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1301.0 - Year Book Australia, 2006  
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Contents >> Chapter 6 - Labour >> Underutilised labour

UNDERUTILISED LABOUR

The extent to which the available supply of labour is used is an important social and economic issue. From a social viewpoint, concern centres around the number of people whose aspirations for work are not being met. From an economic perspective, there is interest in measuring the extent to which available labour resources are not being fully used within the economy.

The number of unemployed people and the unemployment rate are widely used measures of the available labour resources that are not currently utilised in the economy. However, these measures do not represent the full extent of labour underutilisation. As a result, the ABS has produced a series of broader measures that include other groups of people whose labour is underutilised, such as underemployed workers and discouraged jobseekers.

The ABS produces labour underutilisation measures based on the number of people whose labour is underutilised (headcount measures), and the number of hours of available labour that are underutilised (volume measures).

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 people 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 people 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 2004 there were 578,300 underemployed people (table 6.45). The underemployment rate was higher for women (7.2%) than men (4.3%). 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 2004 the labour force underutilisation rate was 11.1%. 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 people marginally attached to the labour force, as a proportion of the labour force augmented by those two groups. The two groups of marginally attached people are: people actively looking for work, not available to start work in the reference week, but available to start within four weeks; and discouraged jobseekers. The extended labour force underutilisation rate was 12.2% in September 2004. 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.

6.45 LABOUR UNDERUTILISATION - September 2004

Units
Males
Females
Persons

Unemployed'000
315.8
253.8
569.6
Long-term unemployed'000
73.3
50.7
124.0
Underemployed'000
243.4
334.9
578.3
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
20.4
26.3
46.6
Discouraged jobseekers'000
28.4
53.6
82.0
Labour underutilisation rates
Long-term unemployment rate(b)%
1.3
1.1
1.2
Unemployment rate(c)%
5.5
5.5
5.5
Underemployment rate(d)%
4.3
7.2
5.6
Labour force underutilisation rate(e)%
9.8
12.7
11.1
Extended labour force underutilisation rate(f)%
10.5
14.1
12.2

(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, Datacubes (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 (graph 6.46).

Graph 6.46: LABOUR UNDERUTILISATION RATES - September


Differences in labour underutilisation between states and territories are primarily driven by differences in unemployment rates. In September 2004, Tasmania (13.4%), Victoria (12.3%), South Australia (12.0%) and Northern Territory (11.1%) all had labour force underutilisation rates equal to or above the national average (11.1%) (table 6.47).

6.47 LABOUR UNDERUTILISATION, By states and territories - September 2004

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
5.1
5.4
10.5
11.6
Victoria
1.3
6.3
6.0
12.3
13.3
Queensland
1.0
5.1
5.5
10.6
11.7
South Australia
1.2
5.9
6.1
12.0
13.1
Western Australia
0.8
4.9
5.4
10.3
11.4
Tasmania
2.0
6.9
6.4
13.4
14.3
Northern Territory
*0.2
8.3
2.8
11.1
11.5
Australian Capital Territory
*0.4
4.2
4.1
8.3
9.2
Australia
1.2
5.5
5.6
11.1
12.2

(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, Datacubes (6105.0).

VOLUME MEASURES OF LABOUR FORCE UNDERUTILISATION

Labour underutilisation can also be measured in terms of the number of potential hours of labour that are not used. Such 'volume' measures represent the quantity of unutilised available 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 people 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 6.48 shows experimental volume measures of labour force underutilisation for September 2004. 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.

6.48 VOLUME MEASURES(a) OF LABOUR UNDERUTILISATION - September 2004

Units
Males
Females
Persons

Volume of potential labour in the labour force
Unemployed persons (hours of work sought)
'000 hours
10,209.9
6,832.3
17,042.2
Underemployed workers (additional hours of work offered)
'000 hours
4,132.8
4,727.5
8,860.4
Employed persons (usual hours of work performed)(b)
'000 hours
222,330.6
135,255.4
357,586.0
Total(c)
'000 hours
236,673.3
146,815.2
383,488.6
Experimental volume measures of labour force underutilisation
Volume unemployment rate
%
4.3
4.7
4.4
Volume underemployment rate
%
1.7
3.2
2.3
Volume labour force underutilisation rate
%
6.1
7.9
6.8

(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: ABS data available on request, Labour Force Survey, Survey of Job Search Experience, and Survey of Underemployed Workers.


In September 2004, hours sought by the unemployed (17.0 million hours) formed the largest component (66%) of the volume of underutilised labour in the labour force. Additional hours offered by the underemployed (8.9 million hours) formed the remainder. Table 6.49 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 30 hours of work a week, with men seeking 32 hours compared with 27 hours for women. In contrast, underemployed people offered an average of 15 hours of additional labour, with men again offering more hours (17 hours) than women (14 hours).

6.49 UNDERUTILISED LABOUR(a), Average weekly hours sought or offered by selected groups - September 2004

Males
Females
Persons

Unemployed
32.3
26.9
29.9
Seeking full-time work
36.7
33.0
35.3
Seeking part-time work
16.3
18.2
17.5
Underemployed
17.0
14.1
15.3
Seeking full-time work
20.8
16.6
20.0
Seeking part-time work
16.1
14.0
14.8

(a) Experimental estimates.

Source: ABS data available on request, Labour Force Survey, Survey of Job Search Experience, and Survey of Underemployed Workers.


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 2.3% respectively) reflects the large difference between the additional hours offered by the underemployed (15.3 hours a week) and the hours worked by the employed (36.5 hours).


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