FEATURE ARTICLE: THE UPS AND DOWNS OF WESTERN AUSTRALIA'S LABOUR MARKET


INTRODUCTION

In September 2008, unemployment in Western Australia was at its lowest level on record (2.7% in trend estimate terms). Such a low unemployment rate had not been recorded previously anywhere in Australia, except the Australian Capital Territory (2.5% almost one year before). By contrast, the national unemployment rate was 4.3% and rising.

Despite the worsening global financial situation, Western Australia continued to benefit from the protracted resources boom until late 2008. However, the unprecedented fall in the unemployment rate, from 7.5% in June 2001 to its lowest point in September 2008, was followed by a sharp increase over the next eight months; and by May 2009 it had reached 5.0%.

This article presents an analysis of recent labour market trends in Western Australia and how these have impacted on particular industries and population groups (men, women and youth). State and national data from the last 30 years provide an historical perspective on unemployment, labour force participation and the changing structure of the employed labour force.

Trend data from the ABS Labour Force Survey are used for the analysis, except where original data series only are available. For readers requiring a better understanding of the data sources, brief explanations of salient methodological and data quality issues are provided in text boxes at appropriate points in the commentary.

Why use trend data? Labour force estimates are produced in three series: Original, Seasonally Adjusted and Trend. Seasonal adjustment is an analytic technique that estimates systematic and calendar related influences and removes them from a series. This includes influences that impact seasonally, such as harvest times in farming cycles; and holiday periods including Christmas and Easter. Seasonally adjusted data are particularly useful in short-term forecasting and in allowing comparability from time period to time period. Trend series are formed by removing the irregular and non-seasonal influences from the seasonally adjusted series. The trend component is defined as the 'long-term' movement in a time series and may be the result of factors such as population growth, price inflation and economic development. Trend estimates are used to analyse the underlying behaviour of a series over time, providing a more accurate indication of real movements in the labour force.

THE LABOUR FORCE EXPLAINED

The ABS Labour Force Survey is a household survey designed to produce measures of the economically active population according to guidelines and standards set by the International Labour Organisation (ILO). The survey produces estimates of the population for three mutually exclusive categories; Employed, Unemployed and Not in the Labour Force.

The population for which estimates are made is confined to civilians aged 15 years and over who are usually resident in Australia. Overseas diplomatic and defence personnel stationed in Australia, and their dependants, are outside the scope of the survey. Due to practical collection difficulties and the low numbers involved, the survey also excludes Australian defence personnel.

The labour force is defined as all people in-scope of the survey who are either employed or unemployed.

Employed persons are those aged 15 years and over who, during the reference week:

• worked for one hour or more for payment or profit in a job, business or farm, or as an unpaid helper in a family business; or
• had a job from which they were on leave or otherwise temporarily absent.

The employed labour force includes employees, employers and own-account workers.

Unemployed persons are those aged 15 years and over who were not employed during the reference week but who were actively looking for work (full-time, part-time, temporary or casual) and who were available to start work. They include full-time students actively seeking and available for work in the reference period.

Persons Not in the Labour Force are those aged 15 years and over who were neither employed nor unemployed during the reference period. They include people keeping house (unpaid); people who were retired, voluntarily inactive, or permanently unable to work; people in institutions (hospitals, gaols, sanatoriums etc); members of contemplative religious orders; and people engaged solely in voluntary work.


Source: Labour Statistics: Concepts, Sources and Methods, April 2007 (cat. no. 6102.0.55.001)



RECENT LABOUR MARKET TRENDS

Unemployment Rates

The May 2009 rate of 5.0% represented Western Australia's highest level of unemployment for almost five years. However, this was well below the national figure of 5.7% for the same month. In May 2009, Western Australia had the third lowest unemployment rate in the nation, having recently exceeded the rate in the Northern Territory (3.9%) as well as the Australian Capital Territory (3.3%). All states except Western Australia had rates above 5%, with Queensland having the next lowest rate (5.2%) and New South Wales the highest (6.5%).

