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Measuring Unemployment

The Australian Bureau of Statistics classifies people as being employed, unemployed or not in the labour force.  The labour force is made up of all people over the age of 15 who are either employed or unemployed.  The participation rate is the proportion of the population aged 15 and over who are in the labour force, that is either working or unemployed.

People are considered to be employed if they are doing any paid work at all.

People are considered to be unemployed if, in a particular ABS reference week (that is, the week referred to in an ABS survey measuring unemployment), they are:

  1. Not employed
  2. They are available for work
  3. They are taking active steps to find work

The unemployment rate is the percentage of the labour force that is unemployed.  People who are not part of the labour force are not counted as being unemployed.  Discouraged job seekers who are no longer actively looking for work are considered to be marginally attached to the labour force but do not count as being unemployed.  Movements in the participation rate then are crucially important for understanding unemployment figures.  It is also important to understand that those who are not working full time hours and would prefer to work more hours but were unable to do so for economic reasons are considered to be underemployed but they do not count as being unemployed.

People who have been unemployed for 52 weeks or longer are considered to be ‘long term unemployed’.1

Labour Market Trends

According to the Australian Bureau of Statistics, the trend unemployment rate fell rapidly from 11% in mid 1993 to 8.4% in July 1995, rose slowly to 8.7% in early 1997, and has since declined to 7.4% in March 1999.  While this drop in the official unemployment rate is welcome, it is no reason for complacency.

Long term unemployment is particularly destructive and remains at high levels.  In 1992–93 35.8% of unemployed people had been unemployed for 52 weeks or more.  This percentage fell by 1996-97 to 29.3% but had risen to 31.7% in 1997-98.

The impact on young people of unemployment is also worse than the general rate of unemployment might indicate.  In 1997-98 27.6% of people aged 15 – 19 years were unemployed and looking for a full time job.  14.1% of people aged 20 – 24 were in the same situation.  15.1% of people aged 15 – 19 and 8.8% of those aged 20 – 24 were looking for part time work in 1997-98.

At the same time as enduring high levels of unemployment, many Australians were working overtime.  In August of 1997 41% of full time employees worked overtime on a regular basis.  Average weekly overtime hours per employee working overtime was 6.97 hours in February 1999, an increase of 0.8% from November 1998.  The percentage of employees working overtime increased to 15.29% in February 1999, 1.3% more than in November 1998.

Underemployment is also obscured by focussing only on the unemployment rate.  In September 1997 some 62% of part-time workers who wanted to work more hours reported that they would like to work full-time hours.  54% of all persons working part time and wishing to work more hours were aged less than 35 years.

Hidden unemployment is also present beneath the official unemployment figures.  In September 1997 there were 118,400 people who were discouraged job seekers.

What Causes Unemployment?

In Catholic Social Justice Series No 31, Full Employment: towards a just society, Dr Tim Battin notes:

"Some explanations blame unions for demanding wages that were too high or government spending which caused an unsustainable inflation.  One explanation favoured in the 1970s, and no longer fashionable, apportioned blame to women for entering a work-force where there is presumed a fixed amount of work to be carried out.  On a similar logic, although seemingly unaware of it, some people in recent times especially have ascribed blame to Australia’s new immigrants for taking the jobs that would normally belong to longer established Australians.  Others indict the unfunded Vietnam War of the 1960s or the oil price rises of the 1970s.  And right across the political spectrum, many seem to blame technology and, more generally, the ‘post-industrial’ society we now live in for the present rates of unemployment”  (pp 10 - 11)

If the entry of women into the paid work force had anything to do with unemployment there ought to be a pattern of correlation between high female participation rates and unemployment among comparable countries.  There is no empirical evidence of this.2

In a similar way, immigration has not been shown to have negatively impacted on unemployment.  It may even be that new migrants with their potential for consumer demand and their skills and willingness to work actually aid the process of employment enhancement.3

While artificially high wages and salaries may contribute to inflation, inequity and unemployment, the current wage levels of the most poorly paid workers does not cause unemployment.  It may be argued that lowering minimum wages lowers effective demand for good and services resulting in less production and thus more unemployment.4

Even the technology argument doesn’t stand up to scrutiny.  The 1950s and 1960s were periods of great technological progress and also times of high employment.  Some of the countries with the highest rates of mechanisation and automation in the world have had the lowest unemployment and vice versa.  While there may be dislocation problems and a need for retraining, there is no clear evidence that technology generally causes increases in unemployment.5

Economists of different schools disagree on the causes of unemployment.  Neo-classical economists believe that there is an inverse relationship between unemployment and inflation and that the policy targets of reducing inflation and reducing unemployment are incompatible, therefore a trade off must be made.  These economists see stagflation, the simultaneous occurrence of unemployment and high inflation, as the cause of the economic crisis.  High economic growth rates are seen as the answer.  Post Keynesian economists, on the other hand, believe that the problems of unemployment and inflation are separate and that the role of institutions is critically important in ensuring sufficiently paced and structured investment to cope with increasing numbers of people looking for work.6

Endnotes

  1. These definitions can be found on the Australian Bureau of Statistics website www.abs.gov.au.  For a short glossary of terms used in the discussion of unemployment, see also Battin, T., “Full Employment: towards a just society”, Catholic Social Justice Series, No 31, Australian Catholic Social Justice Council, pp 39 – 41.
  2. Battin, op. cit.,  p 11.
  3. Ibid.
  4. Op cit., p 12.
  5. Ibid.
  6. op. Cit., pp 13 – 19.

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