4102.0 - Australian Social Trends, 2003

ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 03/06/2003

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Contents >> Work >> Underutilised labour: Underutilised labour

Underutilised labour: Underutilised labour

In addition to the 628,000 people in the labour force in September 2002 who were unemployed, a further 574,000 were underemployed.

Lack of paid work may have a significant impact on the financial, personal and social lives of both individuals and their families. People who lack work comprise those who are entirely without work, as well as those who want more work than they currently have. These are people whose labour services are not fully utilised. The number of unemployed people and the unemployment rate are the best known measures indicating the number of people lacking work. However, they do not measure the full extent of underutilised labour.

Underutilised labour
This article uses data from the monthly ABS Labour Force Survey (LFS) and annual supplementary surveys of Underemployed Workers and Persons Not in the Labour Force.

The labour force consists of persons who were employed or unemployed, as defined, during the survey reference week.

Employed persons are those aged 15 years and over who, during the reference week, worked for one hour or more for pay, profit, commission or payment in kind, in a job or business or on a farm; or worked without pay in a family business; or had a job but were not at work.

Unemployed persons are those aged 15 years and over who were not employed during the survey reference week, but were available for work and were actively looking for work.

Underemployed workers are employed persons who worked less than 35 hours during the reference week, who wanted to work additional hours and were available to work additional hours within four weeks.

The unemployment rate or underemployment rate is, for any group, the number of persons within the relevant population as a percentage of the labour force in the same group.

The labour force underutilisation rate represents the underutilisation of labour within the labour force and is the sum of the unemployment and underemployment rates.

Persons marginally attached to the labour force are those who were not in the labour force in the survey reference week, who wanted to work and who:

were actively looking for work but were not available to start work in the reference week; or
were not actively looking for work but were available to start work within four weeks.

Discouraged jobseekers are persons who want to work and could start within four weeks if offered a job, but who are not actively looking for work for reasons associated with the labour market.

The extended labour force underutilisation rate is, for any group, unemployed persons, plus underemployed persons, plus two groups of persons marginally attached to the labour force:

persons actively looking for work, not available to start work in the reference week, but available to start work within four weeks; and
discouraged jobseekers.

as a percentage of the labour force augmented by the above two groups of persons marginally attached to the labour force.

PERSONS AGED 15 YEARS AND OVER: UNDERUTILISED LABOUR - SEPTEMBER 2002

		Number	Rate
		‘000	%

Persons in the labour force
	Unemployed persons	628.5	6.2
	Underemployed persons	574.3	5.7
	Labour force underutilisation	1,202.8	11.9
Persons not in the labour force
	Underutilised labour not in the labour force(a)	121.9	..

Extended labour force underutilisation		1,324.6	13.0

(a) Comprises two groups of persons marginally attached to the labour force: persons actively looking for work, not available to start work in the reference week but available to start work within four weeks; and discouraged jobseekers.

Source: Labour Force, Australia, September 2002 (ABS cat. no. 6203.0); Persons Not in the Labour Force, Australia, September 2002 (ABS cat. no. 6220.0); Underemployed Workers, Australia, September 2002 (ABS cat. no. 6265.0).

In September 2002, there were 628,000 people unemployed in Australia. However, there were other people in the labour force who shared some labour market characteristics of the unemployed: employed people who wanted and were available to take up more work than they had. These people are considered to be underemployed, and may be considered as underutilised labour resources. In September 2002, there were 574,000 underemployed people in the labour force.

There are also some people who are not in the labour force, but nevertheless want paid work. They may be looking for work, or share other characteristics of the unemployed, such as being available to start work. People who want to work and meet some, but not all, of the criteria used to determine unemployment in ABS labour force statistics are considered to be marginally attached to the labour force. In September 2002, there were 78,000 people with marginal attachment to the labour force who did not actively look for work for labour market reasons (i.e. were discouraged jobseekers). There were also 44,000 people who were actively looking for work and, while available to start work within four weeks, were not available to start within the survey reference week. Together, these 122,000 people were included in the broadest of the ABS measures of underutilised labour.

