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Statistics are people too

By Ken Wolff

On 20 October, the ABS released its labour force survey data for September 2016. The media duly reported the drop in unemployment from an upwardly revised 5.7% for the previous month to 5.6% but most also picked up that this was largely a result of a drop in the participation rate, from 64.7% to 64.5%.

Firstly, a few explanations. The participation rate was traditionally a measure of all those aged between 15 and 64 (the ‘working age population’) who were ‘in the workforce’ and, of course, owing to students and stay at home parents, and other factors, this would never be 100% — around 70% was usually very good. However, the ABS now uses the total population aged 15 and above which I think can be a little misleading because it encompasses many elder retirees — including over 450,000 people aged 85 and over, who I doubt would be considering work.

‘In the workforce’ includes those who are actually employed, whether full-time or part-time, and those who are unemployed but are looking for and are available for work. So a fall in the participation rate usually means that people have dropped out of the workforce and given up looking for work — at least for now. It should also be noted that to be counted as ‘employed’ a person only needs to have worked one hour in the week of the survey — not what most of us would call ‘employed’ but it is the international definition and the ABS uses it, arguing that even an hour’s work is contributing to the economy. What that does mean is students and retirees who may be working no more than a couple of hours a week are included in the employment count.

The ABS also provides raw figures, ‘seasonally adjusted’ figures and ‘trend’ figures. I will mostly use the seasonally adjusted figures which attempt to smooth out known large variations, such as the number of school leavers entering the workforce at the end of each year and seasonal workers who come and go from employment at particular times. The trend figures can be interesting for what they show statistically in terms of where the figures are heading. Except where otherwise referenced all the data I have used comes from the ABS website, including downloading some of their Excel spreadsheets for more detailed data, so I do not separately reference each of these individual sources.

Having said all that, and leaving aside debate about the quality of the ABS labour force data (which has been questioned), I want to pay attention to what these percentages actually mean in terms of people.

The 0.1% drop in unemployment meant that there were 12,500 fewer people unemployed. That may sound like a reasonable improvement but even at 5.6% the number unemployed is 705,100 and that is a lot of people whichever way you look at it — without including their families. But somehow, the government, the bureaucrats advising them, economists and even most of the media seem to overlook the scale of that number by focusing simplistically on the percentage. That is over 705,000 people whose spending power is limited which not only makes life hard for them but, through reduced consumption, also impacts the economy.

The situation is exacerbated when we consider the long-term unemployed — those unemployed for 12 months or longer. As at August 2016 there were 169,000 long term unemployed (based on ABS data) or about 24% of the unemployed. But in September the Department of Social Security released data showing it had 290,161 long-term job seekers on Newstart Allowance in August. No matter which figure you use, that is a large number of people ‘doing it tough’ for a long time and many of them will have little chance of ever finding suitable work after such lengthy periods of unemployment.

Considering the participation rate is a little more difficult given the way the ABS now calculates it. On their calculation, it would seem that almost 40,000 people have dropped out of the workforce but, as that now includes all people 15 and over, a number of those could be retirees. Focusing just on the working age population, at least 25,000 people (probably more) have stopped looking for work. Not large numbers in the overall scheme of things but significant in terms of the number of people involved.

Employment dropped by 9,800 but that partly hides the fact that 53,000 full-time jobs were lost (part-time employment increased by 43,200). That is on top of the continuing loss of full-time jobs over many months now. While the seasonally adjusted monthly figures vary, including both rises and falls, the trend estimates for full-time employment have been consistently lower for each month since December 2015, suggesting full-time employment is on a downward slide.

The September figure for full-time employment is the lowest since June 2015 and since a peak of 8.217 million in full-time employment in December 2015, 102,000 people have lost full-time work (or 54,000 in trend terms and 271,000 on the raw numbers). In that same time, part-time employment increased by 162,800 but, as this includes all those working one hour or more, much of it may not involve significant hours of work.

Even that is only part of the story. Since July 2014 the ABS has been providing data on ‘underemployment’ in the workforce: this includes those engaged full-time but actually working part-time ‘for economic reasons’ and those employed part-time who would prefer more hours. In the first category, there were 75,900 people, predominantly male (60,800), an increase of 3,700 over the August figure. There were 979,900 part-time workers who would prefer more hours, including about 600,000 females (that was a decrease of about 30,000 on the August figure). That is almost 9% of those employed.

