Underemployment is recognised as a key measure of spare capacity in the labour market. The ABS was one of the first organisations to definitively measure underemployment in the 1980s, and previously published a quarterly time series.
Australia’s underemployment rate has been increasing since it was first recorded in 1978, and has generally risen over periods of economic weakness, most notably in the early 1990s, and during the Global Financial Crisis.
In October 2018, the ABS launched a headline monthly series of underemployment and underutilisation (which includes both unemployment and underemployment) estimates as part of Labour Force, Australia (cat. no. 6202.0). This followed a review of Labour Statistics content1 in 2012 and consultation with key stakeholders that identified a need to more frequently monitor underemployment.
The monthly estimates have been well received by labour statistics stakeholders; including the RBA who noted that, while the monthly unemployment rate remains the best indicator of spare capacity in the labour market, the addition of a monthly underemployment rate to the Labour Force release assists them in taking a timely, broader perspective on spare capacity in the labour market.
The Labour Force Survey uses the international standard of working one hour or more in a week to determine whether someone is employed. Underemployment statistics provide insights into the extent to which people are working but would like to work more hours.
More frequent underemployment estimates also help to mitigate some of the misconceptions that official unemployment estimates are understated, as noted by economic journalist Greg Jericho:
“This is a fantastic development that is rather remarkable in light of the very significant cuts to the ABS funding over the past five years. It should reduce the criticism of the ABS that it misses out on many ‘real’ unemployed because it counts being employed as working at least one hour a week”2.