Youth Unemployment

Employment data for young people in Western Australia, aged 15-19 years, are available only in original data terms. As might be expected, the unemployment rate for this age group, in original terms, tends to fluctuate widely from month to month as it is affected by mass entries to, and exits from, the education system at different points in the academic year. A second factor bearing on the comparison between youth unemployment rates and those of older populations is that a much larger proportion of the younger age groups are involved in part-time or full-time education while undertaking, or seeking, employment. For this reason, it is useful to consider unemployment rates for young people according to their educational attendance. Thirdly, owing to sample size, unemployment rates for some population sub-groups (e.g. young persons not attending an educational institution; or full-time students looking for full-time work) are not statistically reliable at the state level and are therefore not included in this analysis. Finally, the data presented on youth relate only to the 15-19 year age group because monthly employment data for people in the 20 to 24 age group are not released at the state level.

Historically, unemployment rates for young people have been much higher than for others in the Australian labour force. For Western Australians in the 15-19 year age group, the May 2009 unemployment rate (11.5 %) was more than double that of the state's total population (5.1%) in original terms. For young persons in full-time education who were simultaneously looking for full-time or part-time work, the May 2009 unemployment rate was 12.9%. The rate of unemployment was highest (16.3%) among young persons (whether or not attending an educational institution) who were looking for full-time work.

Among the states and territories, Western Australia had the lowest youth unemployment rates. In May 2009, the national rate was 16.7% for all 15-19 year olds and 15.2% for full-time students in that age group. For young persons seeking full-time work, the national figure rose to 26.2%.

Industry Profile

Between September 2008 and May 2009, Western Australia experienced the largest percentage increase in unemployment of all states and territories, from 2.7% to 5.0% in trend terms. This reflects contraction in certain sectors of the Western Australian economy in response to the global economic downturn. This contraction was most apparent in the primary and mining-related service industries.

As monthly employment data cross-classified by industry are not available in trend (or seasonally adjusted) series for Western Australia, quarterly original data are used in the following analysis. Consequently, the numbers of employed people quoted are approximate and not directly comparable with the trend data used elsewhere in this article. They are nevertheless indicative of the industry drivers in recent employment trends.

In the May quarter 2009, an estimated 52,000 people were employed in the Mining industry, almost 20,000 fewer than in the November quarter 2008 (original data). Although employment figures for this industry have been very volatile historically, the May 2009 figure represents a 27% decrease over the previous six months and a 29% decrease over the previous year.

The six months to May 2009 also saw a substantial fall in the number of people employed in Agriculture, forestry and fishing. Again, this is an industry in which employment figures are volatile; however during this period, the number employed in Agriculture, forestry and fishing fell by almost 16,000, to around 35,000 persons.

Over the same period, a substantial decrease (over 6,000) occurred in the number of people employed in the Professional, scientific and technical services industry, which fell below 69,000 in the May quarter 2009. It is likely that some of these job losses resulted from the contraction in the mining industry. Estimates from the October 2008 ABS survey, Labour Mobility and Intentions, Western Australia indicate that approximately 40% of people employed in the Professional, scientific and technical services industry were engaged in a mining support activity, contracted to the mining industry or directly engaged in a mining operation.

Job losses across these three industries accounted for about 70% of the total jobs lost between November 2008 and May 2009. Smaller job losses in other industries, including Electricity, gas, water and waste services; Rental, hiring and real estate services; Accommodation and food Services; Construction; and Manufacturing also contributed to the rising rate of unemployment..

In contrast, the period between November 2008 and May 2009 saw a net increase in the total number of people employed in other industries. Net growth occurred particularly in Retail trade and the Health care and social assistance industries, where a high proportion of workers are currently employed in a part-time capacity.

Retail trade is the largest employing industry in Western Australia. In November quarter 2008, the workforce in Retail trade numbered 130,000 persons. By May quarter 2009, this figure had risen to 142,000, of whom 52% were employed part-time.The Health care and social assistance industry is the state's second largest employer, with a workforce rising from 114,000 in November quarter 2008 to almost 130,000 in May 2009. Of these, a significant proportion (approximately 38%) were part-time workers.

These two industries accounted for almost one quarter (23%) of the total Western Australian labour force in May 2009 and about 44% of all jobs gained in the preceding six months. Other major contributions to job gains over this period were in the Public Administration and safety industry, which added approximately 13,800 persons; and the Education and training industry, which added approximately 6,700 persons to the employed labour force. These industries together accounted for another 33% of all job gains between November 2008 and May 2009.