If we add the unemployed, for total ‘underutilisation’ of the labour force, we get 1,760,900 people not able to contribute fully to the economy even though they wish to do so — that is about 14% of the workforce. How can our economy be going well if 1.8 million people are not contributing to production and consumption as much as they could? In economic terms they have less scope for discretionary spending: it is normal that as income falls a greater portion of it has to be spent on essentials, such as food and utilities.

To make things worse, we can also consider the data the ABS provides on those ‘not in the labour force’ (NILF) as it reveals more information about ‘hidden’ unemployment. The most recent data I could find was for 2014 (released in February 2015). A further explanation is required here. In the labour force surveys people are asked if they looked for work in the week of the survey and if they could start within four weeks: if they do not meet those criteria they are classified as not in the labour force. The 2014 NILF figures show 21,700 people who were actively looking for work but could not start within four weeks and another 53,200 who were ready to start work. In addition, there were 851,000 people who wanted work, could have started within four weeks, but were not actively looking, including 102,100 ‘discouraged jobseekers’ a majority of whom were over 55. There are many reasons why people are not looking for work, including family issues and illness, but they remain interested in returning to the workforce. While the figures may have changed since 2014, it is clear that we are talking about hundreds of thousands of people who would like to be in work but for a variety of reasons, including just giving up, are not. So now, including these ‘hidden’ unemployed, and those ‘underutilised’ in the labour force, we are talking about something like 2.5 million people. Imagine what could be done if we created sufficient jobs and hours of work to meet that demand!

Total hours worked in September increased by 4 million hours to 1.66 billion hours. This is more interesting in trend terms: an increase of 2.2 million hours and the fourth consecutive increase after declines in the previous five months but still 2.4 million hours below the December 2015 peak. Overall, total hours worked has been trending upwards since 2000 but that is largely driven by population and workforce growth. Callam Pickering from CP Economics pointed out that work hours have actually been trending downwards over that same time when calculated per person. That is a sign of the increase in part-time work.

Ad Astra recently wrote about Turnbull’s planning black hole and it is no more evident than in the lack of response to these figures. What is the government doing to provide work for the 705,000 unemployed, or to provide more work for the one million who are underemployed? What is it doing to encourage people to remain in the workforce, rather than dropping out through the sheer frustration of being unable to find suitable work? I would suggest that many of those dropping out of the workforce have found the ‘cost’ (in economic terms, which includes effort and time as well as money) of finding work too high. I have little doubt that the onerous Centrelink job search requirements would be contributing to that ‘cost’. Increasing the time before which a person is entitled to receive Centrelink payments will not help. And what will the government do to address the ‘hidden’ unemployed, those not in the labour force but who would like to be?

The government’s approach seems to be that it should all be left to ‘the market’, to businesses, both large and small, to provide employment — eventually! That does nothing to support people in the present nor even to offer hope of employment or better hours in the short term. And even in the medium term it may be no more than a mirage. As I pointed out in ‘Are governments ready for the coming economic and social changes’, we are witnessing the rise of the ‘gig economy’. While that may provide some entrepreneurial opportunities, many businesses will move to a labour-force model of part-time or short-term employment. Perhaps the rise in part-time work already evident in the ABS data may be its beginnings. Australia now has the third highest part-time workforce in the OECD, representing 32% of those in employment.

Simply relying on business to create employment, without government support, may also be fraught. The recent NAB quarterly business survey showed ‘weaker profits and softer trading conditions have led to a moderation in business conditions’. Businesses did think that conditions would be reasonable over the next three to twelve months and capital expenditure plans remained strong.

ABS data, however, suggested that business investment fell 5.4% in the June quarter, and more than 17% over the year but much of this was said to be driven by the winding down of the resources boom. Despite that qualification, the NAB survey found that ‘a broader non-mining recovery appeared to stall in the September quarter’. There was also a deterioration in the retail and wholesale sector — to me, not surprising if we have 2.5 million people with lesser income than would be provided by any work, full-time work or more hours of part-time work.

Other business indicators showed sales from manufacturing rose 0.2% (but ‒0.6% and also down 2.9% over the year in trend terms). Companies’ gross operating profits rose 6.9% but were flat over the year (or flat in the June quarter and falling 4.3% over the year in trend terms). While profits may have jumped in the June quarter, wages rose only 0.8%. So where is that money going? — not into new jobs!

