DURATION OF UNDERUTILISATION


LONG TERM UNEMPLOYMENT AND UNDEREMPLOYMENT


INTRODUCTION

The recent economic downturn has brought increased attention to changes in both unemployment and underemployment. The labour market appears to have responded to the recent economic downturn in a slightly different fashion to previous downturns, with lower than expected increases in unemployment. The rise in underemployment was suggested as one reason for this lower than expected increase in unemployment, with employers decreasing the hours worked partly to offset the need to reduce the size of their workforce.

Underemployment has increased in prominence in recent years, particularly as the general decline in unemployment during the 2000s was not seen to the same extent in underemployment. For example, unemployment dropped from 6.9% to 4.2% between August 2001 and August 2008, while underemployment only dropped from 7.3% to 6.0% over the same period. This phenomenon was discussed in the article 'Historical labour underutilisation', which appeared in the July 2009 issue of Australian Labour Market Statistics (cat. no. 6105.0).

As the change in focus from unemployment to underemployment and underutilisation has been an important development, so is the need for attention on the duration of underutilisation, as long-term unemployment (ie. people unemployed for a year or more) tells only part of the story of sustained unused labour.

Understanding trends in the duration of underemployment is important in providing a holistic view of underutilisation and how this is changing over time. This article provides a contrast of both of the key compositional measures of duration of underutilisation:

1. Proportion of unemployed people who are long-term unemployed (referred to in this article as LTU1)¹
2. Proportion of part-time underemployed people who are long-term underemployed (referred to in this article as LTU2)²

This article provides data for the past ten years, in order to show changes in long-term unemployment and underemployment.


LTU1 AND LTU2

The key difference between the LTU1 and LTU2 series, illustrated in Graph 1, is that the proportion of unemployed people in long-term unemployment (LTU1) noticeably fell during the period of sustained economic growth, while the proportion of part-time underemployed people in long-term underemployment (LTU2) remained largely unaffected. The LTU1 fell by almost half from the start of the period, from 28.4% in September 1999 to 15.5% in September 2009, while the LTU2 remained relatively steady, with a peak in September 2003 (39.8%). This suggests that the relative stability in the underemployment rate, which was observed despite a strong labour market, was in part the result of persistent underemployment. Generally more than a third of underemployed part-time employed people over the entire period were underemployed for a year or more.

SEX

Since September 1999, there has been a higher rate of long-term unemployment among unemployed men than women, while the reverse is true for underemployment. The LTU1 generally fell for both men and women over the period (from 31.7% to 16.2%, and 24.0% to 14.7% respectively), while the LTU2 largely fluctuated around an average rate of 33.0% and 36.1% respectively.

AGE

The rate of both long-term unemployment and long-term underemployment increases with age. Both the LTU1 and LTU2 are lowest in the 15 to 24 year old age group, and then increase through the ten year age ranges, and are highest for people aged 55 years and over. This is in contrast to the unemployment rate and underemployment rate, which are relatively high amongst young Australians. Young people therefore experience unemployment and underemployment more than other age groups, but for less prolonged periods of time. This is partly explained by the fact that young people will also have shorter labour market experience.

The youth LTU1 only marginally decreased over the period, relative to the older age groups. The older age groups saw considerable decreases in the rate of long-term unemployment, particularly people 55 years and over, for whom the rate decreased from 49.2% in September 1999 to 24.6% in September 2009.

The youth LTU2 increased from 19.4% in September 1999 to a high of 29.2% in September 2003, and after subsequently falling for much of the decade, began to increase again in September 2009. Across the age groups, the two largest changes over the period were a 19.2 percentage point decrease for those aged 55 years and over, from a high of 64.1% in September 1999 to a low of 44.9% in September 2009, and a 7.2 percentage point decrease for 35 to 44 year olds (from 42.5% to 35.3%).

FURTHER INFORMATION

For more information, please contact Bjorn Jarvis on (02) 6252 6552 or email bjorn.jarvis@abs.gov.au.


END NOTE

1. LTU1 data are from the monthly Labour Force Survey, in respect of September each year. Original data have been used, but seasonally adjusted and trend estimates are also available.

2. LTU2 data are from the Survey of Underemployed Workers, which is a September supplement to the monthly Labour Force Survey. Duration of underemployment is only available from this survey and is published in Underemployed Workers, Australia (cat. no. 6525.0).