The rise in the number of people employed in providing health, education, vocational training and social welfare services lends support to the proposition that the need for these services has grown in the Western Australian community, particularly among those facing unemployment, decreased working hours or housing disadvantage as a consequence of the global financial crisis.

Thus, while the early months of 2009 have seen rapidly rising unemployment, the job losses have not been evenly distributed across all industries. Job losses were largely concentrated in the primary industries and in the Professional, scientific and technical services industry, while some job gains occurred in retail and certain public and private sector service industries.

Part-time Employment

In the six months to May 2009, the proportion of the employed labour force working part-time (i.e. less than 35 hours per week) rose from 27% to 29% (original data). This includes employees, employers and own-account workers. Over the same period, the average number of hours worked by employees fell to 34.5 hours per week.

The increase in the proportion of part-time workers was unevenly spread across industries. In the six months to May 2009, significant increases occurred in the Professional, scientific and technical services industry (from around 19% to almost 25%); and in the Transport, postal and warehousing industry (from 20% to just over 24%). A substantial increase in the proportion of part-time workers also occurred in the Agriculture, forestry and fishing industry although normal seasonal influences may be largely responsible in this case.

By contrast, the Health care and social assistance; Public administration and safety industries and Rental, hiring and real estate services industries saw decreases in the proportion of part-time workers. This diminishing proportion in some health, welfare and community service-oriented industries may be due, in part, to the community's increased need for these services during the wider economic downturn.

In May 2009, the two industries in Western Australia with the largest proportions of part-time workers were Accommodation and food services (54%) and Retail trade (52%). Both industries experienced a small percentage increase in these proportions in the six months to May 2009 (around one percentage point in each case). However, their numerical contribution to the total number of part-time workers in the labour force is substantial. Of the estimated 344,000 persons working part-time in Western Australia in May 2009, the Accommodation and food services industry contributed approximately 34,000 workers (10%) while the Retail trade industry contributed almost 74,000 (22%) in original terms.

Although the recent increase in the total number of people employed in the Retail trade industry (approximately 12,000 persons in six months) may be attributable, in some measure, to the Federal Government's economic stimulus packages, it is evident that the growth in retail employment has occurred largely in part-time work.

Source: Labour Force, Australia, Detailed,Quarterly, May 2009 (cat. no. 6291.0.55.003)

LONGER-TERM MOVEMENTS IN THE JOB MARKET

During the past 30 years, labour market trends have been influenced by a number of factors.These include broad societal changes, the changing global financial situation and the state's rapid economic development and related skill shortages during the 1990s and most of the current decade. All of these factors have impacted, at different times, on Western Australia's job market.


Trends in Labour Force Participation

One of the broad societal changes that has affected the Western Australian job market in the last 30 years has been a dramatic rise in the labour force participation of women. In May 1979, 46% of women aged 15 years and over were in the labour force. By May 2009, this figure had increased to over 61%. Much of this increase may be attributed to increased opportunities to work part-time and the increasing pressure on employers to provide family-friendly work environments.

By contrast, the male rate of participation has trended downwards, falling from 80% in 1979 to a record low of 73.5% in August 2004. In the last five years, the male participation rate has been more volatile, rising again to 77.5% in September 2008 (when unemployment was also at an all-time low) then falling back slightly to 76.9% by May 2009. The fall in men's participation over the last thirty years may be due to a number of factors including the ageing of the population and improved superannuation outcomes associated with a shift, in the first few years of the century, towards earlier retirement in some higher-paid occupations.

Changing Structure of the Workforce

Over the last three decades, there has been a significant change in the composition of the state's employed labour force. In 1979, almost two-thirds (65%) of the workforce were men and one third (35%) were women. By 2009, the comparable proportions were 56% and 44% respectively.

In 1979, 83% of the workforce were employed full-time but by 2009 this figure has dropped to around 71%.The increase in part-time employment can be attributed to long and short-term factors, of both a social and economic nature. For example, it is likely that the recent global economic downturn has impacted on the proportion of persons working part-time, as employers in affected industries have opted to reduce the hours worked by their employees, rather than undertake a retrenchment process. Longer-term factors include societal and cultural changes, which have enabled more women, particularly women with young children, to work part-time; and young singles of both sexes to be increasingly engaged in casual and part-time employment while attending an educational institution. A third contributory factor is increasing flexibility in work practices, which has enabled some mature-aged workers to move to part-time employment in the years immediately prior to retirement.

