3 May 2017
PDF version [404KB]
Penny Vandenbroek
Statistics and Mapping Section
Introduction
This guide provides a brief overview of
underemployment, an introduction to the key concepts and terminology, and lists
relevant data sources. This is one in a series of quick guides, designed to
provide a basic understanding of Australian labour market data. Other guides
include unemployment,
youth
unemployment, long-term
unemployment, labour
force and employment,
which are available from the Parliamentary
Library website.
In the labour force framework, the labour
force is the sum of the employed and the unemployed. People who are neither
working, nor actively looking for work, are therefore described as ‘not in the
labour force’. Depending on the measure used, underemployed people are either
employed or not in the labour force (see diagram below). The focus of this
paper is on people who are currently employed and would prefer to work more
hours.
Labour force framework
Source: ABS,
Labour Statistics: Concepts, sources and methods, 2013, cat. no. 6102.0.55.001
Underemployment
Being underemployed can have a significant impact on the
financial, personal and social lives of individuals. While there are some
people who are entirely without work (e.g. the unemployed), there is also a
growing number of people who are in work but who want more work (i.e. underemployed).
These workers are likely to be competing with the unemployed for available
jobs.
Who are underemployed people?
The International
Labour Organization (ILO) describes underemployment as the underutilisation
of the productive capacity of the labour force. Underemployment
may refer to a variety of situations, most commonly it refers to someone who is
employed, but not in the desired capacity. The unmet need may relate to any or
all of: hours of work, level of skill utilisation, application of qualifications
or experience, or level of compensation (i.e. working in a lower paid job than
qualifications would suggest the worker is suited to). While there is a growing
pool of research on skills mismatch, space constraints mean this theme will not
be discussed here.
The focus of this guide is employed people,
who wanted to work more hours, and were available to do so within a specified
period of time (i.e. time-related, or ‘visible’ underemployment).
Employed people
The ILO describes employed
people as those above a specified age (i.e. 15 years and over) who performed
any work at all, in a specified period, for pay or profit (or payment in kind),
or who were temporarily absent from work. More information on employment is
provided in Employment
statistics: a quick guide.
Insufficient hours of work
The Australian
Bureau of Statistics (ABS) identifies two distinctive groups as
underemployed, people who:
-
worked part-time and wanted to work more hours and were available
to start work with more hours, either in the reference week or in the four
weeks following the reference week; and
- usually worked full-time, but who worked part-time hours in the
reference week for economic reasons (such as being stood down or insufficient
work being available). It is assumed that these people wanted to work full-time
and would have done so, had the work been available.
How is underemployment measured?
The ABS conducts a monthly Labour
Force Survey. This household survey is designed to produce key
estimates of the labour force (employment and unemployment) from a sample of more
than 50,000 people.
| Underemployed
workers are employed people aged 15 years and over, who want, and are
available to work, more hours than they currently have. |
Note that the Labour Force Survey
excludes some groups of people, including those living in institutions, members
of permanent defence forces, certain diplomatic personnel, and overseas
residents. More information is available from the ABS.
The ABS releases
quarterly trend, seasonally adjusted and original (unadjusted) estimates of
underemployed people through the Labour
force (cat. no. 6202.0, Tables 22 and 23). The same release also
includes monthly estimates (original only) from July 2014 onwards. Estimates
are available by a limited range of characteristics, including age, sex, State
and Territory. Labour
force, detailed, quarterly (cat. no. 6291.0.55.003, Table 19) provides
estimates of underemployed people by industry and occupation (main job).
What are the key measures?
The number of underemployed workers
(head count)
Graph 1 shows changes in the number of underemployed
people by sex from the start of the data series (trend) until the most recent quarter.
1. Underemployed people—trend
Source: ABS, Labour force, Feb 2017, cat. no. 6202.0 (Table 22)
Underemployment rate
The rate is the number of underemployed expressed as a
proportion of the labour force (i.e. employed + unemployed). The underemployment
rate is higher than the unemployment rate as it relates to a broader group
of people. Graph 2 shows changes in the underemployment rate by sex from the
start of the data series (trend) until the most recent quarter. An example of
the difference between the two rates is provided in Graph 4 (on the next page).
2. Underemployment rate—trend
Source: ABS,
Labour force, Feb 2017, cat. no. 6202.0 (Table 22)
Graph 3 shows changes in the rate by selected age groups from the start
of the data series (trend) until the most recent quarter.
3. Underemployment rate by
age (years)—trend
Source: ABS,
Labour force, Feb 2017, cat. no. 6202.0 (Table 22)
Graph 4 shows the underemployment rate by state and territory (of usual
residence) for the most recent quarter (trend), as well as the unemployment
rate for the equivalent period. This highlights the gap between the two
measures and provides an indication of the overall underutilisation (see also,
Graph 6).
