by Scott Baker
It was curious reading this week that our Federal Government has reported April’s unemployment rate as 6.2%, up by a mere 1.0% since April last year and back to April 2015 levels.
Looking at the unemployment rate since April 2015 as graphed, one may think the impact of the COVID-19 pandemic is an economic ‘reset’, and we’ve recovered from unemployment problems in recent years. Note the sharp surge back to April 2015 levels.
However, a like for like comparison is not possible so lets take a closer look at the key data and then the assumptions behind the calculations.
Employment decreased by 594,300 people but unemployment only increased by 104,500. So, what happened to the other 489,800 people? Were they undecided? Taking unpaid gardening leave?
I don’t think so. The issue lies in who gets discounted from the labour force figures, before it is broken up into employed & unemployed.
According to a recent study by University of Canberra titled ‘We need to find new ways to measure the Australian Labour Force”, since the 1960’s (when the post-WW2 ‘baby boomers’ were just entering the work force), the ABS has collected Australia’s labour force data monthly, based on the number of persons resident in Australia over the age of fifteen, and sought to measure the changes month on month via a survey with a minuscule sample size of about 0.32% of the civilian population.
As for what constitutes “employment”, and to answer the question posed by the ABC recently “since when have people working one hour per week been considered employed?”. Since 1982, that’s when. About the same time as Australia’s industry began being off-shored to countries such as China, Australia has used the International Labor Organisation’s revised definition of “employed persons”, which is “all persons aged 15 years and over who, during the reference week: worked for one hour or more for pay, profit, commission or payment in kind, in a job or business or on a farm”.
Is that reasonable in this era of accelerating globalism where we now have an oversupply of labour placing downward pressure on wages yet an ever widening skills gap? I’ll let you be the judge.
During the survey, any respondents who haven’t done any paid work in the last week, they are asked two further questions – first, have they actively sought work in the last four weeks, and second, are they currently available to start work? They are only considered unemployed if they answer yes to both of these questions. If they answer no, they’re not even counted as part of the labour force! This also means that they’re classified exactly the same as full-time homemakers, carers, the ill and non-working retirees.
So, bizarre as it sounds, those 490,000 people who had a job to go to in March but not in April, who haven’t been looking for work in April (because of the lockdowns?) and don’t know if they’re able to work or not (uncertainty following the social distancing mandate?), don’t even count as unemployed because they’re not even counted in the labour force!
As for the 720,000 Australians who are now receiving JobKeeper payments (a form of social security payments the same as JobSeeker) but not working any hours, they’re still counted as ‘employed’ within the labour force, based on the assumption they will return to work when the COVID-19 pandemic is over. Unlikely as this might seem once businesses have ‘right-sized’ or find themselves in solvency challenges when the six month grace period ends. All forms of employer support and social security payments should be treated equally as it’s all taxpayer funded.
Applying three simple but reasonable assumptions to correct the April data, ie
- If you’re not working but not looking, it doesn’t mean you’re unable to work,
- If you’re receiving social security payments in lieu of your regular wage or salary, you’re unemployed, and
- If you can’t see it and count it, you can’t manage it,
Then adding back the forgotten-but-actually-now-unemployed 489.8 thousand people to the labour force (now 13.7318 million people), and classifying the 720,000 JobKeeper recipients as currently unemployed, then the unemployment figure with our economy locked down in April would be more like 2.1376 million persons, or 15.56% of the ‘labour force’, which in itself appears understated given our population is 25.6 million.
Now, if trust is defined as ‘the assured reliance that what was promised will be’ then in these uncertain times Australians need leadership from Government to ensure the data we rely upon is founded in truth.
The road to economic recovery may well be long and rocky, but if businesses and government agencies are armed with the unblemished truth & reliable data we can make the right decisions for ourselves at the right time, and ensure no one who is willing and able to contribute falls through the cracks.
 (Source: Australian Bureau of Statistics Labour Force (data set 6202.0) for April 2020)