All in all, the government is ignoring that labour force data is about people, not just a series of percentages. It is ignoring the unemployed, the ‘hidden’ unemployed, and ignoring the problems created by underemployment and the loss of full-time jobs. Turnbull seems to believe that businesses will come good and provide the jobs or that people will create their own jobs, all part of his new innovative and agile economy. But how do the long term unemployed fit into that scenario? How do 705,000 unemployed survive until the economy comes good with little or no government intervention? How do one million people find the work hours they are seeking? How much production and consumption are we losing by having 2.5 million people not fully engaged in the economy? How are those 2.5 million people faring? — has anybody in government bothered to ask that?

As Ad Astra asked, where is Turnbull’s plan to make job growth happen? After all, this is people we are talking about.

What do you think?

Why do the ‘experts’ talk in terms of percentages rather than the number of people affected?

Why is the government ignoring the scale of this problem and claiming success when there are marginal shifts in the percentages?

This article was originally published on The Political Sword

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13 comments

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  1. Harquebus

    There are limits to growth and we have reached them. Combined with population growth, the trend for unemployment can now only go one way, up.

  2. totaram

    Ken: “Why do the ‘experts’ talk in terms of percentages rather than the number of people affected?”:

    Be careful what you wish for. NOT talking about percentages is the Coalition’s best ploy to fool the public. The use of absolute numbers is a sure bet to muddy the waters in a growing economy. Everything is “a record number”, whereas compared to previous years as a % it may be higher or lower, and that might be the pertinent way to look at it. So “record debt” and “record amount spent on education”, “record amount spent on welfare” etc. all add to the coalition govt.’s rhetoric, whereas they may have been cutting these outlays.

    On the other hand, it is indeed true that the unemployed are actually people, so that behind the percentages are actual numbers. This just shows that life is complex and nuanced and humans are losing the ability to deal with the increasing complexity of their existence. It has become easier than ever to fool them and misinform them. What is the solution? I don’t have any. Either they will learn or they will descend into dystopia, bloody carnage, and extinction. I hope I will be long gone before that, although my descendants may suffer.

  3. Ken Wolff

    totaram

    Accept your point as a general approach. I have argued previously that when the government states it is spending record amounts on education and health, it is no better than saying it is spending more than governments did in the 1960s.

    But in this case, as you acknowledge, the unemployed, the ‘underemployed’, and the ‘hidden’ unemployed are people, many of whom will be doing it tough and the government’s approach seems intent on making it ‘tougher’.

    There is certainly a case for both approaches in the right circumstances.

  4. MichaelW

    The ABS released their SURVEY data? A survey into unemployment in Australia, is this a survey where people are cold called to ask if they are working or not as in the way other surveys are conducted.

    True unemployment figures can be obtained from centre link quite easily, volunteers, people working for the dole, people who work one hour per week paid or unpaid should not be considered as employed. We would then see the true unemployed figures I should imagine they would be way up into double figures..

  5. townsvilleblog

    Due to a lack of a jobs plan the L&NP govt has guaranteed this outcome. Had they invested in and given others willing to invest in renewable energy, that alone would create approximately 6,000 jobs in Australia in installations alone. There are at least 3 major car manufacturing plants that will be left vacant next year along with thousands of workers facing growing unemployment, thanks to this tory govt.

    It’s time for a government to move into the 21st century and stimulate employment, we already have 1,101,000 unemployed in this country and a further 1,002,000 under-employed who cannot get enough hours/pay to support themselves or their family. Something has to be done for “people” instead of multinational corporations who pay zero tax thanks to loop holes within the tory govt’s taxation legislation.

    The owners of these corporations, the global 1% who own 50%+ of the global economy have a mental illness called “insatiable greed” they already own 50%+ but want more, so their mates, the L&NP are happy to flog off our government services State and Federal to these people, cheaply of course, so they can aim at 60%+ ownership of the global economy via privatization of our services, for which we pay PAYE and small business tax to receive.

    Obviously where the subsidized cost of a service to a pensioner might be $5 it will rise to $50 so the pensioner can no longer afford it, and may die as a result. All in the L&NP plan, yet 48% of Australians remain that way inclined, to vote L&NP/LNP we must wonder what they are thinking?

  6. townsvilleblog

    I beg your pardon, the figures I have quoted are from the respected Roy Morgan Research group, the “real” figures are shocking.

