete is to tax money, not people.

And John I would love to receive a copy of your book and if email suits, simply ask Graham for my address.

Cheers

Cheryl and Arjay

Defining people in work as employed seem to me more appropriate than calling them unemployed, even if some of them don’t work very long hours. Most part-timers are happy with the hours they work, and prefer part-time work for a range of valid reasons. Defining those who want longer hours as “under-employed” also seems to me an appropriate description.

There is no conspiracy here, or attempt to deceive the media, or to hide under-employment for political reasons. The under-employment numbers are there on the ABS website for anyone who takes the trouble to look.

Arjay, I’m not nit picking. I accepted the validity of parts of Malcolm’s argument, but his use of the change seasonally adjusted in data is shonky, and he should know it

Rhian, call it what you like, even defend the system, but the reality is that ANYONE who works ONE HOUR PER WEEK, even if it's UNPAID WORK, being defined as EMPLOYED is nothing but a joke and a way of manipulating the numbers to make ANY GOVERNMENT look better than they are, and they (all governments) are guilty of using these false numbers to their advantage.

It is quite simply time for ALL GOVERNMENTS to man up and come clean about the real state of unemployment in this country.

rehctub

If one hour a week is too low, how about 10, or 20, or 30, or 35?

As 579 has already explained, very few people work less than 5 hours a week; and of those who do, most no not want to work longer hours. Even if we count them as unemployed, which seems an odd thing to do, 579 has also shown the effect on measured unemployment would be pretty small.

If they don’t merit counting as employed, I think the most logical category for them would be “not in the labour force” (ie neither employed not unemployed) – in which case excluding them would have a no effect on the number of unemployed and a negligible effect on the unemployment rate.

Yes Rhian, while I can see your logic here, why then are these very low hour jobs counted as, jobs we created, by governments.

After all, one of the main problems with the current method of calculation is just that, they (government) use the numbers to their advantage, with statements like " we have created ?? Jobs this month.

So perhaps your suggestion of not reporting jobs of less than say 14 hours per week would be the better solution, as those on the dole receive about that in net pay per day (low skilled rates).

So if we remove these from both the jobs created and the unemployed, I think this would work well.

Some interesting comments here. The Australian public believe that 5.4 per cent is the real unemployment figure when in fact its a methodological fantasy constructed to fit an international benchmark. Fat lot of good that's going to do.

Notions that most people 'don't want to work more hours' is fanciful if you ask people in the JSAs and training orgs. One of the reasons why it is very hard to get a job is because there aren't any jobs. The Government knows this and most of the people on this thread I suggest know this as well. Population increases plus waves of school leavers and graduates have flooded the nations capability to create new jobs to keep up with demand.

I suggest many people have simply given up.

In reply to rehctub, if you can't drop by to collect the book, perhaps you could send a stamped, self-addressed envelope so that I can pop a copy in the mail. The book can be posted as a large letter, less than 500 g and less than 2 cm thick - normal postage within Australia $2.90.
This offer of a complimentary copy of Your Future in Your Hands is also open to any OLO subscriber. My postal address is GPO Box 2927 Brisbane 4001.

Butch Doesn't understand or doesn't want to.
People simply Give up looking for a job, in other words they are not fair dinkum at obtaining a job. A good way to employment is through voluntary labor.
Why are miners screaming for labour continuously.
The highest unemployment is in QLD, not surprising, is it.
If you can't accept a world standard, blame Howard he put it there.

Cheryl

The ABS includes a question on whether people want more hours in its regular labour force survey. About a quarter of part-timers report that they do want more hours (the under-employed), but most do not:

http://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/6265.0Main%20Features4Sep%202011?opendocument&tabname=Summary&prodno=6265.0&issue=Sep%202011&num=&view=

As I read it, there are three different questions under discussion on this thread

1. Does the inclusion of people working only a few hours a week significant affect the measured unemployment rate?
2. Does Australia have a significant level of under-employment that is not captured in the in the standard definition of unemployment?
3. Do 1) and 2) constitute an effort by government to conceal the true extend of unemployment?

I think that the answer to 1) and 3) is ‘no’, the answer to 2) is ‘yes’.