Criteria for unemployment
Official estimates of unemployment are compiled in accordance with international standards for labour force statistics. In the ABS, a person aged 15 years or over is defined as unemployed if they satisfy all three of the following criteria.

The person must not be employed, i.e. they must be without work. In essence, any person who did one or more hours of paid work during the survey reference week is defined as being employed, irrespective of whether they were also looking for work.
The person must be actively looking for work. A person must have, at some time during the previous four weeks, undertaken specific 'active' steps to look for work, such as applying to an employer for work, answering an advertisement for a job, visiting an employment agency, using a touchscreen at a Centrelink office, or contacting friends or relatives to search for work. The search may be for full-time or part-time work but, in either case, the person must have done more than merely read job advertisements in newspapers. This criterion is waived for persons who were waiting to start a new job within four weeks from the end of the reference week, and could have started in the reference week if the job had been available then.
The person must be available to start work. This is taken to mean that they were available to start work in the survey reference week (i.e. the week before the interview).

UNDEREMPLOYED WORKERS - SEPTEMBER 2002

		Males	Females	Persons

		%	%	%
Part-time workers wanting more hours who were available to start work with more hours		84.9	96.5	91.7
	Looking and available to start	52.0	50.5	51.1
	Not looking but available to start	32.9	46.1	40.6
Full-time workers who worked less than 35 hours in the reference week for economic reasons		15.1	3.5	8.3

Total		100.0	100.0	100.0

		'000	'000	'000

Total		240.3	334.0	574.3

Source: Underemployed Workers, Australia, September 2002 (ABS cat. no. 6265.0).

Underemployed workers
Underutilised labour resources are often viewed as comprising people who are out of work, whether unemployed or out of the labour force completely. However, underutilised labour can also include some people who are in work: specifically, those who work fewer hours than they want to - the underemployed.

For practical reasons, the ABS defines underemployed people as either part-time workers who want, and are available for additional hours of work, or full-time workers who worked part-time hours in the survey reference week for economic reasons (e.g. they had been stood down, put on short time, or there was insufficient work available for them). In September 2002, 8% of underemployed people were in this latter category, that is, they usually worked full-time, but worked part-time for economic reasons. In September 2002, men were more likely than women to be underemployed for this reason (15% of underemployed men, compared with 3% of underemployed women).

PROPORTION OF PART-TIME WORKERS WHO ARE UNDEREMPLOYED
Graph - Proportion of part-time workers who are underemployed

Source: Underemployed Workers, Australia, September 1994 to September 2002 (ABS cat. no. 6265.0).

In 2002, most underemployed people (92%) were part-time workers wanting more work. The majority of these underemployed people were women. This is partly because women are far more likely to be working part-time than men. In September 2002, there were 1.9 million women working part-time, compared with 769,000 men. Despite this, men working part-time were more likely to be underemployed than women working part-time.

While all underemployed workers want to work more hours, not all want to work full-time. Underemployed men are more likely to want full-time work than underemployed women. In September 2002, almost three-quarters (73%) of all underemployed male part-time workers wanted full-time work, compared with 49% of all underemployed female part-time workers.

Underemployed part-time workers were more likely to be aged less than 25 years than other part-time workers (37% of underemployed part-time workers in September 2002 compared with 30% of all part-time workers). They were also less likely to be aged 45 years or over than other part-time workers (22% of underemployed part-time workers compared with 32% of all part-time workers).

Between 1994 and 2002, the total number of underemployed people increased by 25%, consistent with an increase in the total number of part-time workers. While the proportion of female part-time workers who were underemployed changed little over this period (17% in both September 1994 and September 2002), the proportion of male part-time workers who were underemployed decreased from 33% in September 1994 to 27% in September 2002.

