Labour Account Australia methodology

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Reference period
March 2022
Released
8/06/2022

Introduction

The Australian Bureau of Statistics (ABS) produces a wide range of labour market statistics, derived from various sources, and designed to meet differing user needs. Forming an overall picture of the labour market from the variety of available datasets – that are compiled with differing scopes and purposes – can be challenging. The Australian Labour Account addresses this challenge by applying a conceptual framework and analysing a range of labour market data to produce a coherent and consistent set of aggregate labour market statistics. These statistics support macro-economic analyses of people’s participation in paid employment and related production over time.

The ABS commenced publishing annual Australian Labour Account estimates in 2017, with an initial time series starting from 2010-11. In July 2018, the available information was expanded to include quarterly estimates starting from September quarter 2010. In December 2019, historical Labour Account data was included that extended the quarterly time series to September 1994 and the annual series to 1994-95.

The Labour Accounts are released approximately two months after the end of the reference quarter. Quarterly estimates are available from September quarter 1994 onwards at the industry division level, in original, seasonally adjusted and trend terms.

The annual (financial year) Labour Accounts are usually released around November of each year with data available from 1994-95 onwards at the industry subdivision and division levels, and are produced in original terms only. Unbalanced tables are also available as original data only.

The concepts and definitions underlying the Australian Labour Account are built on International Labour Organisation (ILO) fundamentals and expand them to ensure consistency with the System of National Accounts (SNA08). The result provides a set of core macro-economic labour market variables derived through data integration, with both an industry focus and time series dimension. Descriptions of the underlying concepts of the Australian Labour Account, and the sources and methods used in compiling the estimates, are presented in Labour Statistics: Concepts, Sources and Methods

Purpose

The ABS produces a range of labour market statistics to meet differing user needs for labour market information. The information produced as a result is comprehensive, however the varying outputs differ in source, scope, coverage, and methodology. This can make comparing and consolidating the various datasets challenging. Differing estimates may be available from a range of different sources, each with their own strengths and weaknesses.

The Labour Account confronts and integrates numerous labour market statistics to provide time series estimates of the number of employed people, jobs, hours worked and the income earned for each industry in one coherent framework. These estimates, conceptually aligned with the Australian System of National Accounts (ASNA), improve macro-economic analysis and forecasting. 

Scope

The scope of the Australian Labour Account is all enterprises resident within Australia's economic territory that are engaged in the production of goods and services, where that production falls within the scope of the National Accounts production boundary. The Labour Account relates to the employment of all people in jobs created by those enterprises. The scope of the Labour Account includes all people who contribute to Australian economic activity irrespective of their residency status. 

An enterprise is a productive undertaking maintained and controlled by one or more households, corporations or "quasi-corporations" that are resident in Australia's economic territory. The goods and services produced by household-controlled enterprises solely for consumption by the household itself are excluded from the scope of the Australian Labour Account.

Australian economic territory includes all geographies under the control of the Australian Government, i.e. the Australian mainland, offshore islands, Antarctic territories, Australian embassies and military establishments in other countries, and Australia's exclusive maritime economic zone. It excludes foreign embassies and military establishments in Australia.

Conceptual framework

The Australian Labour Account framework incorporates labour input aggregates (people, jobs and hours) which describe supply and demand in the labour market, as well as labour related payments (as income and as costs). The framework has been designed to conceptually align with the ASNA framework to enhance compatibility with National Accounts and productivity estimates.

The Australian Labour Account framework has four quadrants:

  • Jobs
  • People
  • Hours
  • Payments

The four quadrants are linked by a set of identity relationships, which the aggregate statistics must satisfy. These identities are shown in the below diagram. Some relationships are direct, such as “employed people in the total economy” is equal to “the number of main jobs”, while other relationships are considered indirect or derived, in that the relationship is based on an average or ratio measure such as average hours worked per job, or average labour income per employed person. 

