Official unemployment rates only tip of the iceberg

BY EMMA KEMP
With official unemployment figures at 4.3 per cent, one of the lowest rates since 1980, the state of Australia’s labour force is certainly looking good on paper.
But about twice the number of people who are categorised as unemployed are suffering significant hardship from lack of work, and that figure will grow significantly, according to economy expert Julian Disney, director of UNSW’s Social Justice Project (SJP), Chair of the National Affordable Housing Summit and previous World President of the International Council on Social Welfare (ICSW).
The latest Roy Morgan figures show that 1.3 million Australians fall under the category of ‘underemployed’, meaning they are either without work or seeking more work.
But Mr Disney said the situation for Australian workers is worse than it looks, saying unemployment statistics are only the tip of the iceberg.
The unemployment measure categorises people as employed as long as they are working more than one hour a week.
‘More recently, it’s been a very inaccurate measure because a lot of people might be scraping together five or ten hours of work a week,’ Mr Disney said. ‘They would look like they were employed but that was nothing like enough to live on.’
Roy Morgan statistics for the September 2008 Quarter estimated there are 735,000 underemployed Australian workers, representing 6.7 per cent of the population. Coupled with the unemployment estimate of 584,000 (5.3 per cent), there are approximately 1,319,000 (12 per cent) Australians either unemployed or underemployed.
Mr Disney said as a rough rule of thumb, the total number of people who are in distress from lack of work is often double the basic unemployment figure.
‘For example, when the unemployment rate was 6 per cent the Australian Bureau of Statistics (ABS) found about 12 per cent were either unemployed or substantially underemployed,’ he said. ‘So it fails to pick up a lot of the problem, and that’s then a big part of the misunderstanding by people of what’s happened. Of course employment has improved over the last few years but it’s never been as good as people have implied.’
Mr Disney said the same principle would apply even more so in Sydney than other areas in Australia.
Indicators developed by the Centre of Full Employment and Equity (CofFEE ) and based on ABS statistics also consistently suggest that the true rate of labour underutilisation is roughly double the reported unemployment rate.
CofFEE documentation says the estimates of hidden unemployment in Australia indicate that many more jobs have to be created to reduce the true slack in the labour market than the unemployment rate suggests.
‘The reality for Australia is that the economy continues to waste 9.3 per cent of its available labour resources even as we enter an inflationary phase with skills shortages evident in some sectors,’ says the CofFEE Hidden Unemployment in Australia Working Paper for 2007. ‘Taken together, the persistent labour underutilisation and the emergence of skill bottlenecks signal a major failure in economic management by the federal government.’
According to CofFEE, the problems of labour underutilisation and of skills shortage in the workforce could have been alleviated had the government invested in a national skills development framework.
The Reserve Bank now predicts that jobless rates will continue to swell to around 5 per cent during the next year.
Mr Disney said there is no doubt the figures will grow substantially given the global economic crisis.
‘Exactly what they’ll grow to I don’t know, but there’s definitely going to be hundreds of thousands of people out of work over the next year or so,’ Mr Disney said. ‘Around Australia as a whole at least half a million people will either lose their job or be dependent on someone who loses their job. So it’s going to be a very substantial increase in the number of Australians in distress.’
Mr Disney said the rates of unemployment and underemployment in Australia are to an extent at the whim of a volatile economy, but also emphasised that the financial sector has come to dominate economic policy at the expense of the real economy.
‘It’s no coincidence for example that when you look at the ABC News at night you have a sector on finance, you don’t have a sector on business. Business is entirely analysed through movements on the stock market not through what the businesses are actually doing, but what’s happening to them on the stock market. Finance has dominated real business and the real economy,’ he said.
Mr Disney said the global credit crunch was a foreseeable mess that we let ourselves fall into.
‘It can’t be fixed quickly, and what’s happened was not unpredictable and was not unpredicted. The problem is that the mainstream media in particular have listened only to the dominant voices of people in the business world and among economists,’ Mr Disney said. ‘Some of us have been pointing out for more than a decade quite explicitly that this would happen and why it would happen, and even some senior people in the business world have pointed it out.
‘The current system of (market) regulation has been much too slack, and where it’s tried to be firmer it’s often been ill-directed.
‘If it applied proper market theories and principles about how to encourage strong markets we wouldn’t be in this position.’