Underemployment can also be thought of in terms of the amount of extra work sought by underemployed people (sometimes referred to as 'volume' measures). In September 2002, employed people performed 328.1 million hours of work during the Labour Force Survey reference week. If underemployed part-time workers had worked their preferred number of extra hours, this total would have increased by 8.0 million hours (2.4%). In general, underemployed people working shorter hours wanted to increase their hours of work by more than those working longer hours. In September 2002, underemployed part-time workers who usually worked 10 hours per week or less wanted, on average, an extra 19 hours of work per week. In contrast, underemployed part-time workers who usually worked more than 30 hours per week wanted, on average, 8 hours of extra work.

UNDEREMPLOYED PART-TIME WORKERS LOOKING FOR ADDITIONAL HOURS BY MAIN DIFFICULTY IN FINDING ADDITIONAL WORK - SEPTEMBER 2002

	Males	Females	Persons
Main difficulty in finding work	%	%	%

No vacancies in line of work	23.6	19.5	21.3
Lacked necessary skills or education	9.1	11.8	10.6
Too many applicants for available jobs	9.9	9.4	9.6
No vacancies at all	8.4	9.2	8.9
Considered too young or too old by employers	10.9	6.5	8.4
Unsuitable hours	5.7	10.1	8.2
Insufficient work experience	5.5	6.4	6.0
Other difficulties(a)	19.9	21.1	20.6
No difficulties reported	6.9	6.0	6.4

Total	100.0	100.0	100.0

(a) Includes: own health or disability; too far to travel/transport problems; language difficulties; difficulties with ethnic background; difficulties with childcare; other family responsibilities and other difficulties.

Source: Underemployed Workers, Australia, September 2002 (ABS cat. no. 6265.0).

...difficulties in finding more work
In September 2002, almost one in three (30%) underemployed part-time workers looking for additional hours of work said they had encountered difficulties because there were no vacancies in their line of work, or simply no vacancies at all. An additional 29% said there were too many applicants for available jobs, that they were considered too young or too old by employers, or that they lacked necessary skills or education.

Men were more likely than women to mention one of these five reasons as their main difficulty in finding additional hours of work (62% of male underemployed part-time workers looking for additional work compared with 56% of their female counterparts). Women were more likely than men to cite difficulties related to a lack of necessary skills or education (12% of females compared with 9% of males), or to unsuitable hours (10% of females compared with 6% of males).

PERSONS MARGINALLY ATTACHED TO THE LABOUR FORCE - SEPTEMBER 2002

		Males	Females	Persons

		%	%	%
Wanted to work and were actively looking for work		11.4	6.6	8.2
	Were available to start work within four weeks	7.9	4.2	5.4
	Were not available to start work within four weeks	3.5	2.4	2.7
Wanted to work but were not actively looking for work and were available to start work within four weeks		88.6	93.4	91.8
	Discouraged jobseekers	9.3	9.8	9.6
	Other	79.3	83.6	82.2

Total		100.0	100.0	100.0

		'000	'000	'000

Total		263.0	545.2	808.1

Source: Persons Not in the Labour Force, Australia, September 2002 (ABS cat. no. 6220.0).

People with marginal attachment to the labour force
Some jobless people would like to work but, for a variety of reasons, are either not actively looking for work, or not available to start work. They therefore do not meet all the criteria used to define unemployment in ABS labour force statistics. However, these people do meet some of the criteria, and can be regarded as having marginal attachment to the labour force.

Most people marginally attached to the labour force (92% in September 2002) are not actively looking for work, but would be available to start work within four weeks. The remainder are actively looking for work but not available to start within the survey reference week.

Women are more likely than men to be marginally attached to the labour force, although the number of men who are marginally attached to the labour force increased over the decade to 2002. Over this period, the number of men marginally attached increased by 7% (from 247,000 to 263,000 men), while the number of women marginally attached decreased by 9% (from 600,000 to 545,000 women). Men marginally attached to the labour force tend to be younger than women marginally attached to labour force. In September 2002, 39% of men marginally attached to the labour force were aged 15-24 years compared with 23% of women marginally attached to the labour force.

