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The Hidden Unemployed In Australia

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The Social Implications of Long Term Unemployment

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The Hidden Unemployed In Australia

  1. 1. Discover your edge
  2. 2. Workforce 2020 Globalisation and technological innovations are rapidly changing the nature of the Australian workplace as well as the workplace for most of the world. These changes, in turn, profoundly affect who is doing the work and how and where it is carried out. The very structure of the workforce has been undergoing change for many years; in fact early in the twentieth century, biology was destiny in the Australian workplace. With few exceptions, the work to be done was more easily performed by men than by women. But that is emphatically no longer the case. Now the nature of work has changed, almost all jobs today can be done as easily by women as by men. This gender shift may well be the most significant change in the history of the Australian workplace. A century ago, the Australian workplace was predominately a place in which men produced agricultural and manufactured goods. Most women worked as home makers. To be sure, some women worked in gender specific jobs as teachers and nurses, and others held bottom-end jobs in mills and sweatshops, or as domestics. A few women where also employed in various professions, all of these cases though where the exception to the rule, that the workplace was chiefly a masculine domain. The farm and factory work that predominated demanded plenty of brawn and relatively little brain power. Back then, men where needed for the long hours of hard physical labour that defined most jobs. Formal schooling was required for only few occupations, and most skills were learned on the job. th But as the 20 century progressed, the nature of work changed, particularly after mid-century. As we have seen the Australian economy has largely shifted from producing goods to providing services. At the same time, machines have increasingly substituted for manual labour in agriculture and industry, thus brawn gradually lost its importance in the workplace. Machines may well have displaced many people over this period, but machines did not destroy jobs, instead we have allowed machines to do the worst jobs and kept the best ones as well as created new ones for people to do. Physical capital and human capital often are complements, not substitutes. A software expert is useless without a computer and vice versa. As physical strength and other gender specific traits came to be less important workplace attributes, more jobs could be held by women as well as men. Despite this long slow structural change to the workplace, many commentators are still surprised by the rise in participation rates for women as participation rates for men declines. Australia has been in an economic and labour expansion mode for many years now, and because of this there has been an abundance of new jobs created. Many if not most economists and social commentators have chosen to ignore the reality of the hidden unemployment that exists in Australia, that has been created by this long term structural change to the workplace. Whenever market economies have made large investments in physical capital, those investments have raised both the quantity and quality of job opportunities; unfortunately Australia has failed to invest in the physical capital in the past. The level of economic activity will always change through different phases of the business cycle, and this can cause considerable if not dramatic changes to the levels of unemployment or more importantly, employment. Paid employment is important in reducing social disadvantage and poverty as well as improving overall living standards. Australia’s population is aging and steps must be taken to ensure that the long term economy can sustain the increased expenditure needed in the future for health, aged care and aged pensions. There are very real social and economic reasons for increasing participation in paid work and ensuring we do not ransom the future to address today’s economic ills. While the current focus is on the economic crisis that we face, population aging will not stop, and addressed correctly will bring opportunities for those that do not currently participate in paid employment and will provide them with opportunities to do so. This will make it all the more important to ensure that people are job ready to take advantage of these opportunities as they arise; now is not the time to take our eye off the long term goal of education and training that will give the disadvantaged a chance for the future. Governments have always placed “full employment” high on their list of economic policy objectives, but full employment is perhaps an illusive objective: a strong and healthy economy will always have some industries that are expanding and contracting, and this is truer in today’s global economy than ever before.
