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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Gender imbalances in Underemployment, Australia

Relative Underemployment of Females vs Males in Australia by Industry

Relative Underemployment of Females vs Males in Australia by Industry

Underemployment is often referred to as a type of “hidden unemployment” – workers who are being paid for one or more hours in a period are considered “employed”, but the reality is that some of these workers would like to be working more hours.  Doing some analysis on the Australian Bureau of Statistic’s latest underemployment survey yielded an interesting insight… Women are hugely over-represented in underemployment statistics in almost every industry. Continue reading