What is the real unemployment rate?

by Marcus L’Estrange, The Sensible Centrist No 44, 9th October 2020

“I believe around two million Australians are unemployed, or around 15 per cent, with 1.3 million underemployed. All up, around 25 per cent plus.

The dramatic understatement of Australia’s unemployment and underemployment figures by the ABS causes major distortions in handling covid19, economic planning and general policy making.”

“The Australian Bureau of Statistics ‘Labour Force’ unemployment figures of 6.7 per cent must be taken with a massive grain of salt. They are merely a political definition of unemployment, not an actuarial one.

Terry McCrann has attacked the ABS’ official unemployment figures, effectively calling them “fake” and claiming the real figure is more like 30 per cent in the private sector: “The ABS has to ditch its ludicrous methods of measuring joblessness if it wants to be taken seriously again” (Sunday Herald Sun, May 10, 2020).

He claimed that the ABS unemployment estimates were already ridiculous 30 years ago, and are beyond ridicule now. The only jobs data that now have any meaning come from Roy Morgan Research.

Back in 2017, Adam Creighton wrote in The Australian: “The definition of unemployment certainly doesn’t satisfy the ‘pub test’. It actually includes only a minority of people without work who want it. Imagine if a group of rogue statisticians, hellbent on issuing numbers that reflect reality, seized control of the Australian Bureau of Statistics. Their first decision would be to release an unemployment rate above 15 per cent — almost triple the official figure”.

There are many reasons for this but the following examples should suffice:

  1. The ABS regard you as unemployed only if you are “actively looking for work” in the week prior to the survey period. But just what work is there to look for right now and indeed for many years, particularly since the global financial crisis? Not only are businesses not hiring now, many are being forced to not operate at all. Persons who only looked in newspapers or at job advertisements on the internet are seen as passively, rather than actively, looking for work and so are not considered unemployed. How job seekers are supposed to apply for a job that they are unqualified for or simply doesn’t exist, in order to be regarded as an “active” job seeker, is beyond me. Similarly, just checking noticeboards is not considered an active job search.

  2. JobSeeker/Youth Training Allowance (dole) recipients, due to covid19 restrictions, do not at the moment have any mutual obligation requirements, (e.g. “actively looking for work”) because the requirements have been suspended until June 1, 2020. So, no one on JobSeeker allowance (1.6 million mid May) and no one on the JobKeeper allowance will be counted as unemployed. As of mid May, 835,000 employers, with six million employees, are covered by JobKeeper. The ANZ Job Vacancy survey for April showed that there were 64,000 vacancies, down from 136,000 in March and 62 per cent lower than a year ago.

    Commentator Alan Kohler asked on April 25: “Six million people are budgeted to get it (JobKeeper), which is 46 per cent of the workforce. Would they have been unemployed without it? Does that mean unemployment would have been 56 per cent, not 15 per cent, without the Job Keeper Allowance?”

  3. If you work one hour in the week before the survey period you are regarded as being employed. The ABS gives the same status to people who work one hour as those who work 40 hours plus! A more objective measure would be the average number of hours worked per month per adult. Apart from being more objective, it incorporates the impact of unemployment, participation, underemployment and population ageing.

  4. If you are not ready to start work during the week after the survey you are not counted as being unemployed. For example, if you have short-term health problems, are moving house or you cannot immediately obtain childcare, you don’t count. You are not unemployed.

  5. People stood down who receive even a week or two of annual/long service leave will also be counted as employed. Additionally, people who have been laid off are not counted as unemployed if they believe they have a job to go back to within four weeks.

  6. A falling rate of participation in the labour market. If people simply give up looking for work, that reduces the actual number of officially unemployed Australians. Half a million workers dropped out of the workforce in April and were not counted as unemployed. Hence the nonsensical ABS figure of 6.2 per cent for April.

  7. Youth Allowance (youth dole) recipients who are studying part time as a requirement of receiving the dole are not counted as being unemployed.

  8. If you receive JobSeeker (dole) but are allowed to engage in volunteering, work part time or are homeless, you are not counted as being unemployed.

  9. If you have worked without pay in a family business during the survey week you are counted as being employed.

When you allow for these factors, the real figure is, well, certainly not 6.7 per cent. I believe it is at least around two million unemployed, or around 15 per cent, with 1.3 million underemployed. All up, around 25 per cent plus.

The dramatic understatement of Australia’s unemployment and underemployment figures by the ABS causes major distortions in handling covid19, economic planning and general policy making.”

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