  3. 3. Think of the manufacturing industry in Australia twenty or thirty years ago. While the global and Australian economy have been growing year on year, manufacturing jobs have continued to decline as manufacturing has been off shored and the very structure of our workforce has been reshaped, in fact there are now thousands of less manufacturing jobs available than existed in 1989. While an unemployment rate of 1% or 2% was considered normal in the early sixties, with manufacturing dominant, changes in technology and the globalisation of markets appear to have set a new benchmark for unemployment as an official economic measure at around 4 percent. We must remember that today in a service based economy, changes to the economy can happen more quickly than the labour market can adjust if labour market policy is too restrictive. There has been some discussion on the speed of corporate decision makers in laying off staff in this current downturn compared to previous events, and this has all been blamed on the quick demise of business confidence, but this has been made possible by the liberal and fluid IR policy we now have that allows a faster reaction to economic changes. Business that can expand and contract quickly will be equally quick to hire and discharge employees. The result will be dynamic labour markets as workers change jobs more frequently, but perhaps not by choice. Commentators have for a long time recognised that there are a lot more unemployed people in Australia than the official unemployment data suggests, in fact some claim that the government has simply been trying to hide the truth, first we need to understand what the official data is measuring and why. Each month the Australian Bureau of Statistics surveys a representative sample of Australian households, with the objective of defining if a person is employed and has any economic contribution – this is after all a measure of economic productivity. A person is defined as employed if he or she is at least 15 years of age, and in the current week has: 1. worked for at least one hour for pay; 2. worked for at least one hour in an unpaid capacity in a family business or farming business; 3. Been prevented from working by illness (on sick leave) strike or other unusual circumstances such as office closing over Christmas etc. The workforce is defined by both people that are considered working (see the above) and the official unemployed. To be defined as unemployed the person must not be employed in any capacity at present, but must be actively looking for work and available to start work if a job becomes available. This is where the issue becomes embroiled depending on your stance as a social advocate or a pure labour market economist. People that don’t fit the defined category of unemployment such as home-makers, students, voluntary workers, retired people, people that just did not look for a job in the given week of the survey are not considered to have any economic impact capacity at the moment. If they are not working or looking for a job they can not contribute to economic output directly so they are not counted. This is why your outlook on the official unemployment rate probably depends on your stance as a pure economic indicator of productivity or a social miscarriage that does not reflect the true level of total unemployment.
  4. 4. What Does The Real Unemployment Number Look Like? The difference between the ABS estimates of unemployment and the real measure provided by Roy Morgan Research can be quite significant. When considering the ABS Estimates of unemployment compared to the Roy Morgan Research analysis, there is a difference that can not be ignored as the chart clearly shows. The ABS data for December 2008 showed 498,100 unemployed on a trend basis and 501,100 on a seasonally adjusted basis. This number is based on the strict economic criteria of looking for a job in the past week and being available to start a job now. The Roy Morgan Research, data, which simply measures people that are not working but would like to have a job, is 674,000 people. This is course 172,900 more people than the official data suggest. The big difference between the two measures is that the ABS estimate of unemployment was 4.4%, while the Roy Morgan Research estimate sits at 6.2% and climbing. Social commentators further argue that the unemployment figures understate the true rate, and that greater recognition should be given to underemployment as well as the hidden unemployment. People count as being underemployed if they are working fewer hours than they would like to, and need to for financial stability. Ongoing research by Roy Morgan Research shows that there are currently 783,000 people that are underemployed, (see chart on following page) and given the few hours they are able to work each week, 66% of them are living on under $384 a week. For the many people that are underemployed, their lives tend to get very disrupted by changing work schedules. They never know how much income they are going to have each week and even what working hours they will have from week to week. More long term and more serious in some ways is the impact on family life and social interaction. Undoubtedly, there are some people who like working part time hours for their own work-life balance, but these people are not considered underemployed as they are generally not seeking and needing more hours. The major issue that needs to be addressed is the social implications of the underemployed as they shrink lower into poverty.