Like unemployment, marginal attachment to the labour force is, for many, a short-term situation. It is also often voluntary, as people may chose to remain out of the labour force, for example, to raise children or to study. In September 2002, 59% of people marginally attached to the labour force intended to join the labour force within the next 12 months. Men marginally attached were more likely to intend to enter the labour force within 12 months than women marginally attached (69% compared with 55%).

More than half (56%) of all people with marginal attachment to the labour force who were not actively looking for work intended to enter the labour force within the next 12 months. Of those who cited personal reasons (including study) for not looking for work, 58% intended to join the labour force within 12 months, compared with 44% of those who cited family reasons (including childcare). While most people not looking for work for family reasons were women, men in this category were slightly more likely than women to be intending to enter the labour force within 12 months (48% compared with 44%).

DISCOURAGED JOBSEEKERS BY MAIN REASON NOT ACTIVELY LOOKING FOR WORK - SEPTEMBER 2002
Graph - Discouraged jobseekers by main reason not actively looking for work - September 2002

Graph - Discouraged jobseekers by main reason not actively looking for work - September 2002

Source: Persons Not in the Labour Force, Australia, September 2002 (ABS cat. no. 6220.0).

...discouraged jobseekers
Discouraged jobseekers are people who are not actively looking for work for reasons directly associated with the labour market (that is, as a result of difficulties in finding work). In September 2002, 10% of all people marginally attached to the labour force were discouraged jobseekers (78,000 people).

A large proportion of discouraged jobseekers gave up looking for work because they felt that employers considered them either too young or too old. In September 2002, 40% of discouraged men and 36% of discouraged women fell into this category. Less than a third (27%) of all people discouraged for this reason expected to enter the labour force in the next 12 months.

Men were more likely than women to give up looking for work because of difficulties associated with their locality or line of work (32% of men compared with 19% of women). However, women were more likely than men to give up looking for work because they felt they lacked necessary schooling, training, skills or experience (26% of women compared with 14% of men).

Long-term unemployment
The longer individuals remain unemployed, the more difficult it can be for them to find a job. Long-term unemployed persons are those who have been unemployed for at least one year. The long-term unemployment rate is the number of long-term unemployed persons expressed as a percentage of the labour force.

While unemployment fluctuates with the economic cycle, the highest incidence of long-term unemployment generally occurs after, rather than during, economic downturns. Contributing to these peaks are people who become unemployed either prior to or during recessions, and who do not find work during the subsequent economic recovery.

Long-term unemployment rates (trend series) peaked in 1993, with close to 4% of the labour force (around 35% of all unemployed persons) unemployed for 12 months or more. By September 2002, the long-term unemployment rate had dropped to a little over 1% of the labour force (22% of all unemployed persons).

LABOUR UNDERUTILISATION RATES
Graph - Labour underutilisation rates

(a) Trend series.

Source: ABS 1982–2002 Labour Force Surveys; Persons Not in the Labour Force, Australia, September 1994 to September 2002 (ABS cat. no. 6220.0); Underemployed Workers, Australia, September 1994 to September 2002 (ABS cat. no. 6265.0).

Underutilisation rates
By grouping the unemployed with underemployed people and with some groups of people with marginal attachment to the labour force, some broader measures of labour underutilisation can be formed. In September 2002, the labour force underutilisation rate, incorporating unemployed and underemployed people, was twice the size of the unemployment rate (12% compared with 6%). The extended labour force underutilisation rate, which includes unemployed people, underemployed people, and some people marginally attached to the labour force, was 13%.

Movements in labour underutilisation rates are primarily driven by movements in unemployment. Unemployment fluctuates with the economic cycle, although each labour market downturn over recent decades (1972, 1978, 1983 and 1993) has been associated with progressively higher levels of unemployment (see Australian Social Trends 2001, Unemployment trends and patterns). However, in the decade to 2002, the trend unemployment rate has almost halved, dropping from almost 11% in September 1992 to 6% in September 2002.