Looking beyond the 5 per cent unemployment headlines

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We hear a lot about the current 30 year low unemployment rate of 5%. But does this headline news figure give the whole picture?

Re Generation co founder, Peter Landis explores the wider light thrown on the issue by the various definitions attached to this topic.

The unemployed and the underemployed. These two very different groups are worth considering and government labour force strategists are indeed well aware that while people may have some work, they may well want more. Let's consider the market definitions of the Australian work force.

The process begins with the cleaving of Australia's 15 years + population into two sections. Strangely, these sections are almost identical in population; one is named, "The Work Force", while the other has no name – the inhabitants are collectively referred to as, "Not in the Labour Force".

The Work Force

This section contains those who are employed – full or part-time – and the unemployed. The definitions of these terms are also strange. For example, if a person works one-hour in a family business, during the test week, that person is classified, "employed".

Conversely, if a person is not employed and is not able to start work within 7 days, for whatever reason, that person is not classified, "unemployed", they are, "Not in the Labour Force".

These definitions conform to international standards and are not designed to deceive. However they clearly confuse the true status of people in The Work Force. For this reason, a classification has been developed to make the picture clearer:

"The Underemployed". These people are either employed part-time, who want to work more hours, or people employed full-time who worked part-time hours in the reference week for economic reasons (such as being stood down or insufficient work being available).
Not in the Labour Force

This section contains the rest of the population, who are neither employed nor unemployed (excluding permanent members of Australia's defence forces who are not categorised in either section).

Those not in the labour force include people who were: keeping house (unpaid); retired; only in education (students); not working and not wanting to work (voluntarily inactive); permanently unable to work; in institutions (hospitals, jails, sanatoriums, etc.); members of contemplative religious orders; those only undertaking unpaid voluntary work for a charitable organisation.

Once again, this is not entirely an accurate reflection of those "Not in the Labour Force". Many people in this section need and want work, and are actively looking, but are unable to start work within 7 days. There are others who have tried, but have simply given up, known as "discouraged workers".

Underutilised Labour

This is a not often quoted classification. But it is becoming the most watched statistic among Government and industry strategists as they seek ways to stem the impact of imminent labour force shortages, for obvious reasons.

The table below begins on the left with the News Headline rate – knowqn to most people because it makes the papers, radio and TV bulletins every month. But consider the other employment measures:

The Labour Force Underutilisation Rate:

The unemployed + the underemployed, expressed as a proportion of the labour force.

The Extended Labour Force Underutilisation Rate

The unemployed + the underemployed + a subset of persons from the "Not in the Labour Force" – i.e., those wanting work + the discouraged workers, expressed as a proportion of the labour force augmented by the marginally attached persons.

To demonstrate their significance, here are ABS' January, 2006 statistics:

Unemployment Rate	Underemployment Rate	Labour Force Underutilised Rate	Extended Labour Force Underutilisation Rate
5.5%	5.6%	11.1%	12.2%

In cold hard facts this means that around 1.3 million Australians need and want more work.

Research by the Re Generation has demonstrated that these underutilisation rates are consistent across all demographics; including people aged 45-69.