  5. 5. Hidden unemployment refers to people that do not have jobs and would like to work but do not conform to the strict economic definition, and so are not included in the official ABS statistics. The hidden unemployment can include discouraged workers, who have simply given up looking for work because they do not believe they will find a job due to their age, lack of experience, training, poor language skills or many other reasons. This data provided by Roy Morgan Research estimates of unemployment and underemployment paints a very different social picture for the “lucky country” As at January 2009, there are a total of 1,550,000 people that are unemployed or underemployed. This is a staggering number for an economy that has been expanding for so long, and shows how many Australians are being left behind. There are 783,000 that are underemployed and need more work to survive and 767,000 that are unemployed, with this number expected to rise by another 250,000 people over the next eighteen months. Participation More Than Just Data Another key factor that is important in any discussion of employment and unemployment from a pure economic perspective is the participation rate. Participation is defined as the extent to which the population is willing and able to work. This work may be full time, part time, casual, or they may simply be actively looking for a job – they are still participating in the workforce. The participation rate simply refers to the portion of population that is aged over 15 that meets the above definition of participating, which is they are working or looking for work. Australia has a population of people 15 and over of around 17,296,000 and of these 11,243,000 are either working or looking for work; this provides a participation rate of 65%. Another point to consider on this basis is that with 65% of the population participation in the workforce by either working or looking for work, there still remains 35% that are not participating for one reason or another. Participation in the workforce is much more than just a series of statistics about official unemployment rates; encouraging participation in the workforce is about assisting Australians to be financially independent and securing their futures, overcoming financial isolation, and providing opportunities for all people. Increasing long term participation is also good for the economic security of Australia – ensuring we have the skilled workers to take on new jobs and drive growth industries and services that are the countries future. With this in mind it is important to note that the participation rate has a strong bearing on the unemployment rate. The unemployment rate can actually go up with no real loss of jobs, and this is because the participation rate has gone up as well. In a simple case if we assume we have 10,000,000 people in the work force, with 9,500,000 working and 500,000 unemployed and looking for work we have an official unemployment rate of 5%. Now lets assume that for this example we had a participation rate of 65% and for one reason or another the participation rate increased to 65.2%, this would add an additional 30,000 people to the workforce looking for work. We would now have a workforce of 10,030,000 people with 9,500,000 working and 530,000 now looking for work or a jump in the official unemployment rate to 5.3% despite the fact that no jobs where lost, simply more people wanting to have jobs.
  6. 6. The reverse effect in this factor can also be true, if we use the same examples as the previous case and assume that 20,000 people lost their jobs from our workforce of 10,000,000 then we would have 9,480,000 working and 520,000 unemployed and looking for work – giving a jump in unemployment to 5.2%. Now further assume that 20,000 people just simply grave up this month and stopped looking and are therefore no longer counted, we would still have 9,480,000 working and 520,000 unemployed and looking for work, but we would now have just 9,980,000 counted as participating in the workforce or a slight shift to 64.87%. The statistical shift would be almost meaningless, and lost to many commentators. The net effect is that we have 20,000 jobs lost and 20,000 people that have given up looking or 40,000 people in total not just the 20,000 that shows up in the unemployment rate data. This is one of the key reasons why the official ABS measure and the Roy Morgan Research measure are so different. The above chart from the Australian Bureau of Statistics, clearly shows that for December 2008, the number of people classified as unemployed increased by just 1,200 people. The important factor was the drop in participation from 65.1 to 65.0 or 0.1 percentage points. This is important, as this equates to around 12,000 people that where not counted this time.
  7. 7. Consumer Confidence & the Unemployment Rate While the official unemployment rate is devised more as a pure economic indicator, we must remember that from a social perspective there are varying types of unemployment, each with particular factors that impact on an individual’s capacity to work or to get a job in any kind of economic environment. Consumer confidence plays a big part as to how and when people to choose to participate in the labour market. Roy Morgan Consumer Confidence-ABS Unemployment Rate 150 12 140 10 130 120 8 110 Consumer Confidence Unemployment Rate 100 6 90 4 80 70 2 60 50 0 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 The chart of the Roy Morgan Consumer Confidence and the ABS Unemployment Rate shows there is a very different economic cycle impact on the two measures. Consumer confidence was clearly seen as a forward indicator coming out of the recession of the 1990’s with consumer confidence heading upward in 1992, while the unemployment rate was still heading upward over this same period, as a classic lagging indicator. While all the negative news regarding increasing jobs losses and rising levels of unemployment are impacting on current consumer confidence, we may well soon see confidence again starting to rise, even as more and more people lose their jobs. We are in fact already starting to see this with the weekly consumer confidence data we provide, which is more reflective of potential consumer spending than lagging monthly data. The is More Than One Type of Unemployment People can be out of work for a variety of reasons, and it is important to recognise the type of unemployment and the reason for it, in order to be able to choose the appropriate policies to address and reduce the problem. In other words all unemployed people are not created the same way, and government response will need to address more than one issue. For some types of unemployment it is appropriate for the government to try to create more jobs, or to encourage business to expand to absorb some unemployed people or to retain them in a downturn. In other cases it may well be better for the government to establish a long term policy that helps to retrain the unemployed or even to relocate to other jobs that are available.
