6102.0.55.001 - Labour Statistics: Concepts, Sources and Methods, Dec 2005
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Labour Statistics: Concepts, Sources and Methods was originally released in 2001 in both electronic and paper versions (cat. no. 6102.0). The paper publication will not be rereleased. However, the web version (cat. no. 6102.0.55.001) is being updated on an ongoing basis. This chapter was updated on 15 December, 2005.
SCOPE OF THE POPULATION 2.3 The economically active population should, in theory, include the entire population of the country who are engaged in economic activity as defined. In practice, restrictions are sometimes imposed both for legal and practical reasons (such as relevance of the measure) in a household survey context. The international standards recognise that business surveys and administrative records may be used to supplement household survey measures. Commonly, surveys aimed at measuring the economically active population are restricted to the civilian population (other than those living in institutions) above a set minimum age. 2.4 The international standards and guidelines recognise the need to exclude people below a certain age from the measures, without specifying a particular age limit. The responsibility for setting such limits lies with individual countries. Examples of factors influencing the age limit are:
2.5 A maximum age limit is not a feature of the international guidelines but, for practical reasons, some countries do use a maximum age limit. The international guidelines also recognise the possible need, in the survey context, to exclude other population groups such as people living permanently or semi-permanently in institutions. 2.6 The international standards require that members of the armed forces be classified as employed, and recommend that, for analytical purposes, the economically active population be divided into two parts: the armed forces and the economically active civilian population. The guidelines recognise that there may be difficulties in obtaining measures of the armed forces from labour force surveys, and that separate administrative counts may be necessary. ECONOMIC ACTIVITY AND THE SNA PRODUCTION BOUNDARY 2.7 The concept of economic activity underlying measures of the economically active population is compatible with the concept of economic activity used in the SNA. The concept of economic activity in the SNA is defined in terms of the production of goods and services falling within the SNA production boundary. In the SNA, production is viewed as a physical process in which labour and assets are used to transform inputs of goods and services into outputs of other goods and services. Economic activity covers all market production and certain types of non-market production including the production and processing of primary produce by households for their own consumption, the construction of dwellings and structures for own use, and the production of fixed assets (footnote 1) for own use. 2.8 While the SNA definition of the production of goods and services covers a wide range of activities, many other activities still remain outside its scope. For example, the production of domestic and personal services for consumption within the same household (such as preparing meals and caring for children) are excluded. The production of domestic and personal services is excluded because of the difficulty in producing economically meaningful estimates of their values, and because of the adverse effects their inclusion would have on the usefulness of the accounts for policy purposes and analysis of inflation and unemployment. The extension of the production boundary to include own-account household services would result in virtually the whole adult population being defined as 'economically active', unemployment would cease to exist, and employment statistics would become meaningless (SNA93, 6.22). 2.9 The SNA definition of production also excludes voluntary unpaid work associated with community charity and volunteer work. Services of this type include a wide range of welfare, sport, education, training, rescue and fire services. In general, the purpose of voluntary work is to provide a service to others which would not otherwise be available. People engaged in voluntary work do, however, contribute to national output and welfare. In recognition of this, the international guidelines contain a provision to identify people engaged in voluntary work, as well as people engaged in unpaid domestic activities falling outside the boundary of economic activity, and to classify them separately among the population not economically active (ICLS 1982). In addition, SNA93 recommends that the boundary of production could be extended by incorporating unpaid household work and volunteer and community work in so-called 'satellite accounts' (SNA93 21.120). These are accounting statements which are separate from, but consistent with, the existing national accounts. CURRENT AND USUAL ECONOMIC ACTIVITY 2.10 The international standards identify two measures of the economically active population: the currently active population measured in relation to a short reference period such as one week or one day; and the usually active population measured in relation to a long reference period such as one year. 2.11 The currently active measure provides a snapshot of the economically active population at a particular point in time. This current stock measure of the labour supply, collected at sufficiently frequent intervals, can contribute to the formation of national accounts data (particularly relating to compensation of employees), and can also be used to monitor labour market trends in general (and employment and unemployment levels in particular). 