Australian Labour Account - identity relationship diagram

Australian Labour Account - identity relationship diagram
This image represents the relationship between each concept within the four quadrants. Jobs: Number of main jobs plus number of secondary jobs equals filled jobs. Filled jobs plus job vacancies equals total jobs. People: Employed people equals number of main jobs (total economy level). Employed people plus unemployed people equals labour force. Unemployed people plus underemployed people equals underutilised people. Hours: Hours actually worked plus hours sought but not worked equals available hours of labour supply. Additional hours sought by underemployed plus hours sought by unemployed equals hours sought but not worked. Overtime hours paid for plus ordinary time hours paid for equals hours paid for. Hours actually worked divided by filled jobs equals average hours worked per job. Payments: Employment subsidies minus payroll tax plus employment related costs plus total labour income equals total labour cost. Total labour cost divided by hours worked/hours paid equals average cost per hour worked/average cost per hour paid. Compensation of employees plus labour income from self-employment equals total labour income. Total labour income divided by employed people equals average labour income per employed person.

Sources

A variety of household, business and administrative source data are used to compile the Labour Account, including:

  • Australian National Accounts: National Income, Expenditure and Product
  • Quarterly Business Indicators Survey (QBIS) 
  • Economic Activity Survey (EAS)
  • Survey of Employment and Earnings (SEE)
  • Labour Force Survey (LFS) 
  • Survey of Employee Earnings and Hours (EEH) 
  • Linked Employer-Employee Database (LEED) 

These sources, and others, are combined and confronted to address gaps, and identify and resolve inconsistencies in the data by drawing on the differing strengths of the data sources. Adjustments for scope and conceptual differences between data sources are applied in compiling the Labour Account.

Concepts and Outputs

A brief summary of the concepts and outputs of the four Labour Account quadrants are as follows:

Jobs

People

Hours

Payments

All Labour Accounts outputs are produced quarterly by industry division and annually by industry sub-division. Where 'Labour Account' is added as a prefix to a data item (e.g. 'Labour Account main job' and 'Labour Account secondary job'), this indicates an adjusted estimate rather than a direct estimate from the principal data source (such as the household Labour Force Survey). Unadjusted estimates in the Labour Account have a prefix added which reflects the principal data source (e.g. 'Labour Force Survey unemployed people').

Measurement error

Measurement error is the cumulative impact of data error, including survey error and modelling error. Survey error includes both sampling error and non-sampling error. While every effort is made to minimise the impact of measurement error on Labour Account estimates through robust methods and data confrontation, some degree of measurement error is inherent and unavoidable.

Sampling error is the variability arising from the use of samples, rather than a complete enumeration of a population of businesses or households (i.e. a census). It refers to the difference between an estimate for a population based on data from a sample and the value for that population which would result if a census was conducted.

Non-sampling error is caused by factors other than those related to sampling error. Non-sampling error can happen at any stage of a survey and can occur in non-survey data sources. Non-sampling error includes missing data or misclassification. For example, error could occur in the industry classification of sponsored visa holders, or in the reported number of people in the permanent defence forces.

Modelling error includes errors in modelling assumptions. For example, the assumption that the proportion of children aged under 15 years who work has remained constant since 2006, or that QBIS employment movements accurately reflect quarterly change in the latest available annual data.

Data are not available for earlier periods of some series of the Australian Labour Account. Missing data have been estimated by applying movements, or proportional distribution, from a conceptually related series. Data estimated in this way are not considered to be as statistically robust as data based on observed and comparable survey estimates.

Seasonal adjustment and trend estimation

Seasonal adjustment is a statistical technique that attempts to measure and remove the effects of systematic calendar related patterns, including seasonal variation, to reveal how a series changes from period to period. Seasonal adjustment does not aim to remove the irregular or non-seasonal influences, which may be present in a data series.

It is important to note that the methods used for seasonal adjustment in the Labour Account do not force the sum of the estimates for each quarter of a year to equal the original annual total.

For analysis of the underlying behaviour of the labour market using the Labour Account, the ABS recommends using trend estimates. These are produced using a statistical smoothing technique, in order to dampen the irregular element.

Since the June 2020 release, given the extent of change in the labour market during the COVID-19 period, the ABS has temporarily suspended trend series and moved from using “concurrent seasonal adjustment” to using “forward factors seasonal adjustment”. For more information, please refer to Assessing the impact of Covid-19 on the Labour Account - Seasonal adjustment and trend estimation.

For more information about ABS methods for deriving trend estimates and an analysis of the advantage of using them over alternative techniques for monitoring trends, see Information Paper: A Guide to Interpreting Time Series - Monitoring Trends.

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