  8. 8. Cyclical Unemployment Cyclical unemployment is one that the media most reports on as is the headline data of the unemployment rate. Cyclical unemployment results when the level of demand in the economy is not high enough to keep all available labour employed. In the current economic downturn, cyclical unemployed will move to around 7% as a result of the downswing in the global and local business cycle suggesting another 250,000 people will lose their jobs. The demand for labour is derived from the demand (or perceived demand) of the goods and services that the economy produces, so as production falls the demand for labour falls as well. Generally when there is a contraction it is the casual workers, the young, inexperienced and low skilled workers that are the most vulnerable. This time because of the structure and flexibility of the of the labour markets with the revised IR laws and cause of the down turn being primarily a global credit freeze, it has been the skilled workers that have been hit first, but that will now flow on to other jobs and skills. But as is always the case, cyclical unemployment will again fall as the economy expands in the future, so any government policy measures to boost the economy through its own spending or expansionary monetary policy will help reduce the problem in the short term. Unfortunately history has shown us that after each recession, society is left with a bigger pool of long term unemployed, who then find it increasingly hard to get back into the workforce the longer they are out work. One simply needs to consider the labour market over the past few years with record low levels of unemployment and many commentators suggesting Australia was at full employment. As recently as 2007 and early 2008, there where almost 200,000 unfilled vacancies across the country. Business leaders where crying out for workers and demanding increases in migration to meet the growing demand that was compounded by the skills shortage, yet there where still 450,000 people counted as unemployed and looking for work. Adding further to the social dysfunction was another 300,000 unemployed people that would like to work, but were not counted according to Roy Morgan Research. So at the peak of labour market growth, with 200,000 unfilled vacancies we still had a minimum 750,000 people unemployed and wanting to work; why? The answer is as stated previously, that after any increase in the unemployment rate, we have always been faced by an increasing number of long term unemployed. So despite the jobs boom of the recent past, the 750,000 unemployed people lacked the skills to fill those jobs, and ended up in this position due to structural changes in the economy. Structural Unemployment This then brings us to another type of unemployment, which is structural unemployment. This occurs when jobs are lost due to changes in the structure or make-up of the economy itself, and when those who lose their jobs do not have the skills needed for other work that is available. Structural unemployment can occur even in times when plenty of jobs are available, which is why we have also seen a decline in worker numbers in the power industry since 1989 as jobs growth expanded almost everywhere else. The real social issue is that as these people lose their jobs from an industry that is shrinking, they do not have the skills to do the work in another industry that is growing, and they give up looking and are no longer even counted as unemployed. Some structural unemployment also comes from changes driven by population dynamics. Australia’s population is aging, and our school system that was built to accommodate the post war “baby boom” is increasingly seeing fewer new students entering the school system. This will ultimately convert to fewer jobs for primary and high school teachers creating a potential structural loss of jobs.
  9. 9. At the same time the aging population will create an increase for workers in nursing homes, retirement villages, financial planning and other social support workers such as home nursing. This example of structural unemployment that will be faced in the future will mean that some teachers that lose their jobs, will probably not have the immediate skills to meet the increasing demand for health care workers, financial planners etc, but because they are well educated will have the ability to re-skill and take advantage of the “new” jobs and new industries that become available. Many of the reforms of the past decades that have been designed to make the Australian economy more globally competitive, such as cuts in protection to the manufacturing industry has displaced thousands of well paid workers from their jobs. Their life long skills working in manufacturing could not be transferred to another industry or job. This is a clear and ongoing case of structural unemployment, as the chart below shows, that since 1984 this industry peaked at 1,291,100 workers and has gradually declined to 1,067,700 workers; a loss of 151,400 jobs. Many of these people have been unable to find new jobs in growth industries and through no fault of their own have joined the long term unemployed. Structural unemployment also arises from changing technology, which allows producers to raise productivity and lower costs by substituting computers, robots or other forms of replacement for labour. This is of course part of the advancement of society and has been occurring for centuries as machines have replaced people on farms and in factories. Certain products have become obsolete and so have the skills of the people who make them. This process of change has accelerated in recent years in the globalisation of the economy, and the greater role of the interconnected world through computers is now affecting white collar jobs in banks, offices, call centres, and will continue to do so. Structural unemployment is a clear case where government policy should not try to stimulate overall demand, but should instead provide re-training for people in the declining industries to allow them to shift to the growth industries. Retraining could involve the government paying for displaced workers to do training courses, or subsidising employers while they learn the new skills on the job. This is an opportunity that was missed for the many thousands of manufacturing workers whose jobs became non existent but can not be ignored in the future. The main ways the governments can help reduce the impact of structural unemployment are all involved with helping migrate the unemployed from one job or industry to another.