2.12 The usually active framework was introduced as an international standard in 1982. It provides a framework for the collection of data reflecting the dominant pattern of activities over a lengthy period. The use of a long reference period can provide more representative estimates of the economically active population where economic activity has significant seasonal variation. Further, as it permits collection of information on not only the main activity of individuals over the year but also their other activities (e.g. spells of employment and unemployment), it is useful for analysis of employment and income. THE LABOUR FORCE FRAMEWORK 2.13 The currently economically active population is also referred to as the labour force. The labour force is conceptually equivalent to the labour supply available for the production of economic goods and services in a given short reference period. The labour force is the most widely used measure of the economically active population. The term 'labour force' as defined in the international standards is associated with a particular approach to the measurement of employment and unemployment. Essentially this approach is the categorisation of people according to their activities during a short reference period using a specific set of priority rules. 2.14 The labour force framework classifies the in-scope population into three mutually exclusive categories, at a given point in time: employed; unemployed; and not in the labour force. The employed and unemployed categories together make up the labour force which gives a measure of the number of people contributing to, or willing to contribute to, the supply of labour at that time. The third category (not in the labour force) represents the currently inactive population. Diagram 2.1 shows these concepts. 2.1 THE LABOUR FORCE FRAMEWORK 2.15 The labour force framework includes rules for sorting the population into the three basic categories. These rules are applied in population surveys through three steps. The first involves identifying the in-scope population. The second involves identifying, within the in-scope population, those people who are engaged in economic activity as defined - either at work or temporarily absent from work. The third step involves identifying, among the remaining people, those people who were actively seeking and available for work, or who were not seeking work because they were waiting to commence a job that they had already found. The labour force framework classifies people identified in the second step as employed, and those identified in the third step as unemployed. The residual population is classified as 'not in the labour force'. 2.16 The labour force framework rules have the following features:
2.17 The rationale for the treatment of people temporarily absent from work, and of people waiting to start a job they have already found, stems directly from the labour supply perspective, and is discussed further in Chapter 3 (paragraphs 3.5, 3.6, 3.11 and 3.12) and Chapter 6 (paragraphs 6.7, 6.13 and 6.14). ACTIVITY PRINCIPLE 2.18 The activity principle of the labour force framework requires that a person's labour force status be determined by what they were actually doing in the reference period, in terms of their engagement in, or capacity to engage in, economic activity. Commonly, surveys seek responses to a series of activity-based questions, which reflect both the reference period and the priority rules. The purpose of the activity principle is to provide an objective measure of the labour force. Priority rules 2.19 Under the priority rules, precedence is given to employment over unemployment and to unemployment over economic inactivity. To ensure that all economic activity is covered, a practical minimum quantity of work is required (one hour or more in the short reference period); this also ensures that only those completely without work can be classified as unemployed. Of those completely without work, the unemployed must have taken active steps to obtain work and be currently available for work. The employed, the unemployed and the inactive are thus mutually exclusive and exhaustive components of the population. 2.20 Together, the priority rules and the activity principle provide unambiguous labour force measures, regardless of other activities that may be undertaken at the same time. For example, a person at work may also be actively seeking other employment; they are currently contributing to economic production and are therefore classed as employed, despite their job search. Similarly, a person working part-time while undertaking full-time study will be classed as employed. Likewise, a full-time student who is not working and is actively seeking and available for work will be classed as unemployed. Reference period 2.21 The concepts of employed and unemployed need to relate to short time periods to allow meaningful measures of current levels and changes in employment and unemployment. Two short reference periods are presented in the international standards as suitable for the purpose: one week; and one day. Since employment and unemployment are stock concepts, the statistical measures would ideally be of a precise point in time. However, the closest practical time-span that could represent a single point in time is one day or one week. The choice between a one week and a one day reference period is not a recent problem but one that has been the subject of much consideration and debate by labour statisticians for over 50 years. 2.22 As a result of the application of the priority rule (under which economic activity, however little, has precedence over other, non-economic, activities), the labour force measured using a one week reference period must always be equal to or greater than the labour force measured using a single day of that reference week. The difference between the two measures depends on the relative number of people who change their activity status during a week. The differences are likely to be fairly small, because, in the course of a week, the movement of people from unemployed to employed and from employed to unemployed is more likely than people changing their status from inside the labour force to outside the labour force. 