The extent to which the available supply of labour is utilised is an important social and economic issue. From a social viewpoint, concern centres around the number of people whose aspirations for work are not being met. From an economic perspective, there is interest in measuring the amount of spare capacity in the labour force for future labour supply and its potential to contribute to the production of goods and services.
Measures such as the unemployment rate and long-term unemployment rate do not reflect the full extent of labour underutilisation. As a result, the ABS also produces labour underutilisation measures based on the number of people whose labour is underutilised (headcount measures), and the number of hours of available labour that are underutilised (volume measures). These measures take into account groups of people such as underemployed workers and discouraged jobseekers.
HEADCOUNT MEASURES OF LABOUR UNDERUTILISATION
The ABS has produced three supplementary measures of labour underutilisation, in addition to the unemployment rate:
Underemployment rate – the number of underemployed workers as a proportion of the labour force. Underemployed people comprise part-time workers who would prefer more hours, and are available to work more hours, and full-time workers who worked part-time hours in the reference week for economic reasons. This rate is produced quarterly.
Labour force underutilisation rate – the sum of the unemployed and the underemployed (the underutilised population), expressed as a proportion of the labour force. This rate is also produced quarterly.
Extended labour force underutilisation rate – the sum of the unemployed, the underemployed, and two groups of people marginally attached to the labour force, as a proportion of the labour force augmented by those two groups. The two groups of marginally attached people are: people actively looking for work, not available to start work in the reference week, but available to start within four weeks; and discouraged jobseekers. This is the broadest of the ABS measures of underutilised labour. This rate can only be produced annually.
Table 8.33 shows that there were 810,900 underemployed people in August 2011. The underemployment rate was higher for females than males (9% and 5% respectively). This in part reflects the higher proportion of females who are in part-time employment.
In August 2010, the extended labour force underutilisation rate was 13%. The extended labour force underutilisation rate was higher for females than males (16% compared with 11%), not only because females had a higher rate of underemployment, but also because females were more likely to be in the marginally attached populations that contribute to this rate.
8.33 LABOUR UNDERUTILISATION
Units
Period
Males
Females
Persons
Unemployed
'000
Aug 11
329.7
280.0
609.7
Long-term unemployed
'000
Aug 11
68.4
56.7
125.1
Underemployed
'000
Aug 11
331.3
479.6
810.9
Marginally attached to the labour force(a)
'000
Aug 10
66.3
91.7
157.9
Labour underutilisation rates
Unemployment rate
%
Aug 11
5.1
5.1
5.1
Long-term unemployment rate
%
Aug 11
1.1
1.0
1.0
Underemployment rate
%
Aug 11
5.1
8.8
6.8
Labour force underutilisation rate
%
Aug 11
10.2
13.9
11.9
Extended labour force underutilisation rate
%
Aug 10
11.3
15.6
13.2
(a) Includes only a subset of marginally attached groups (those who wanted to work but were not actively looking for work and were available to start work within four weeks).
Historically, movements in unemployment have been the primary drivers of movement in headcount measures, reflecting additional labour supply. However, underemployment has been steadily increasing in relative importance to the available resources that are not being utilised in the economy. Graph 8.34 shows that the underemployment rate has been consistently higher than the unemployment rate since 2000. Historically, the largest difference between the rates was in 1993, with underemployment at 6.8% and unemployment at 10.7%. More recently, the largest difference between the rates was in 2010, with underemployment at 7.2% and unemployment at 4.9%. The labour force underutilisation rate was highest in 1992 (17.6%) and lowest in 2008 (9.6%).
The trend historical labour force underutilisation rate shows a number of periods in which underutilisation has been an increasing or decreasing concern for the labour market, and these closely align with the peaks and troughs of the economic cycle. Graph 8.35 shows the relatively steep increase in the early 1990s, and a sharp increase from May 2008 to May 2009.
Since May 1991, the underutilisation rate for females has been consistently higher than for males. The difference was most pronounced in the February quarter 2004, with a difference of 5.3 percentage points (16% for females and 10% for males), and least pronounced in August 1992 and February 1993, with a difference of 2.6 percentage points for these quarters.
The labour force underutilisation rate decreases with age. As seen in graph 8.36, in August 2010, 15–19 year olds had the highest underutilisation rate (29% for males and 34% for females), followed by 20–24 year olds (18% and 19%). The lowest rate was for people aged 65 and over (5% for both males and females), a pattern reflected in both the unemployment rate and the underemployment rate. The underutilisation rate was higher for females than for males in all age groups.
VOLUME MEASURES OF LABOUR FORCE UNDERUTILISATION
Labour underutilisation can also be measured in terms of the number of potential hours of labour that are not used. The volume of underutilised labour in the labour force is defined as the number of hours sought by unemployed people plus the preferred number of additional hours of work of underemployed workers. The volume labour force underutilisation rate is the ratio of unutilised hours to the total number of utilised and unutilised hours in the labour force. This rate is produced annually.
Table 8.37 shows volume measures of labour force underutilisation for August 2010. For all three underutilisation measures (i.e. unemployment, underemployment and labour force underutilisation), the volume measures are usually lower than headcount measures, as the average number of potential extra hours of unemployed or underemployed people is generally less than the average hours actually worked by employed people.
In August 2010, the hours sought by unemployed people (18.4 million hours) formed the largest component of the volume of underutilised labour in the labour force (60%), while additional hours preferred by the underemployed formed the remainder (12.3 million hours or 40% of the volume of underutilised labour).