4. Underemployment and
unemployment rates by State/Territory (usual residence)—Feb 2017, trend
Source: ABS,
Labour force, Feb 2017, cat. no. 6202.0 (Table 23)
Underemployment ratio
The ratio is the number of underemployed expressed as a
proportion of total employed. The ratio
narrows the focus of underemployment, providing a measure of people that are
employed but have insufficient work hours. The ratio mirrors the rate, but sits
at a higher level, given that it is expressed as a proportion of a smaller
overall group. Graph 5 shows changes in the ratio by sex from the start of the
data series (trend) until the most recent quarter.
5. Underemployment ratio—trend
Source: ABS,
Labour force, Feb 2017, cat. no. 6202.0 (Table 22)
Underemployed worker
characteristics
The ABS provides more detailed information about
underemployed workers through a supplementary labour survey. Since February
2015, estimates have been released through Participation, Job
Search and Mobility (cat. no. 6226.0). The release includes information
on part-time workers who would prefer to work more hours, the number of hours
sought, the types of steps taken to find more hours, the availability to work
more hours and a range of personal characteristics (e.g. sex, age, relationship
in household, educational attainment). Prior to 2015, estimates were available
from an alternate release, Underemployed
Workers (cat. no. 6265.0). While the ABS provides time series estimates
for the past and current surveys, they caution that comparisons should be
undertaken with care, as the survey periods vary, some of the population groups
are conceptually different and some data items have changed, see ‘Comparability
with previous surveys’ in the Explanatory
notes.
Labour underutilisation
Underutilisation
is a broader measure of spare labour capacity than the official unemployment
rate. The ABS produces a range of supplementary measures of labour
underutilisation, including the underemployment rate and ratio, as well as the
underutilisation rate. These measures cover additional groups of people
considered to be underutilised labour resources, including some who are
currently outside the labour force (i.e. neither employed nor unemployed).
To improve understanding of potential additional
labour capacity, the ILO suggests consulting a range of labour force
indicators, including: employment-to-population ratio, participation
rate/inactivity rate, status in employment, and labour productivity. Analysing data
by personal characteristics, such as age distribution, family composition, the
presence of children, education level, and migration status, can also assist in
assessing underutilised labour capacity.
Underutilisation
rate
The rate is the sum of the unemployed and
the underemployed, expressed as a proportion of the labour force. Graph 6 shows
changes in the rate by sex from the start of the data series (trend) until the
most recent quarter.
6. Underutilisation rate—trend
Source: ABS,
Labour force, Feb 2017, cat. no. 6202.0 (Table 22)
Volume measures
Capacity for hours can be measured through the difference of the
hours usually worked by employed people and the unused potential hours of
labour available. Hours include those sought (by the unemployed) and additional
hours preferred of people whose labour is not fully utilised (i.e. the
underemployed). Estimates are published from August 2014 onwards in the quarterly
detailed release (cat. no. 6291.0.55.003, Tables 23a and 23b). The hour
estimates relate to a one week period of the relevant quarter month. Key
volume measure rates include: unemployment rate; underemployment rate; and
underutilisation rate. The release also includes the number of hours sought by
the unemployed, the underemployed and in total.
Other data sources and information
The Statistics and Mapping Section of the Parliamentary
Library provides quarterly updates of ABS data in the Monthly Statistical Bulletin
(1.9 Underemployment).
The Reserve Bank of Australia (RBA) included an update on
underemployment in their February 2017 Statement on Monetary Policy,
see: Statement Box
B: Underemployment and labour market spare capacity.
The ABS provides the following articles on interpreting
underemployment statistics, ‘Spotlight
on underemployment’, Labour force, Nov 2016 (cat. no. 6202.0) and ‘Labour
underutilisation: more than unemployment’, Australian Labour Market Statistics,
Jan 2011 (cat. no. 6105.0).
For copyright reasons some linked items are only available to members of Parliament.
© Commonwealth of Australia
Creative Commons
With the exception of the Commonwealth Coat of Arms, and to the extent that copyright subsists in a third party, this publication, its logo and front page design are licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia licence.
In essence, you are free to copy and communicate this work in its current form for all non-commercial purposes, as long as you attribute the work to the author and abide by the other licence terms. The work cannot be adapted or modified in any way. Content from this publication should be attributed in the following way: Author(s), Title of publication, Series Name and No, Publisher, Date.
To the extent that copyright subsists in third party quotes it remains with the original owner and permission may be required to reuse the material.
Inquiries regarding the licence and any use of the publication are welcome to webmanager@aph.gov.au.
This work has been prepared to support the work of the Australian Parliament using information available at the time of production. The views expressed do not reflect an official position of the Parliamentary Library, nor do they constitute professional legal opinion.
Any concerns or complaints should be directed to the Parliamentary Librarian. Parliamentary Library staff are available to discuss the contents of publications with Senators and Members and their staff. To access this service, clients may contact the author or the Library‘s Central Enquiry Point for referral.