2.23 The solution adopted in the international standards aims to satisfy different conditions which exist among countries. In countries such as Australia, where regular full-time employment is dominant, similar average results will arise from the use of a reference period of a week or a single day; however, the one week reference period is likely to provide results of lower variance and is therefore preferred. Conversely, where people employed in casual, part-time, or temporary jobs constitute a significant proportion of total employment, the use of a one day reference period will provide a more precise measure of employment and unemployment than using a reference period of a week. EXTENSIONS TO THE LABOUR FORCE FRAMEWORK 2.24 The basic framework as outlined above can be extended to identify various sub-groups of employed (e.g. underemployed, full-time and part-time workers, and self-employed people), unemployed (e.g. long-term unemployed, youth), and people not in the labour force (e.g. people marginally attached to the labour force, discouraged job seekers). Extensions to the basic labour force framework are discussed in detail in subsequent chapters. DEFINITIONS USED IN ABS SURVEYS 2.25 The ABS produces estimates of the currently economically active population in a number of household surveys. Definitions of the currently economically active population used by the ABS align closely with international standards and guidelines. GENERAL PRINCIPLES 2.26 The ABS uses the labour force framework as outlined above for classifying the Australian population according to their labour force status (employed, unemployed or not in the labour force). Labour force status is derived by asking a series of questions about a person's work-related activities and availability for work in the reference period. The criteria for determining a person's labour force status are (broadly) as follows:
2.27 The determination of labour force status from these criteria is as follows:
DEFINITIONS USED IN ABS HOUSEHOLD SURVEYS 2.28 Labour force status is determined in a number of ABS household surveys. The Labour Force Survey is designed to produce precise estimates of employment and unemployment, and the definitions used align closely with international standards and guidelines. In other household surveys where labour force status is used as an explanatory or classificatory variable, it is generally not practical to determine employment and unemployment as precisely as in the Labour Force Survey. While aggregates produced from these other surveys are designed to be consistent with the international concepts of employment and unemployment, the treatment of certain small population groups is simpler than that used in the Labour Force Survey. Labour Force Survey 2.29 Estimates of the currently economically active population produced from the Labour Force Survey align closely with the international concepts and definitions outlined above. The paragraphs below describe the scope of the population for which estimates are made, and the definition of labour force status used in the Labour Force Survey. Scope 2.30 The scope of the population for which estimates are made is confined to the civilian, 'usually resident' population aged 15 years and over. The 'usually resident' population also excludes non-Australian defence personnel (and their dependants) stationed in Australia, diplomatic personnel of overseas governments, and people who are usually resident in other countries and are temporarily (footnote 2) residing in Australia. 2.31 The Labour Force Survey excludes Australian defence personnel, because of practical collection difficulties and the low numbers involved. Where an estimate is required of the total labour force, for example in international comparisons collated by the ILO, survey estimates are supplemented by administrative counts of the defence forces. 2.32 An age limit of 15 years and over is used in the Labour Force Survey. Australian labour and compulsory schooling legislation have resulted in low numbers of young people being involved in economic activity. While such legislation varies from state to state, the net result is that age 15 is the lowest practical limit at which it is feasible and cost-effective to measure the participation of young people in economic activity with acceptable accuracy. Labour force status 2.33 The definitions of 'employed' and 'unemployed' used in the Labour Force Survey are explained below. Diagram 2.2 illustrates the differences between 'employed', 'unemployed' and 'not in the labour force'. 2.34 Employed are defined as people aged 15 and over who, during the reference week:
2.35 Unemployed are defined as people aged 15 and over who were not employed during the reference week, and:
