CHAPTER 7. NOT IN THE LABOUR FORCE

INTRODUCTION

7.1 The labour force framework discussed in Chapter 2 categorises the population into three mutually exclusive groups: employed; unemployed; and not in the labour force. This chapter discusses the concept 'not in the labour force'. It follows on from the discussion on employment (Chapter 3) and unemployment (Chapter 6) and concludes the discussion on the currently economically active population.


CONCEPTS AND INTERNATIONAL GUIDELINES

7.2 According to the international standards (Thirteenth International Conference of Labour Statisticians 1982), the population not currently economically active (that is, not in the labour force) comprises all people not currently employed or unemployed, irrespective of age. Theoretically, then, those not in the labour force include people below the age specified for measuring the economically active population and older people who have retired from the workforce. The standards recognise that, for analytical purposes, the economically active population may be related to the total population to derive a crude participation rate or, more appropriately, to the population above the age prescribed for the measurement of the economically active population. In practice, many countries restrict the population scope of household surveys, and provide separately sourced estimates for those below the age limit when a total population estimate or a crude participation rate is required (e.g. for international reporting).

7.3 Not all people who are classified as not in the labour force are voluntarily economically inactive; some want to work but are classified as not in the labour force because they do not satisfy the criteria for unemployment (active job search and availability to start work - see Chapter 6 for further discussion).

7.4 The international guidelines (Thirteenth International Conference of Labour Statisticians 1982) recommend that people not in the labour force may be classified by reasons for inactivity, which are listed as:

• attendance at educational institutions;
• engagement in household duties;
• retirement or old age; and
• other reasons such as infirmity or disablement.

MARGINAL ATTACHMENT TO THE LABOUR FORCE

7.5 The international guidelines (Thirteenth International Conference of Labour Statisticians 1982) suggest that, where the standard definition of employment is used, countries develop classifications of people not in the labour force according to the relative strength of attachment to the labour market. The International Labour Organisation, in its manual Surveys of Economically Active Population, Employment, Unemployment and Underemployment, states that people marginally attached to the labour force are those not economically active under the standard definitions of employment and unemployment, but who, following a change in one of the standard definitions (of employment or unemployment, such as active job search or availability to start a job), would be reclassified as economically active.

Discouraged workers

7.6 The guidelines recognise that, though not precise in concept (nor defined in the international guidelines), the term 'discouraged workers' generally refers to people who want a job and are currently available for work but have given up any active job search because they believe they cannot find a job.


DEFINITIONS USED IN ABS SURVEYS

7.7 The ABS produces estimates of persons not in the labour force in a number of household surveys. The definition used is consistent with the concepts outlined above except for people aged less than 15 years, who are generally excluded from ABS measures of labour force status. Persons not in the labour force are therefore generally defined in ABS household collections as 'persons aged 15 years and over who are neither employed nor unemployed'. Those not in the labour force include people who are:

• retired or voluntarily inactive;
• performing home duties or caring for children;
• attending an educational institution;
• experiencing a long-term health condition or disability;
• experiencing a short-term illness or injury;
• looking after an ill or disabled person;
• on a travel, holiday or leisure activity;
• working in an unpaid voluntary job;
• in institutions (hospitals, jails, sanatoriums, etc.);
• permanently unable to work; and
• members of contemplative religious orders.

7.8 Estimates of persons not in the labour force vary across different household surveys because of differences in the definitions of employment and unemployment used in these surveys, and the respective scope of these surveys. As discussed in preceding chapters, the Labour Force Survey is designed to produce precise estimates of employment, unemployment and people not in the labour force, and definitions used align closely with international standards. In other household surveys, it is generally not practical to define employment and unemployment as precisely as in the Labour Force Survey. Two alternative questionnaire modules are used to collect measures of labour force status (i.e.employment, unemployment and persons not in the labour force) in these surveys: the reduced questionnaire module (for use in personal interview) and the self-enumerated questionnaire module.

7.9 Estimates of persons not in the labour force produced from the reduced questionnaire module (used in most Special Social Surveys) are higher than those produced from the Labour Force Survey. This is due to differences in the treatment of certain categories of people:

• the reduced questionnaire module for personal interviews does not ask respondents about the reasons they did not actively look for work. Therefore, the reduced questionnaire module does not identify 'future starters'. Future starters are 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. Using the reduced questionnaire module such people are classified as not in the labour force rather than as unemployed (about 3% of unemployed); and
• in the Labour Force Survey, people on workers' compensation 'last' week and not returning or 'don't know if returning' to work, and people away from work for four weeks or more without pay, are classified as either unemployed or not in the labour force. Using the reduced questionnaire module, all people absent from work, but who usually work one hour or more a week, are classified as employed (about 0.8% of employed).

7.10 The self-enumerated questionnaire module (used in the Census of Population and Housing) also produces different estimates of persons not in the labour force when compared to the Labour Force Survey. Some differences result from the shortened set of questions, which cannot determine labour force status as precisely as the Labour Force Survey. Other differences result from the self-enumeration nature of the questions and the inevitable differences in interpretation across respondents. As a result, estimates of persons not in the labour force from the self-enumerated questionnaire module are best used as explanatory or classificatory variables to explain other phenomena, rather than for detailed analysis of the labour force itself.