It is hard to sustain the argument that the government is trying to conceal the true extent of unemployment, given that it publishes under-employment estimates as part of its standard labour force release every month.

Furthermore, not all of the oddities in the unemployment data act to make the labour force data look positive. For example, I guess many people world not consider a 15-year old in full-time schooling looking for weekend work at a local supermarket as “unemployed”, but the ABS counts them as so. In fact, more than 60,000 (about 10%) of the unemployed are people aged 15-19 in full-time education looking for part-time work, with a further 17,000 full-time students aged 20-24 looking for part-time work.

(data based on annual average in the year to November 2011 – see Table 03a here .
http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/6291.0.55.001Nov%202012?OpenDocument)

I take your point Rhian,

but citing the figures from the link, we have "722,600 people working part-time, but would prefer more hours and were available to start work with more hours ..."

I don't reckon that satisfies your claim that most people working part time are content with their hours. They are not content.

Many are contractors or working casually. Some do a few hours a week and just scrape by. The ACTU did a study on this last year (contract/casual workers) and the problems are considerable - not the least being that the majority of Australians simply think the nation is cruising at 5.4 unemployment when in effect it is dragging effective unemployment at 10-12 percent.

Cheryl

The 722,600 part-timers wanting longer hours and available to work, represent 21% of the 3.4 million total part-timers. There were also 92,100 people who would prefer longer hours but were not available to work them, for a total of 24% of part-timers wanting longer hours - “about a quarter”, as I said.

About half of these (445,200, or 13% of all part-timers) would prefer full-time work.

I agree that this is a significant social and economic issue, but I don’t think there is a conspiracy to conceal it from the general public.

If you all want to tackle the root cause of under employment look at the debt.

We used to have 4 State Govt banks and the Commonwealth Govt bank.With the fractional reserve system of banking they could have $10 worth of deposits and create from nothing $100 worth of loans.Over the life of the loan the banks make more money than the principal.The banks get to keep the interest but the created principal gets written off the books and does not enter the real economy because it would create too much inflation.

These Govt bank's profits were used to help keep our taxes low but now our Govt has to borrow from OS banks who just create it from nothing and we have to pay more taxes to service the debt.Hence there is less money,less infrstructure thus less jobs in our economy but a lot more debt.John Howard was no great economist he had the luck of an enormous mining boom.

Even our inflationary money gets created as debt.Why is this so bad? Well that inflationary money represents the depreciation of your toil.It is a very cunning tax by the banking system that creates the depreciated value of your hard earned dollar again as debt.

The way forward is to put pressure on our Govt to get the Reserve Bank of Australia to create at least the inflationary of 3% of GDP and loan to to our private banks who just borrow it from OS banks anyway.This will save us $36 billion pa + interest in taxes.It will not harm our private banks or their shares.Infact it will make them better off because the money stays here.30% of our mortgage money comes from OS banks.

This private fractional reserve system of banking is an absolute rort.It is socialism for the super rich.They own you by virtue of creating from nothing the money to equal your toil.

Nothing will change unless this unfair system is addressed.http://www.themoneymasters.com/ 'How the banks create 90% of the world'smoney.'

I am afraid this article, and this thread, has missed the key point in the whole measurement of unemployed issue. If anyone with a working partner loses their job then they are not eligible for any centrelink payment so there is no mechanism for them being recorded as unemployed. They could be fronting up to employment agencies every week but they will not be recorded in any official stats. Male or female, they will simply slip into the ranks of "home duties" until they find another job.

The same applies to students starting work. My son spent 6 months seeking work after Uni but did not show up in the stats until he turned 21 and was eligible for jobstart.

So the under reporting of the unemployment rate is not just an issue of definitions. It is a matter of data integrity and willful misrepresentation of the facts. And every mortgage payer in the country is paying at least 2% in extra interest on their loans because of our seriously corrupted unemployment stats.

Lance Boyle

The ABS labour force data have nothing to do with the count of benefit recipients. They are derived from surveys of a sample of household the ABS conducts each month. You are right than many unemployed people are not entitled to benefits. Also, some people entitled to benefits are not counted by the ABS as unemployed – for example, people who are not actively looking for work.

The two measures are quite different and not connected.