Post 37: Towards a realistic measure of unemployment in Australia.

Introduction.

Population Research WA reveals the Australian Bureau of Statistics (ABS) unemployment data does not reflect reality. This is because the ABS employs a ‘restrictive’ definition of ‘unemployment’.[1] We believe the issue is the ABS has adopted the UN’s International Labour Organisation (ILO) concepts and methods for estimating unemployment.[2]

The ILO concepts of unemployment: A hindrance or a help?

The ILO recommend participating countries apply their concepts and survey methods to estimate several aspects of the Labour Force. The ABS have adopted most of the ILO recommendations. One of the controversial measures is that the ABS do not count workers as unemployed that have gave up looking for a job during the Covid-19 pandemic. This excludes a large number of people who are out of the Labour Force, not because they do not want a job, but because they have simply given up looking.[3]  The ABS have received criticism for not adapting their surveys to the extreme economic conditions.[4] The ILO has discouraged Australia from doing so: “Introducing temporary amendments or significant revisions to the operational definitions used in Labour Force Survey is not recommended”.[5]  

As one ABC Business Analyst put it, national unemployment figures released this week are some of the most confusing in Australia’s history. They’re also dire.[6] For example between (April and May 2020), 142,000 Australian’s dropped out of the work force were counted as “employed” even though they didn’t work a single hour.[7]

It is unfortunate the ABS do not apply a broader concept to unemployment in times of global pandemics such as Covid-19. They clearly have the capability to do so (see Figure 1 below).

Canada and USA do employ a more comprehensive approach to unemployment.[8] They treat all people formally stood down ‘on temporary layoff’ as being unemployed. Population Research WA uses the Canada and USA methods to calculate unemployment and the results are in the discussion below.

Back to the basics – informing the public about headline unemployment estimates.

It would be advantageous for the ABS to focus on headline estimates crucial to the public understanding of how bad unemployment really is and include workers that are temporarily stood down. A big question mark on the ABS methods is that even if the respondent works only 1 hour per month, the ABS capture this in their total employment figures? Much the same as an individual that works a 38 hour week.

The ABS unemployment rate paints a brighter picture than reality.[9] This may help to explain why a Government agency such as the ABS continues to work with those concepts. The Federal Government is unlikely to pressure the ABS into using the Canada and USA methods as it would be viewed in worse light. For example, if people that were temporarily stood down are included in the unemployment count, the rates would be much higher .

The development of such narrow measures by the ILO – may be as a result of their support for Globalisation and mass immigration. They are a agency of the United Nations. The UN implement policies such as the Global Compact on Migration which aims to disarm sovereign borders and allow huge legions of free movement from 3rd World countries to advanced economies. [10] If a broader concept of unemployment prevailed. This has the potential to garner public support against the huge intake of migrants when unemployment is high.

What is clear is current methods are not producing realistic results.[11] Between March and May 2020 a cumulative estimate of 623,600 Australian’s dropped out of the Labour Force. If those that dropped out were included in ABS official measures – the number of unemployed people would have been 1.55 million and a unemployment rate of 11.3%. The ABS do not consider Australian’s as unemployed even though they lost their jobs or have been stood down due to Covid-19. So the official unemployment estimate is 7.1%.[12] This is because 623,600 Australian’s responded in the negative. That they did not actively look for full-time or part-time work or were available for work as a result of the pandemic. [13]

Table 1: Table 1 Australian headline labour measures with additional estimates to support comparisons with the USA and Canada.

Unemployment (Groupings)Mar-20Apr-20May-20March to May change
Australia – unemployed people716,100841,900927,600209,500
Australia – unemployed people plus employed people in Group 1725,3001,254,5001,066,300341,000
Australia – unemployed people plus employed people in Group 2743,6001,553,3001,236,700493,100
Canada – unemployed people (includes temporary layoffs)1,547,0002,418,3002,619,2001,072,200
United States – unemployed people (includes temporary layoffs)7,140,000 23,078,00020,985,00013,845,000
Australia – unemployment rate5.20%6.40%7.10%1.9 pts
Australia – unemployed people plus Group 1, as a percentage of the labour force5.30%9.50%8.20%2.9 pts
Australia – unemployed people plus Group 2, as a percentage of the labour force5.40%11.70%9.50%4.1 pts
Canada – unemployment rate7.80%13.00%13.70%5.9 pts
United States – unemployment rate4.40% 14.70%13.30%8.9 pts
Australia – participation rate65.90%63.60%62.90%– 3.0 pts
Canada – participation rate63.50%59.80%61.40%– 2.1 pts
United States – participation rate62.70%60.20%60.80%– 1.9 pts

(Source: Australian Bureau of Statistics, 2020[14])

Notes: ‘Group 1’ refers to employed people working zero hours who indicated they were ‘stood down’. ‘Group 2’ refers to a further expanded group of employed people working zero hours who indicated they had ‘no work, not enough work available or were stood down’.[15]

West Australia’s real unemployment is absolutely dire as at May 2020.