MARGINAL ATTACHMENT TO THE LABOUR FORCE, DISCOURAGED JOB SEEKERS

7.11 Measures of persons marginally attached to the labour force and discouraged job seekers are collected by the ABS annually in a supplementary survey to the Labour Force Survey, Persons Not In the Labour Force, Australia (cat. no. 6220.0). Definitions used in this survey are outlined below.

Marginal attachment

7.12 People with marginal attachment to the labour force comprise those people who are not in the labour force, who wanted to work, and:

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

7.13 This definition is consistent with that suggested by the international guidelines, and involves relaxing the criteria used to determine unemployment in the Labour Force Survey as follows:

• people meeting the first set of criteria above (wanting to work, actively looking for work, not available to start work) would have been classified as unemployed if the unemployment criterion 'currently available for work' had been waived;
• people meeting the second set of criteria above (wanting to work, not actively looking for work, available to start within four weeks) would have been classified as unemployed if the unemployment criterion 'active job search' had been waived and the criterion 'currently available for work' had been relaxed to include the next four weeks. The circumstances that would permit people to start a job are likely to differ between people in the labour force and those not in the labour force. Accordingly a reference period of four weeks for the availability criterion is adopted, rather than current availability, as for the unemployed.

Discouraged job seekers

7.14 Discouraged job seekers are defined as people with marginal attachment to the labour force who want to work and could start work within four weeks if offered a job, but who have given up looking for work for reasons associated with the labour market. This group includes people who believe they would not find a job for any of the following reasons:

• considered to be too young or too old by employers;
• believes ill health or disability discourages employers;
• lacked necessary schooling, training, skills or experience;
• difficulties because of language or ethnic background;
• no jobs in their locality or line of work;
• no jobs in suitable hours; and
• no jobs available at all.

This definition of discouraged job seekers is consistent with the definition of discouraged workers outlined in international guidelines.

7.15 Diagram 7.1 illustrates the concepts of not in the labour force, unemployed, marginally attached, and discouraged job seekers, as measured in the Persons Not In the Labour Force Survey.



DATA SOURCES

7.16 Estimates of persons not in the labour force are available from:

• the Labour Force Survey;
• the Persons Not In the Labour Force Survey;
• the Census of Population and Housing; and
• Special Social Surveys.
  
  

LABOUR FORCE SURVEY

7.17 The Labour Force Survey is the official source for Australian employment and unemployment statistics and defines persons not in the labour force according to the definitions outlined above, using the full questionnaire module. Persons not in the labour force are further classified as:

• looking for work (i.e. either undertook active job search and were not available to commence work, or undertook only passive job search);
• not looking for work;
• permanently unable to work; and
• in institutions.

7.18 Estimates of reason for inactivity, marginal attachment and discouraged job seekers are impractical to collect in the Labour Force Survey, because of cost, time and respondent burden. These topics are therefore measured in an annual supplement to the Labour Force Survey, as noted below. Notwithstanding this, quarterly estimates of the number of marginally attached people who had actively looked for work, were not available to start work in the reference week, but were available to start within four weeks, are available from the Labour Force Survey. For more details on the content and methodology of the Labour Force Survey refer to Chapter 20.


SUPPLEMENTARY SURVEY: PERSONS NOT IN THE LABOUR FORCE

7.19 The supplement to the Labour Force Survey, the Persons Not In the Labour Force Survey, is the main source of detailed information on persons not in the labour force. Persons not in the labour force are defined as for the Labour Force Survey, but excluded people living in very remote parts of Australia. The exclusion of these people will have only a minor impact on any aggregate estimates that are produced for individual states and territories, except the Northern Territory where such people account for around a quarter of the population. In addition, the supplementary surveys exclude institutionalised people, and this group of people represent approximately 4% of people not in the labour force. The survey produces estimates of persons marginally attached to the labour force, of discouraged job seekers, and of persons not in the labour force classified by reasons for inactivity. The definitions for marginal attachment and discouraged job seekers used in the survey are discussed above. For further information on the content and methodology of the survey refer to Chapter 21.10.


CENSUS OF POPULATION AND HOUSING

7.20 The Census of Population and Housing uses the self-enumerated questionnaire module and defines persons not in the labour force as 'persons aged 15 years and over who, during the week before census night, were neither employed nor unemployed'. As discussed previously, the self-enumerated questionnaire uses a limited set of questions to collect labour force status and measures persons not in the labour force more broadly than collections using the full questionnaire modules. The Labour Force Survey and its supplementary topic Persons Not In the Labour Force both use the full questionnaire. When comparing estimates from the Census with those from the Labour Force Survey, or the Persons Not In the Labour Force Survey, users should also note differences in scope and methodologies across the collections. See Chapter 19 for more information on the Census of Population and Housing.


SPECIAL SOCIAL SURVEYS

7.21 The Special Social Surveys generally use the reduced questionnaire module and define persons not in the labour force as 'persons who were neither employed nor unemployed during the reference period'. Estimates are generally only produced for people (in scope of the survey) aged 15 years and over. As discussed previously, the reduced questionnaire module uses a limited set of questions to determine labour force status, and measures 'not in the labour force' less precisely than collections using the full questionnaire modules, including the Labour Force Survey and its supplementary topic Persons Not In the Labour Force. When comparing estimates from the Special Social Surveys with the Labour Force Survey, or with Persons Not In the Labour Force, users should also note differences in scope and methodologies across the collections.


FURTHER INFORMATION

7.22 For further details contact the Labour Market Statistics Section, on Canberra (02) 6252 7206 or email <labour.statistics@abs.gov.au>.

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