2.2 THE LABOUR FORCE STATUS CONCEPTUAL FRAMEWORK 2.37 The section below discusses the treatment in the Labour Force Survey of particular groups of people as employed, unemployed or not in the labour force. These groups include: participants in labour market programs (such as the 'Work for the Dole' and 'Community Development Employment Projects' schemes); students; contributing family workers; and future starters. Participants in labour market programs 2.38 A wide range of labour market programs is provided by governments. These programs aim to: assist the efficient functioning of the labour market; help individuals and industry to improve the productivity and skills of the labour force; and improve the skills and employment prospects of people disadvantaged in the labour market. Programs implemented by governments take various forms including wage subsidies to employers, vocational training, and paid and unpaid work experience. 2.39 The Labour Force Survey does not ask any questions directly related to participation in labour market programs. Such information is neither necessary nor sufficient to determine labour force status. Individual participants are counted as employed, unemployed or not in the labour force according to economic (work-related) activity undertaken in the survey reference period. The labour force measure, based on economic activity tests, is thus consistent over time and independent of administrative changes to labour market programs or their eligibility rules. 2.40 The treatment of participants in various types of labour market programs is discussed below. 2.41 Participants in programs involving a form of wages subsidy paid directly to employers - people working for pay in a job for which their employer receives a government subsidy are 'working in a job' (employed) regardless of the subsidy (about which the person may have no knowledge). 2.42 Participants in programs involving training but no subsidy (paid either to employers or participants) - if the participant worked for pay in a job (or was temporarily away from work) during the reference week they should be classified as employed. If they did no paid work (and were not temporarily away from work) they are classified as either unemployed or not in the labour force depending on whether they actively looked for, and were available to commence work, in the survey reference period. 2.43 People on a 'Work for the Dole' scheme - 'Work for the Dole' is a government program aimed at providing work experience to improve the skills, and future (paid) employment prospects, of people registered for unemployment benefits. Under 'Work for the Dole' schemes, to maintain their eligibility for benefits, people are required to work on not-for-profit community-based projects for a number of hours per week. 2.44 Superficially, such people might be regarded as 'employed' as they are working for one hour or more and receive a payment. However, they are not paid for their work by the organisations undertaking the community projects. The participants are receiving only their unemployment benefit entitlement (footnote 3), paid directly by the administering government agency. As the community organisations do not have employer/employee relationships with the scheme participants, activity in a 'Work for the Dole' scheme is not considered to be engagement in an employee job. 2.45 Accordingly, the labour force status of people participating in 'Work for the Dole' schemes is determined according to economic (work-related) activity undertaken in the survey reference period. 2.46 Community Development Employment Projects (CDEP) scheme - this scheme of the Federal Government provides local employment opportunities for Aboriginal and Torres Strait Islander communities. Under the scheme, Indigenous communities and organisations can receive a grant, similar in value to the collective unemployment benefit entitlements of participating community members, to undertake a wide range of community development projects. Individuals can choose whether or not to participate in the scheme. Participants forgo their unemployment benefits in exchange for paid employment in the scheme. The work in which they might engage is determined by the community or organisation, and includes activities such as housing repairs and maintenance, artefact production, road works, market gardening, fishing and other business and cultural activities. 2.47 Under the Community Development Employment Projects scheme, the community meets all legal responsibilities to its workers including the provision of award wages and conditions, workers' compensation insurance, and income tax liabilities. Accordingly, an employment relationship is deemed to exist between the community (employer) and the members of the community undertaking work (employees). Participation in the scheme is considered as engagement in a paid employment job, and participants are classified as employed. Students 2.48 People engaged in full-time or part-time study who satisfy the criteria for classification as employed are treated in the same way as any other group. Their labour force status is determined according to economic (work-related) activity undertaken in the survey reference period. Contributing family workers 2.49 People working without pay in an economic enterprise operated by a related person are called 'contributing family workers'. They are classified as 'employed' if they worked one hour or more in the reference week, and as 'unemployed' or 'not in the labour force' if they did not work during the reference week. 2.50 Although ILO guidelines indicate that an unpaid family worker is a person working without pay in an economic enterprise operated by a related person living in the same household (footnote 4), in Australia there is no requirement for the related person to be living in the same household. Future starters 2.51 Future starters are those people who were not employed during the reference week, were waiting to start a 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. 