Who bears the impact of underemployment in Australia?

Underemployment is an important labour market measure.  Most people are familiar with unemployment, that is those people who are not currently working but are part of the workforce.  Underemployment, on the other hand, is a measure of as part-time workers who want, and are available for more hours of work than they currently have, and full-time workers who are working part-time hours for economic reasons (for example, because they have been stood down or there’s not enough work available).

Underemployment statistics in Australia started being tracked in 1978.  This was a time of reasonably high unemployment for Australia (almost 7 percent, with 20 unemployed for every vacancy), and at the same time there was relatively high inflation.*  In February 1978, the underemployment rate was at 2.8% while unemployment rate was 6.3%.  Fast forward 35 years to August 2013, and the underemployment rate was 7.7% with an unemployment rate of 5.7%.  The underemployment rate first exceeded the unemployment rate in 2000, and seems set to stay a larger proportion of labour underutilisation in Australia for the time being.

Underemployment and Unemployment Australia 1978-2013

Underemployment and Unemployment Australia 1978-2013
(click for full size image)

Although unemployment gets all the headlines, it strikes me that as we have a workforce that is transitioning gradually to a more contingent one, then underemployment becomes an increasingly important measure labour market dynamics.  So who bears the cost of underemployment?

The statistics show some interesting patterns – firstly, although inequality in unemployment between males and females has been largely eliminated over years, underemployment still has a significant (albeit slowly reducing) gender gap:

Underemployment and Unemployment Female Representation

Underemployment and Unemployment Female Representation
(click for full size image)

But where we see the most significant difference over the years is between age groups, and between the states.  

Underemployment by Age, Australia  - 1978-2013

Underemployment by Age, Australia – 1978-2013
(click for full size image)

Underemployment by State, Australia - 1978-2013

Underemployment by State, Australia – 1978-2013
(click for full size image)

So it seems that inequality in underemployment is slowly narrowing in terms of gender, but getting wider in terms of age groups and between states and territories.  The 15-24 year old underemployment rate is 5 times what it was in 1978, and trending upwards; and the gaps between the states is widening.  I’m interested to hear your perspectives on what’s happening here, and what the implications may be for 15-24 year olds today, who, in aggregate, are struggling economically with underemployment as they enter the workforce.  Will this turn around when they reach the magical 25, or will underemployment become entrenched and continue throughout their careers?  Is it the casualisation of the workforce that is causing these trends?

* The rise of both unemployment and inflation simultanously is a rare economic combination known as stagflation, which occurred in the USA in the early 1970’s and Australia in the mid 1970’s.  This was a new phenomenon globally that contradicted the economic theories of the time.  Stagflation was particularly troubling as any policy response to improve either unemployment or inflation, it seemed, would exacerbate the other.

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Where to from here for the anti-Fair Work Act campaign?

The day after the Coalition released its’ workplace relations policy, including to keep the Fair Work Act more or less in tact, Matt Cowgill from the ACTU has done some great analysis of opposition to, and results of, the Fair Work Act. Most fascinating for me was the graph of the “Days lost to industrial disputes” since 1987… it’s a very different world we live in today, regardless of whether the coalition or Labor are in government. Continue reading

Hoodies, Disintermediation, and the 457 Visa Program

American Giant Hoodie

American Giant Hoodie

An article titled “This Is the Greatest Hoodie Ever Made” article appeared a few months ago on Slate.  It’s an interesting article, but what grabbed me most about it is that it’s yet another example of technology disrupting traditional business models.  (The author raved so much about the hoodies by American Giant, that the post went viral and caused fulfillment issues for the business).

The author stated that the key to making the greatest hoodie ever is disintermediation:

Today, when you buy a hooded sweatshirt, most of your money is going to the retailer, the brand, and the various buyers that shuttle the garment between the two. [Not to mention the retail].  The item itself costs very little to make—a $50 hoodie at the Gap likely costs about $6 or $7 to produce at an Asian manufacturing facility. 

American Giant has found a loophole in the process. The loophole allows Winthrop to spend a lot more time and money producing his clothes than his competitors do. Among other things, he was able to hire a former industrial designer from Apple to rethink every aspect of the sweatshirt, from the way the fabric is woven to the color of the drawstrings around your neck. The particular loophole that Winthrop has found also explains why he wanted to chat with a technology reporter: It’s called the Internet.

We’ve seen this kind of disruption in manufacturing, real estate, travel, retailing (especially in some categories, such as books), and now even education… basically anything with an intermediary is ripe for disruption (if you have “Agent” in your job title, be very very scared).  And it’s not just consumer markets that are affected – it’s the talent market as well.  Here in Australia there’s a lot of controversy over the skilled visa (“457 visa”) program.  I wonder how long the debate will be relevant in a world where traditional barriers to accessing knowledge and skills are rapidly falling away?   The challenge for both employers and governments is to adapt to this changing economy and way of working and get the best talent with the least number of artificial barriers.