  10. 10. Relocation assistance to help the unemployed move to places where suitable jobs and housing do exist will also help, although this has been tried before with dismal results it does not suggest it will not work in the future – aging boomers looking for a lifestyle change will be a good example of potential workers “willing” to move for a job. Frictional Unemployment Another type of unemployment that exists is created by the internal mobility of the labour market and occurs when workers are temporarily unemployed as they change from one job to another. Some labour economists refer to this labour mobility as frictional unemployment, and some level of frictional unemployment is good for the economy, as long as the waiting time between jobs is fairly short. Frictional unemployment shows that the workforce is mobile and has confidence in the economy, because many workers will only leave one job if they are confident they will get another one. According to the ABS, in the following chart for 2008, 2,318,400 people changed jobs in the past 12 months which is an all time high of 22% turnover in the labour market. Interestingly is that of those that changed jobs, 1,207,900 of those that changed jobs, also changed industries or job types as well. Source: Australian Bureau of Statistics While people will change jobs frequently in times of high consumer confidence, generally in times of low consumer confidence, people will stay in jobs they don’t like if they don’t feel they can get another in a reasonable time.
  11. 11. As labour demand has dried up over the recent months there will be a risk that many people will still seek to change jobs as they have in the past. Gen Y workers having never experienced a downturn may well continue their job hopping habits in the short term, but suddenly finding they are not as in demand as they have been. More young people may find that the length of time it takes to get the new job may stretch into months as in the last downturn the proportion of people classified as long term unemployed rose from 27.8% to 36.6%. According to Roy Morgan Research on workplace engagement, there are still large numbers of Gen Y’s considering changing jobs in the next 12 months; we can only hope they don’t end up on the structural unemployment heap as a result. The majority of the Gen Y’s that are considering changing jobs according to the Roy Morgan data are in professional services and more senior sales roles, and these are the very industries that are cutting back today. Today’s service driven economy is very different from the manufacturing economy of the sixties, when the average duration of unemployment was just 3 weeks compared to 28 weeks in 2008.
  12. 12. The other two main type of unemployment include seasonal unemployment, which occurs with some type of work including farming, fruit picking, shearing and some tourism jobs. Seasonal unemployment is also much higher in December, January and February as school leavers join through labour market but this considered as a self adjusting event. Hard Core Unemployed The final and perhaps one of major social concern is that of the hard-core unemployed and is made up of people that are considered virtually unemployable because of intellectual, physical, psychological or other social characteristics. They can include people who are voluntarily out of work, preferring life on government support to earning an income, and those who want to work but have become too discouraged by the frequent failure to get a job to keep applying. This can show up in the monthly change to participation rates where people once counted as unemployed stop looking and are no longer counted and so participation rates decline. Many people classified by society as unemployable can be made job ready though help with personal skills, basic work clothing or tools, transport options and even basic living skills. These type of social programmes can of course be expensive and will take a long time to benefit the economy, but the converse effect is the amount of money that will need to be spent on a growing number of hard core unemployed through increased welfare cost and health care costs; investing in the future is of course preferable to paying for the past. Part of the purpose of this paper is to bring to light the plight of these long-term unemployed and others that are on the fringe of the labour market as they don’t show up in the unemployment statistics, unless they are currently and actively applying for jobs, but they are still there and want to be seen and counted. Many people have debated that the labour market is no different than any other market where supply and demand dictate pricing, many have argued that unemployment would be reduced if the labour market was completely deregulated. The argument is that labour is a commodity, just like any commodity and wages are like any commodity price. Their position is that wages therefore should depend on the overall market conditions. This argument puts forward that wages would vary with supply and demand and these adjustments would overcome unemployment issues. According to this theory labour surpluses; meaning unemployed people, would cause market process to fall (wages), expanding demand and contracting supply therefore reducing the number of unemployed people. This theory debates that people would be better off overall as it is better to be employed on a low wage than to be unemployed and have no wage at all. Proponents of this approach believe that people would be able to gain skills and experience together with the confidence to further improve their skills. Shortages of labour in particular industries or in the overall market would cause wages to rise, encouraging more workers to gain the skills to move into the industry. The issue with this total approach to flexibility, is that is assumes that private business will do what they should in terms of hiring the unskilled and providing the training they need and then paying them more money in line with their acquired skills. We have all seen the excess of the past thirty years and more importantly the past eighteen years where company profits where growing at record rates driving down the real cost of labour. In this same period record numbers of new jobs had been created driving down the official unemployment rate to the point that Australia had a real crisis in skills shortage, which saw a very real imbalance between the supply and demand. Over this period with massive new jobs creation there where still over 450,000 people counted as unemployed and 200,000 known job vacancies, but a complete mismatch between the skills of those looking for work and the jobs on offer. This is where the first part of the flexibility theory fell apart as private industry did not want to provide on the job training and the government did not step in to assist. The other reality is that while increasing company profits made the real cost of labour cheaper than ever, there was no significant increase in real wages over the same period, while many economists where looking for upward wage pressures due to the skills shortage – it did not eventuate.