2.52 Under ILO guidelines, future starters do not have to be actively looking for work in order to be classified as unemployed. Until February 2004, the Labour Force Survey definition of unemployed only included the subset of future starters who had actively looked for work in the four weeks to the end of the reference week. Hence, the Labour Force Survey treatment of future starters was not fully consistent with the ILO standards because the precondition of active job search was not waived, so that some future starters were defined as 'not in the labour force'. From February 2004, future starters who had not actively looked for work are classified as unemployed in the Labour Force Survey, in line with ILO guidelines. Labour Force Survey estimates were revised back to April 2001 to reflect this change. This revision created a small trend break at April 2001 in unemployed persons and unemployment rate series. For further information on this change, see pages 11 and 12 of Information Paper: Forthcoming Changes to Labour Force Statistics, 2003. Other ABS household surveys 2.53 Most other ABS household surveys use one of the two alternative questionnaire modules: the reduced questionnaire module (used for personal interviews), or the self-enumerated questionnaire module, to produce estimates of the currently economically active population. While these modules are designed to be consistent with the international guidelines, there are some differences between estimates produced from the Labour Force Survey and those produced from surveys using these modules. These differences are due to differences in survey scope, and in the definitions of employment and unemployment used. Scope 2.54 The scope of the survey population varies across household surveys. While it is sometimes broader than that used in the Labour Force Survey, it is often narrower. All ABS household surveys are restricted to the usually resident population but, unlike the Labour Force Survey, other household surveys may not be restricted to the civilian population, nor only to people aged 15 years and over (for example the scope of the Census of Population and Housing includes all the usually resident population). However, estimates of labour force status from these surveys are generally only produced for people aged 15 years and over, or for people aged between 15 years and some upper age cutoff. Some household surveys exclude people living in non-private dwellings (footnote 5) from scope, and unlike the Labour Force Survey may therefore exclude various institutionalised and other people. Labour force status 2.55 Compared with the estimates of labour force aggregates from the Labour Force Survey, the reduced questionnaire module recommended for use in personal interviews results in higher estimates of employed, lower estimates of unemployed, and higher estimates of people not in the labour force. This arises from the simplified treatment of certain categories of people:
Most Special Social Surveys use the reduced questionnaire module for personal interviews, to determine labour force status. 2.56 The self-enumerated questionnaire module also produces different estimates of employment, unemployment and not in the labour force, compared with the Labour Force Survey questionnaire. Some differences result from the shortened set of questions which, like the questions recommended for use in personal interview, cannot determine labour force status as precisely as the Labour Force Survey does. Other differences result from the self-enumerated nature of the questions and the inevitable differences in interpretation among respondents. As a result, labour force status from the self-enumerated questionnaire module is best used as an explanatory or classificatory variable to explain other phenomena, rather than for detailed analysis of the labour force itself. The Census of Population and Housing uses the self-enumerated questionnaire module. DATA SOURCES 2.57 Estimates of the currently economically active population are available from:
LABOUR FORCE SURVEY 2.58 The Labour Force Survey is the official source of Australian employment and unemployment statistics. It produces estimates of the currently economically active population (labour force) according to the concepts and definitions outlined above (paragraphs 2.29-2.52). The population in scope for the Labour Force Survey is the civilian, usually resident, population aged 15 years and over. Estimates from the Labour Force Survey are available by state/territory, capital city/rest of state, and for 77 Labour Force Survey regions. (For more information on LFS regions see the article LFS regions, published in the July 2004 issue of Australian Labour Market Statistics (6105.0).) Chapter 16 (paragraphs 16.34-16.48) provides more information on geographic classifications available from ABS household surveys. For more detail on the content and methodology of the Labour Force Survey see Chapter 20. CENSUS OF POPULATION AND HOUSING 2.59 The Census of Population and Housing uses the self-enumerated questionnaire module to produce aggregates of labour force status consistent with the international standards. However, because the self-enumerated questionnaire module uses a limited set of questions to determine labour force status, the results are not strictly comparable with those produced from other surveys (see paragraph 2.56). For these reasons, labour force status aggregates from the Census should be used with caution in analyses where labour force activities are a major focus. When comparing aggregates of labour force status from the Census of Population and Housing with aggregates from other surveys, users should also note differences in scope and methodologies across the surveys. For example the scope of the Census of Population and Housing, in including all the usually resident population (e.g. permanent defence forces as well as the civilian population), is less restrictive than that of the Labour Force Survey. Estimates from the Census are available down to the statistical local area level (footnote 6) See Chapter 19 for more information on the Census of Population and Housing. SPECIAL SOCIAL SURVEYS 2.60 Most Special Social Surveys use the reduced questionnaire module for personal interviews to produce aggregates of labour force status consistent with international standards. However, because the reduced questionnaire module uses fewer questions to determine labour force status, the results are not strictly comparable with those produced from the Labour Force Survey (see paragraph 2.55). When comparing aggregates of labour force status from Special Social Surveys with aggregates from other surveys, users should also note differences in scope and methodologies across the surveys. 