8.37 VOLUME MEASURES OF LABOUR UNDERUTILISATION(a)—August 2010
Units
Males
Females
Persons
Volume of potential labour in the labour force
Unemployed persons (hours of work sought)
million hours
10.3
8.0
18.4
Underemployed workers (additional hours of work preferred)
million hours
6.0
6.2
12.3
Employed persons (usual hours of work)(b)
million hours
250.9
157.4
408.3
Total(c)
million hours
267.3
171.7
438.9
Volume measures of labour force underutilisation
Volume unemployment rate
%
3.9
4.7
4.2
Volume underemployment rate
%
2.3
3.6
2.8
Volume labour force underutilisation rate
%
6.1
8.3
7.0
(a) Volume measures estimates, based on the number of hours of work sought.
(b) Actual hours worked in the reference week for underemployed full-time workers and usual hours worked for all other employed persons.
(c) The volume of potential labour in the labour force is equal to the hours of labour sought by unemployed persons, plus the hours of labour preferred by underemployed workers (both utilised and unutilised), plus the hours of labour usually provided by employed persons who are not underemployed.
Statistics contained in the Year Book are the most recent available at the time of preparation. In many cases, the ABS website and the websites of other organisations provide access to more recent data. Each Year Book table or graph and the bibliography at the end of each chapter provides hyperlinks to the most up to date data release where available.
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This page first published 24 May 2012, last updated 11 November 2015
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UNDERUTILISED LABOUR
The extent to which the available supply of labour is utilised is an important social and economic issue. From a social viewpoint, concern centres around the number of people whose aspirations for work are not being met. From an economic perspective, there is interest in measuring the amount of spare capacity in the labour force for future labour supply and its potential to contribute to the production of goods and services.
Measures such as the unemployment rate and long-term unemployment rate do not reflect the full extent of labour underutilisation. As a result, the ABS also produces labour underutilisation measures based on the number of people whose labour is underutilised (headcount measures), and the number of hours of available labour that are underutilised (volume measures). These measures take into account groups of people such as underemployed workers and discouraged jobseekers.
HEADCOUNT MEASURES OF LABOUR UNDERUTILISATION
The ABS has produced three supplementary measures of labour underutilisation, in addition to the unemployment rate:
Underemployment rate – the number of underemployed workers as a proportion of the labour force. Underemployed people comprise part-time workers who would prefer more hours, and are available to work more hours, and full-time workers who worked part-time hours in the reference week for economic reasons. This rate is produced quarterly.
Labour force underutilisation rate – the sum of the unemployed and the underemployed (the underutilised population), expressed as a proportion of the labour force. This rate is also produced quarterly.
Extended labour force underutilisation rate – the sum of the unemployed, the underemployed, and two groups of people marginally attached to the labour force, as a proportion of the labour force augmented by those two groups. The two groups of marginally attached people are: people actively looking for work, not available to start work in the reference week, but available to start within four weeks; and discouraged jobseekers. This is the broadest of the ABS measures of underutilised labour. This rate can only be produced annually.
Table 8.33 shows that there were 810,900 underemployed people in August 2011. The underemployment rate was higher for females than males (9% and 5% respectively). This in part reflects the higher proportion of females who are in part-time employment.
In August 2010, the extended labour force underutilisation rate was 13%. The extended labour force underutilisation rate was higher for females than males (16% compared with 11%), not only because females had a higher rate of underemployment, but also because females were more likely to be in the marginally attached populations that contribute to this rate.
Historically, movements in unemployment have been the primary drivers of movement in headcount measures, reflecting additional labour supply. However, underemployment has been steadily increasing in relative importance to the available resources that are not being utilised in the economy. Graph 8.34 shows that the underemployment rate has been consistently higher than the unemployment rate since 2000. Historically, the largest difference between the rates was in 1993, with underemployment at 6.8% and unemployment at 10.7%. More recently, the largest difference between the rates was in 2010, with underemployment at 7.2% and unemployment at 4.9%. The labour force underutilisation rate was highest in 1992 (17.6%) and lowest in 2008 (9.6%).
The trend historical labour force underutilisation rate shows a number of periods in which underutilisation has been an increasing or decreasing concern for the labour market, and these closely align with the peaks and troughs of the economic cycle. Graph 8.35 shows the relatively steep increase in the early 1990s, and a sharp increase from May 2008 to May 2009.
Since May 1991, the underutilisation rate for females has been consistently higher than for males. The difference was most pronounced in the February quarter 2004, with a difference of 5.3 percentage points (16% for females and 10% for males), and least pronounced in August 1992 and February 1993, with a difference of 2.6 percentage points for these quarters.
The labour force underutilisation rate decreases with age. As seen in graph 8.36, in August 2010, 15–19 year olds had the highest underutilisation rate (29% for males and 34% for females), followed by 20–24 year olds (18% and 19%). The lowest rate was for people aged 65 and over (5% for both males and females), a pattern reflected in both the unemployment rate and the underemployment rate. The underutilisation rate was higher for females than for males in all age groups.
VOLUME MEASURES OF LABOUR FORCE UNDERUTILISATION
Labour underutilisation can also be measured in terms of the number of potential hours of labour that are not used. The volume of underutilised labour in the labour force is defined as the number of hours sought by unemployed people plus the preferred number of additional hours of work of underemployed workers. The volume labour force underutilisation rate is the ratio of unutilised hours to the total number of utilised and unutilised hours in the labour force. This rate is produced annually.
Table 8.37 shows volume measures of labour force underutilisation for August 2010. For all three underutilisation measures (i.e. unemployment, underemployment and labour force underutilisation), the volume measures are usually lower than headcount measures, as the average number of potential extra hours of unemployed or underemployed people is generally less than the average hours actually worked by employed people.
In August 2010, the hours sought by unemployed people (18.4 million hours) formed the largest component of the volume of underutilised labour in the labour force (60%), while additional hours preferred by the underemployed formed the remainder (12.3 million hours or 40% of the volume of underutilised labour).