As a result of these social and economic changes, the structure of the Western Australian workforce is now very different from the structure of thirty years ago. In 1979, by far the largest group in the Western Australian workforce were males in full-time employment (62%). By 2009, male full-time workers comprised only 48% of the employed labour force. As a corollary, male part-time workers have increased from around 3% to 8% of the total workforce. Over the same period, female part-time workers have increased from 14% to 20% and female full-time workers from 21% to 24%.





Unemployment trends

Analysis of long-term movements shows that Western Australia has had lower unemployment than Australia for most of the last 15 years.The highest ever recorded figure for Western Australia (10.8%) was experienced in 1991 and 1992, at a time when the national figure varied between 10.1% and 10.2%. This occurred during the last economic recession following the 1987 stock market 'crash', which led to some job losses particularly in the financial sector. Thereafter, the unemployment rate in Western Australia commenced to fall whereas the national rate remained above 10% for the two following years.

Since 1992, the only time in which unemployment in Western Australia exceeded the national rate was for the six consecutive months between March and August 2001. In that time, the state's unemployment figure rose from 6.8%, peaked at 7.5% in June 2001 and then fell back to 7.2% by August. Over the same period the national figure rose from 6.6% to 6.9%.

In the latter half of 2001 the state and national rates resumed their downward trend, with the figure for Western Australia falling considerably faster after March 2004 to reach the all-time low of 2.7% in September 2008. The depth of the fall in unemployment and the rapidity of the subsequent rise (2.3 percentage points in just eight months) have been unprecedented in Western Australia's recorded economic history. These trends clearly reflect the state's significant economic growth driven by the resources boom, followed by the delayed economic downturn related to the global financial crisis.

Male and Female Unemployment

In September 2003, the unemployment rate for Western Australian men (5.9%) dropped for the first time in over a decade below that of women (6.1%). Since then significant job expansion in the male-dominated mineral resources industries caused the unemployment rate for men to fall at a much faster pace. By September 2008 male unemployment had fallen to 2.4% compared with 3.2% for women. However, since the end of the recent resources boom, the gap in unemployment levels between the sexes has again narrowed. By May 2009, 4.9% of men in the Western Australian labour force were unemployed compared with 5.1% of women.

CONCLUSION

The labour market in Western Australia has undergone considerable change over the past 30 years. Three broad factors have been particularly influential: the state's rapid economic development during the resources boom of the 1990s and beyond; the increasing labour force participation of women, particularly in part-time employment; and changing global economic conditions including the current financial crisis.

Despite a steep rise in unemployment in recent months, Western Australia's unemployment rate is still well below that of other states and most OECD countries. The number of employed people has continued to rise in several industries (albeit often in part-time jobs); and has seen serious decline in only a few. Recently released Labour Force data indicate that unemployment in Western Australia reached 5.2% in trend terms (or 5.1% seasonally adjusted) in June 2009 while the rate for Australia rose to 5.8% (trend and seasonally adjusted). Relativities with other states and territories have been maintained, with Western Australia still recording the third lowest unemployment rate in the nation. Notably the unemployment rate is now identical for Western Australian men and women.

At the time of writing, it is expected that the upward trend in unemployment will continue on the same trajectory in the short term. In its 2009-10 Budget Paper, Economic and Fiscal Outlook, the State Government suggests that employment growth is likely to be constrained in the next two financial years "by falling business investment and weak consumption growth". However, the Budget Papers suggest that employment growth will resume in 2011-12 and 2012-13 and forecast a peak average unemployment rate of 6.75% for 2010-11. Based on this and Western Australia's economic and labour market history, it seems that employment conditions in this state may recover earlier, or at a faster rate, than in the rest of Australia and the developed world.

References

Labour Force, Australia, Spreadsheets, May 2009 (cat. no. 6202.0)

Labour Statistics: Concepts, Sources and Methods, April 2007 (cat. no. 6102.0.55.001)

Labour Mobility and Intentions, Western Australia, Oct 2008 (cat. no. 6209.5)

Labour Force , Australia, Detailed, Quarterly, May 2009 (cat. no. 6291.0.55.003)

Budget Paper 3, Economic and Fiscal Outlook, 2009-10 Budget Papers, WA Department of Treasury and Finance