  13. 13. There are of course considerable economic and social problems that are the cost of increasing unemployment, because in reality unemployment is a wasted resource. When you have people that are willing and able to contribute their efforts to the production process, but they are not being used, then this is a wasted resource. Output is lower than would be possible if all the resources where employed, which means that living standards decline and economic growth continues to slow. In this environment, it is more appropriate for the government to target resources to jobs creation that will utilise the existing skills of the workforce, as this can both stabilise industries and jobs and create new jobs, thereby reducing the immediate risk of cyclical unemployment. The broader issue of the hidden unemployed and the underemployed, while needing to be addressed, generally will not provide an immediate benefit flow through. The reason is that these people as already mentioned, are those impacted by structural unemployment, and long term unemployed – many long term unemployed may well have got their initially through structural unemployment and never recovered, and are no longer job ready. The most appropriate method of assisting this group is through investing in education and job training. Formal training has a considerable time lag before the individual becomes job ready and finds a job, so the flow on affect to the economy may not be seen for a long time. An alternative option is to provide subsidies to any business that hires the long term unemployed and provides “on the job training” there would be an immediate economic flow through effect as well as the long term benefits of re- skilling this portion of society for the future. When governments tend to focus on cyclical unemployment only, as we have done in the past, efforts to stimulate jobs growth are generally broad based and only benefit the skilled and job ready. Because we have chosen to ignore structural unemployment over the past twenty or thirty years, we are now faced with the massive task and cost of re-skilling those that keep falling behind as industries continue to change. The most important issue we face for the immediate future is therefore cyclical unemployment because when any labour resources are left unused for any length of time they lose some of their skills. The longer somebody is unemployed in a down turn the more potential there is that they shift from cyclical unemployment to structural unemployment and can’t find a job; this is why after any recession, there is always a larger pool of long term unemployed who find it increasingly harder to get back into the workforce. Australia is one country that at least has a safety net for those that are unemployed as many unemployed people are eligible to receive unemployment benefits. These payments give unemployed people some income and help to prevent aggregate demand from falling to as a low a level as it otherwise would. The opportunity cost of the safety net however, is the other payments the government is not able to make. If more of the stimulus package where to be spent on social welfare, or hand-outs, then less can be spent on jobs creation initiatives such as infrastructure, schools, communications and transport. We must recognise that Australia has a very real social and economic issue to face in terms of the hidden unemployed and the underemployed, as we continue to see a decline in the middle class and their material standard of living.