By applying a cumulative unemployment estimate from March to May 2020 for Western Australia – capturing those that dropped out of the Labor Force (temporarily). The real unemployment rate is 12% and not the official ABS rate of 8.1%. Using this unemployment measure reveals there are 173, 590 West Australia’s currently unemployed. The bigger shock is that WA’s youth (15-24) are facing extreme difficulties, nearly 66,000 out of work and the unemployment rate at an outrageous 28.4%.

Major unemployment in WA, but the McGowan Government provide jobs for foreign workers.

There are major issues with the WA Labor Government approach to immigration at this time of severe economic hardship. Why have they kept the Foreign Graduate Stream open for occupations when there is a pandemic and tens of thousand have lost their jobs or been stood down?  It is disappointing to learn that with such high unemployment in Western Australia; the McGowan Government have not terminated their Foreign Graduate Visa Program.[16] They are still handing out State Nominated visas (3,053 visas from July 2019 to May 2020) to Foreign students including TAFE students taking up jobs that West Australian’s could do.

Why has the McGowan Government kept Perth as a designated regional area during the employment meltdown ? Nearly 30% of the State Nominated visa invites for foreign students were through the regional visa program for designated areas. Greater Perth is classified as a category 2 Regional area for migration purposes.[17]

There is over 700 occupations on the Federal Government regional visa list and they are all eligible to work in Greater Perth. How is the McGowan Government going to get West Australian’s back to work when the international air borders are lifted and the door is left open for thousands of foreign regional visa holders to arrive in Perth?

It’s in Australia’s interest to broaden the ABS definition of unemployment.

It is time for Australia to drop the narrow employment concepts and standards set by the ILO. And produce a better evaluation of what is really happening for Government to shape policy quicker and responsive at a time of extreme economic meltdown such as the Covid-19 outbreak. The pandemic impacts on Australia’s Labour Force has put a torch on the ABS methods used for measuring unemployment. What the Fedral Government should take from this is that the current methods and concepts need to be re-designed.

The Federal Government will eventually allow the air borders to open and the huge intake of foreign workers will begin and competition for domestic jobs will increase. More accurate unemployment estimates will enable the Government to restrict the migration intake when domestic unemployment is high. Canada and the USA implement much broader concepts of unemployment which the the ABS should look at and apply similar methods to Australian surveys (Table 1 above).

References.


[1] Gary Morgan, Michele Levine and Julian McCrann, ‘ABS April Unemployment Estimate Doesn’t Reflect Reality. ABS Claims 594,000 Lose Their Jobs but Only 104,000 Become Unemployed (?!?)’, Roy Morgan, 2020 <http://www.roymorgan.com/findings/8411-abs-april-unemployment-estimates-dont-reflect-reality-202005141058> [accessed 15 May 2020].

[2] Australian Bureau of Statistics, ‘6202.0 – Labour Force, Australia, May 2020’ (c=AU; o=Commonwealth of Australia; ou=Australian Bureau of Statistics, 2020) <https://www.abs.gov.au/ausstats/abs@.nsf/mf/6202.0> [accessed 18 June 2020].

[3] International Labour Organisation, ‘Monitoring Labour Markets amid Lockdowns to Contain the COVID-19 Virus: Essential Labour Force Survey Content and Treatment of Special Groups (Rev.1)’, 2020 <http://www.ilo.org/global/statistics-and-databases/publications/WCMS_741145/lang–en/index.htm> [accessed 18 June 2020].

[4] Gareth Hutchens, ‘Coronavirus Has Hit Australia’s Job Market Harder than Unemployment Figures Suggest – ABC News’, 2020 <https://www.abc.net.au/news/2020-05-14/coronavirus-australia-job-market-unemployment-figures-april/12247990> [accessed 15 May 2020].

[5] International Labour Organisation.

[6] Gareth Hutchens.

[7] Australian Bureau of Statistics.

[8] Australian Bureau of Statistics.

[9] Greg DePersio, ‘How Is the U.S. Monthly Unemployment Rate Calculated?’, Investopedia, 2020 <https://www.investopedia.com/ask/answers/063015/how-does-us-bureau-labor-statistics-calculate-unemployment-rate-published-monthly.asp> [accessed 25 June 2020].

[10] International Labour Organisation.

[11] Australian Bureau of Statistics.

[12] Australian Bureau of Statistics.

[13] Australian Bureau of Statistics.

[14] Australian Bureau of Statistics.

[15] Australian Bureau of Statistics.

[16] Government of West Australia, ‘Migration WA – Current Invitation Round’, 2020 <https://migration.wa.gov.au/services/skilled-migration-western-australia/invitation-rounds/current-invitation-round> [accessed 23 June 2020].

[17] Government of West Australia.

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