Boom time for the under-employed

So this shows that this is the best time for people to be getting a job in the last 32 years, even for teenagers the unemployment rate is dramatically fallen and I would encourage anyone who’s thinking of coming back into the workforce to do so. – Treasurer Peter Costello to the ABC, 10 May, 2007.

Last week’s unemployment rate announcement was great news for a government still basking in the afterglow of its Budget performance. But as the Treasurer was telling the public that this is “the dividend of strong economic policy,” was he telling the whole story?

Strictly speaking, yes. The unemployment rate was 4.4%, the lowest since 1974. But look behind the numbers and the comparison looses some of its shine thanks to the differences in the Australian labour market between then and now.

The definitions of unemployment have changed. Dr Steven Barrett from the Centre for Labor Research at the University of Adelaide points out that in 1974, unemployed meant your were male, out of work and receiving benefits.

“By today’s standards, the unemployment rate in 1974 would have been much higher because the female labour force participation rate was much lower than it is now. Married women who weren’t employed weren’t counted because they weren’t eligible for unemployment benefits.

“The definition for being unemployed now is much broader. Regardless of who you are, if you haven’t done paid work for an hour or more in the past week, or 15 hours of certain types of volunteer work, you are considered unemployed. So the defintion today is quiet borad, suggesting the unemployment rate in the 1970’s was probably quite a bit higher than it is now.”

Barrett also points out that labour market was predominantly male and full time back in 1974, which provides another sharp contrast with today.

“Many jobs being created now are female, part time or casual. So we’ve seen an amazing growth of female participation, the collapse of male participation, and the growth of part time work. If people are working part time but want more hours, you have a big problem with labour under-utilisation, or under-employment. The real level of under-employment could be in the order of two or three times the actual unemployment rate,” Barrett told Crikey.

“The government says they have created thousands of jobs, and talks about flexibility, but in order to meet peak demand, employers are splitting one full time job into two or three part time jobs, which serves to lower the official unemployment rate, but increase under-employment.”

Iain Campbell is a research fellow at the Centre for Applied Social Research at Melbourne’s RMIT University. He says under-employment has been problem since the early 1990’s.

“Since the last recession in the 1990’s, we’ve had a steady decrease in unemployment, and we’ve had this rather bizarre increase in under-employment. What’s also strange is that it hasn’t come down, even when the economy is booming. It suggests that we’ve got substantial problems in our labour market.”

Campbell says the regulatory system is most likely to blame.

“In allowing employers to break up jobs and employ people on very short hours, which advantages the employer who can flex their hours up, but disadvantages the employees. If you’re talking about people who want more hours and who are available and under-utilised, you’re not talking about an unemployment rate of 4%, more like 10-12% nationally.”

Meanwhile, Crikey reader Brefney Ruhl updated the employment comparison table published in Friday’s edition.