  7. townsvilleblog

    totaramOctober 30, 2016 at 7:19 pm The percentages the Roy Morgan Research group found were as follows: unemployment in 2016 July 10.5% August 10.4% September 8.5% October figures will be available in mid November. Their figures are not doctored to make it seem that “the people” are angry about nothing.

  8. townsvilleblog

    HarquebusOctober 30, 2016 at 7:13 pm What a cop out, if the ALP were in power you would be acknowledging that this LNP govt has incompetently mismanaged the Australian economy along ideology lines which has bought the economy crashing down around our feet with over a million “people” unemployed. I suppose you are climate denier also, the flat earth society (FES) strikes again.

  9. Harquebus

    townsvilleblog

    Cop out? I only stated the obvious.
    Both The Coalition and Labor are hopeless economic managers. Like economists, politicians do not factor physical realities.

    Did you get my email? If you did then, you should know my opinion on the climate.

    Cheers.

  10. Jack Straw

    People who voted for the Hanson party don’t understand what is really going on.Though the stupid do respond well to slogans.

    Labor and the greens have to develop slogans of their own that these people will understand.
    For instance. Vodafone,Optus,Westpac,Telstra etc and others have have call centres in Asia.

    Therefore they are stealing Australia Jobs.People should be protesting outside these large Australian companies now demanding these jobs come back home.Potential slogans are.

    :Westpac stole my job” “Vodafone hates Australians”. “Telstra is un Australian”. Optus only likes cheap Labor”. I would like know which other Aussie companies do this? Maybe we could compile a list?

  11. Ken Wolff

    Apologies people for not replying earlier but I tried twice this morning but both times my comment failed to load: the reason is known only to the gods of the ethereal digital world!!

    Michael W

    Yes, the ABS does conduct a survey of 26,000 households (the number used to be higher but was reduced owing to budget cuts). As that would represent over 50,000 adults, it is statistically speaking a sizeable sample – but obviously with a margin of error. They change the households over time (not every time). In the most recent data the ABS admitted that it had adjusted the Queensland figures beause it was changing the households involved in the survey – what it calls ‘rotation’.

    Using Centrelink figures would also create some problems because ,as the ABS defines ’employment’ as working 1 hour or more, there would be some Newstart recipients who would meet that criterion – so separating them out could create difficulties. I may consider another piece looking at the different ways we could measure unemployment and whether we really know an accurate figure.

    townsvilleblog

    The Roy Morgan figures are interesting. I wonder whether they use ‘the working age population’ as their base? – if so, that could influence the percentages they come up with. Whether or not that is what they do, their figures are as debatable as the ABS figures because both are based on ‘surveys’.

  12. king1394

    Your photo of people checking a jobs board takes us back many years. Nowadays finding a job means being subscribed to numerous job sites, many of which boast “650 jobs in your area today” 90% of which have been either advertised before or which are so far out of your area as to be unrealistic.

    You can submit your profile to sites like Taleo which carries all the State government jobs – this site also helps you to muck up any application you make by keeping and submitting old resumes that were designed in response to different jobs. There are also job lists such as Ethical Employment, and NRM (Natural Resource Management) Jobs, which can be quite good but if you live in the country not much is close enough.

    Meanwhile, the Job Search agencies seem to like to keep much of what work they know about to themselves. Presumably they send the person for an interview who is most likely to bring in the best kickback for the JSA. If they do post anything up on a Job board it will not have any contact details, so you have to tell the JSA you are interested, and then they may decide not to put you forward anyway.

    Many job applications require you to provide substantial amounts of information about your experience, as well as ID documents and police checks etc. It can take a few days to put these complex applications together. I remember Joe Hockey talking about doing one job application in the morning, and one in the afternoon being a reasonable expectation – he clearly hadn’t applied for a job in recent memory.

    Oh for the days when all the jobs were advertised in one place, in the local paper so that you had a chance to see what was going and to apply for it.

  13. totaram

    Jack Straw: Those slogans sound like a good idea. I note that the Financial Review (29th Oct.) describes an “event” where the captains of industry spoke and pushed for a united effort against “populism”, which is undermining the efforts of “industry” to get things done.(I saw a copy of the tree-killer edition lying somewhere, but I’m sure you can link to something online). Of course they are blaming the symptom (populism) instead of the cause, which is stagnant or declining standards for the bottom half of the population, but they daren’t admit that that is the case. They even tried to be very even-handed and said “both sides of politics” are indulging in this “populism”! Ha!

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