2.61 The labour-related Special Social Surveys, namely the Survey of Employment and Unemployment Patterns (Chapter 24) and the Survey of Employment Arrangements and Superannuation (Chapter 23), both produced aggregates of labour force status. Unlike most Special Social Surveys, neither of these surveys used the reduced questionnaire module to determine labour force status. Instead both surveys used questions asked in the Labour Force Survey to determine labour force status. 2.62 The Time Use Survey provides information on the daily activity patterns of people in Australia. It provides information about patterns of paid work and unpaid household and community work. The ABS has used data from the Time Use Survey to estimate the value of unpaid work falling outside conventional definitions of economic production (see paragraph 2.9). These estimates comprise unpaid household work, volunteer work and community work. For further details on the Time Use Survey see How Australians Use Their Time 1997 (cat. no. 4153.0). For further information on ABS estimates of unpaid household work see Unpaid Work and the Australian Economy 1997 (cat. no. 5240.0). MEASURES OF THE CURRENTLY ECONOMICALLY ACTIVE POPULATION 2.63 Measures of the currently economically active population include labour force participation rates, population ratios and estimates of gross flows. POPULATION RATIOS AND LABOUR FORCE PARTICIPATION RATES 2.64 Labour Force participation rates and other population ratios are used extensively in analyses of labour statistics, in particular to monitor changes in the size and composition of the supply of labour. 2.65 Population ratios provide information on the percentage of people in a population with certain characteristics. For example an employment to population ratio provides information on the percentage of the population in employment. Population ratios can be calculated for the entire population, or groups within the population; for example, an unemployment to population ratio for people aged 15-19 years provides information on the percentage of people aged 15-19 years who are unemployed. 2.66 The labour force participation rate for any group within the population is the labour force component of that group, expressed as a percentage of the population in the same group. 2.67 The Labour Force Survey publishes labour force participation rates and other population ratios on a regular basis. For more information on the contents and methodology of this survey refer to Chapter 20. GROSS FLOWS 2.68 Estimates of movements between labour force states (employment, unemployment, not in the labour force) from one month to the next are produced from the Labour Force Survey, and referred to as gross flows. The measurement of gross flows provides insight into the nature of changes in each of the labour force categories. For example, in a period of expanding job opportunities when unemployment is not declining, gross flows data may show that many people previously classified as not in the labour force are now satisfying the criteria for being classified as unemployed. The analysis of gross flows data also provides a good indicator of trends and cyclical activity within the labour market. 2.69 Data on gross flows are available from the Labour Force Survey. Estimates relate only to those people in private dwellings for whom information was obtained in successive surveys (about 80% of all people in the survey). For further information on estimates of gross flows and on other outputs from the Labour Force Survey, or its methodology, refer to Chapter 20. FURTHER INFORMATION 2.69 For further details contact the Labour Market Statistics Section, on Canberra (02) 6252 7206. FOOTNOTES 1. Fixed assets are defined in the SNA as produced assets that are themselves used repeatedly, or continuously, in processes of production for more than one year (SNA93, 10.7). < Back 2. People who are usually resident in other countries are considered to be temporarily residing in Australia if the total duration of their stay in Australia is less than 12 months. < Back 3. Plus an allowance to cover expenses associated with participation, such as transport, meals and so on. < Back 4. Hussmanns, R., Mehran, F., Verma, V., Surveys of economically active population, employment, unemployment and underemployment: An ILO manual on concepts and methods, International Labour Office, Geneva 1990.< Back 5. Non-private dwellings are establishments which provide predominantly short-term accommodation for communal or group living and often provide common eating facilities. Non-private dwellings include hotels, motels, hostels, hospitals, religious institutions providing accommodation, educational institutions providing accommodation, prisons, boarding houses, and short-stay caravan parks. Some non-private dwellings are designed for a particular purpose (e.g. hospitals) and, as such, provide accommodation for specific groups of people. For further information on non-private dwellings and ABS household survey design see paragraphs 18.11, 18.12, 18.16 and 18.30-18.32, in Chapter 18. < Back 6. Statistical local areas (SLAs) consist of one or more Census collection districts. In aggregate, SLAs cover the whole of Australia without gaps or overlaps. An SLA consists of a single local government area, or part thereof, or any unincorporated area. For more information see paragraphs 16.35-16.42 in Chapter 16. < Back
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