  14. 14. Social Cost of Long Term Unemployment & Underemployment It is important to remember these are not just statistics but people and for many of these individuals, there is a loss in identity, self esteem and confidence. Long term unemployment has other social cost, as it can lead to anti-social and destructive behaviour, boredom, frustration, shame, family breakdown and even suicide. It is a well known social reality that when unemployment is widespread in a community, in suburbs or regions or even in families, a dole mentality can develop. When people have little possibility of getting a job and have few role models to emulate, they no longer look for work or try to improve their job ready skills and simply learn to use the welfare system which in turn cost money. Society as whole pays the price for ignoring the long-term unemployed as resources are diverted from increasing output that would raise the overall living standards, to repairing and preventing further social decline brought on by the welfare system. The current economic climate demands that we focus on stabilising cyclical unemployment, but the broader social issue also demands that we provide a solution to the long term unemployment & underemployment through training and education. While unemployment is a very real issue that must be addressed, “underemployment” is another issue that is perhaps more urgent for long term productivity. Recent decades have been a time of change and innovation in the world of work. Alongside the increasing labour force participation of women, and the growth in service and knowledge jobs, new or newly significant forms of employment have emerged. These forms which have been generally described as “non-traditional work” have become apparent since World War 2, when we have seen a clear divergence between “traditional work” and the newly devised “no-traditional work”. Traditional work grew in importance during the second half of the twentieth century, underpinned by rapid economic growth and periods of full employment. Traditional work, which was presumed to possess standard attributes in terms of income, legal status, tax status, benefits entitlement and became the focus of government employment and social policies; little has changed since this time. Unlike traditional work, non-traditional work was largely residual, unregulated and given little attention by policy makers, but in recent times the gap between traditional and non-traditional work has lessened. This has been driven in part by the increasing female participation, periods of high unemployment and the shift to the services economy which has changed the structure of the workforce. It is an unfortunate reality that for the majority of those that are underemployed, they are part of the non-traditional workforce and more at risk of losing the few hours of work they may have at the moment. This expansion of non-traditional which many believe has eroded the wellbeing of workers has motivated some calls for government intervention to limit employer access to this type of labour or, alternatively to increase this groups entitlements. Many commentators rightly see non-traditional work as inferior to traditional work, due to hours worked, income, benefits, training and representation. Even though many of these people work just a few hours each week, they are still considered as “employed” by current ABS methodology; just the same as somebody working 40 hours a week. Casual employment is of course the largest non-traditional form of employment, but another that is generally missed is the labour hire employment that has increased considerably since 1998, and is now projected to be around 3% of the workforce. One of the most important issues in developing social policy, is that underemployed people that are working either as casuals or as labour hire employees will become unemployed, but not counted in the governments own data as being unemployed – at least for some months.
  15. 15. The reason for this is quite simple and part of the reason why the Roy Morgan Research unemployment estimate is so much higher than the governments own estimate. If somebody is working just a few hours each week and is told not to come in this week, but that they should have their normal hours next week, then they will still consider themselves employed; next week though the hours don’t eventuate so they are simply unemployed but did not get counted as such. There is a considerable lag effect before this starts to show up in official data. With the labour hire employees, it is perhaps a similar issue, but one that is much harder to track until many months have passed. Labour hire employees are generally employed by the labour hire firm, and placed into work and paid by that firm. There is an estimated 350,000 people that are labour hire employees, working through labour hire firms and placed into jobs on a daily or weekly basis. Companies using labour hire firms could simply reduce their head counts by not providing hours/jobs for the labour hire firm to fill, and this means that labour hire employees will become unemployed. Firms using labour hire could for example reduce their head counts by 50,000 and it would not become apparent for many months, as the labour hire employees would consider they still had something coming up in the future. Roy Morgan Research has shown that in families comprising some non-traditional wage earners and earning less than the median income, non-traditional workers are usually the primary wage earner, which simply means that at least 783,000 identified by the same Roy Morgan data are at considerable risk today as the traditional measure of unemployment is forecast to rise. Change has been coming for a long time, but now action is needed to address the underlying reality of Australia’s hidden unemployed.
  16. 16. About Roy Morgan Consulting: Roy Morgan Consulting is a division of Roy Morgan Research, Australia’s best known and longest established market research and public opinion polling company, which was founded in 1941 by Roy Morgan. Since then, Roy Morgan Research has grown and prospered. While originally specializing in public opinion, corporate image and media measurement, the company has expanded to cover all aspects of market research information gathering whether by personal interviews, the telephone, self-administered or the Internet Our Vision We build every engagement as a working partnership in which deep trust and a clear understanding of objectives and outcomes are developed with our clients that allows them to achieve their objectives. Our Consulting Services: Marketing strategy Customer insights Brand strategy Pricing Econometric modelling Marketing investment efficiency and effectiveness Customer loyalty Sales and channel management Communications strategy Our Industry Coverage: Automotive Information technology Fast Food Employment Services Finance Government FMCG Utilities Gambling Travel & Tourism Insurance Telecommunications Media Sports Retail Contact Information: Stephen Hinch Director-Roy Morgan Consulting 230-232 Sussex Street, Sydney. NSW Australia 2000 Email: steve.hinch@roymorgan.com Office: +61 (0) 2 9021 9111 Cell: +61 (0) 488 495 270

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