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 relevant guides
include employment
and unemployment,
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, Feb
2018, 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 employed population. 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 addressed 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).
Who counts as employed?
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.
What types of workers are
considered underemployed?
The Australian Bureau of Statistics (ABS) identifies two distinct groups as
underemployed:
- part-time workers who wanted to
work more hours and could start additional hours either in the reference week
or in the subsequent four weeks; and
-
full-time workers 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 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, which is designed to produce key estimates of the
labour force (employment and unemployment). The sample is approximately 50,000
people each month.
Note: the Labour
Force Survey excludes some groups of people, including members of permanent
defence forces, certain diplomatic personnel, and overseas residents. More
information is available from the ABS.
Where do I find underemployment
data?
The ABS releases
monthly trend, seasonally adjusted and original (unadjusted) estimates of
underemployment via the ‘Downloads’ tab of the Labour force (cat. no. 6202.0, Tables 22 to
25). 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 else do we know about underemployed
workers?
The ABS provides more
detailed information about underemployed workers through a supplementary labour
survey. Since February 2015, estimates are available from Participation, Job Search and Mobility (cat. no. 6226.0). The survey release provides
information on part-time workers who would prefer to work more hours and:
- number of hours sought
- types of steps taken to find more
hours
- availability to work more hours
and
- personal characteristics (e.g.
sex, age, relationship in household, educational attainment).
Estimates prior to 2015 are
available from Underemployed Workers (cat. no. 6265.0). While the ABS provides estimates
for this survey alongside the current survey, analysis of changes over time should
be undertaken with care, as the reference 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.
What are the key measures?
The number of underemployed workers (head count)
Graph 1 shows monthly (trend) changes in the number of
underemployed people by sex.
1. Underemployed people—trend
Source: ABS, Labour force, Oct 2018, cat. no. 6202.0 (Table 22)
Underemployment rate
The rate is the number of underemployed people expressed
as a proportion of the labour force (i.e. employed plus unemployed). Graph 2
shows monthly (trend) changes in the underemployment rate by sex.
2. Underemployment rate—trend
Source: ABS, Labour force, Oct 2018, cat. no. 6202.0 (Table 22)
Graph 3 shows monthly (trend) changes in
the rate by selected age groups.
3. Underemployment rate by
age (years)—trend
Source: ABS, Labour force, Oct 2018, cat. no. 6202.0 (Table 22)
Graph 4 shows the trend underemployment
rate by state and territory (of usual residence) for the most recent period, and
the trend unemployment rate for the equivalent month. This highlights differences
between the two measures and provides an indication of overall underutilisation
(see also, Graph 6).
4. Underemployment and
unemployment rate by state/territory (usual residence)—trend, Oct 2018
Source: ABS, Labour force, Oct 2018, cat. no. 6202.0 (Table 23)
Note: estimates of
underemployment are not generally available at sub-state levels.
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 who 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 monthly
(trend) changes in the ratio by sex.
5. Underemployment ratio—trend
Source: ABS, Labour force, Oct 2018, cat. no. 6202.0 (Table 22)
What is meant by labour underutilisation?
Underutilisation is a broader measure of spare labour
capacity than the official unemployment rate. The underutilisation measures
produced by the ABS extend beyond the underemployment rate and ratio, to cover
additional groups of people, 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.
What are the key measures?
Underutilisation rate
The rate is the sum of the unemployed and the
underemployed, expressed as a proportion of the labour force. Graph 6 shows monthly
(trend) changes in the rate by sex.
6. Underutilisation rate—trend
Source: ABS, Labour force, Oct 2018, cat. no. 6202.0 (Table 22)
Volume measures (hours sought)
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 available
from August 2014 onwards in Labour force, detailed, quarterly (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 the unemployment rate, underemployment
rate and underutilisation rate. The release also includes the number of hours
sought by the unemployed, the underemployed and in total. Selected personal
characteristics are also provided (e.g. age, sex).
What other information is available?
Parliamentary Library, Monthly
Statistical Bulletin (1.9
Underemployment), updated each month.
A Heath, ‘The Evolving Australian Labour Market’,
Speech (on behalf of the RBA), Business Educators Australasia 2018 Biennial
Conference, Canberra, 5 Oct 2018.
ABS, ‘Underemployment in Australia’, Labour force, Sep 2018, cat. no. 6202.0.
S Jackson, ‘The problem isn’t unskilled graduates, it’s a lack of
full-time job opportunities’, The
Conversation, 17 Jan 2018.
R Wilkins and I Lass, The Household, Income and Labour Dynamics in Australia
(HILDA) Survey: Selected findings from Waves 1 to 16, Melbourne Institute: Applied Economic & Social
Research, University of Melbourne, 2018.
N Cassidy and S Parsons, ‘The rising share of part-time employment’, RBA Bulletin, Sep quarter 2017.
RBA, ‘Box B: Underemployment and labour market spare
capacity‘, Statement on Monetary
Policy, Feb 2017.
ABS, ‘Spotlight on underemployment’, Labour force, Nov 2016, cat. no. 6202.0.
S Otterback, M Wooden and YK Fok, ‘Working-time mismatch and mental health’, Melbourne Institute Working Paper no. 11/16,
University of Melbourne, Mar 2016.