David O’Halloran: One hour a week counts as employed – it doesn’t matter

Jul 30, 2022
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Image: PxHere / mohamed hassan

One hour a week counts as employed – it doesn’t matter.

Much criticism is levelled at the unemployment rate when working as little as one hour a week can count as being employed. However, the criticism is unjustified and distracts from the real problems with calculating the unemployment rate.

The Australian Bureau of Statistics (ABS)’ Labour Force Framework classifies the adult population (aged 15 years and over), at a given point in time, into three mutually exclusive categories:

1. Employed,

2. Unemployed, and

3. Not in the labour force.

These categories align with International Labour Organisation (ILO) standards and have minimal definitional differences across countries. Labour force data are obtained and extrapolated from the ABS Monthly Household Survey – a survey of approximately 30,000 Australian households (about 0.32% of the civilian population), which includes questions about labour force participation. Households are required by law to participate in these surveys once per month for eight months, with one-eighth of the sample being replaced each month.

Anyone who worked for one hour or more for payment or profit (known as ‘economic work’) in the survey week is counted as employed, although the survey does not check if the work is actually paid or if it is profitable.

There are good reasons why these one-hour-a-week workers need not distract our attention. First, the actual number of people who work one hour a week is small – the ABS estimates it is only approximately 15,000 Australians, or 0.1 per cent of the labour force. Even at a more generous four hours of work a week, this still accounts for less than one per cent of all workers. Their impact on the unemployment rate is therefore negligible. Second, we cannot assume that people who work one hour a week are underemployed – almost three quarters of them report that they work enough hours. Many people who work one hour a week are working for profit rather than a wage and the most common profile of this group is female (58 per cent), over 55 years old (46 per cent) and an owner manager (50 per cent).

Even though the boundary between being ’employed’ and ‘unemployed’ may appear to be a pathetically low bar, it is the boundary between ‘unemployed’ and ‘not in the workforce’ that is more problematic and has a far greater impact on the unemployment rate because of how the unemployment rate is calculated.

The employed and unemployed categories together make up the labour force. The unemployment rate is the percentage of unemployed people in the labour force. The third category, not in the labour force, represents those who did not undertake economic work, and had neither actively looked for work in the past four weeks nor were available to commence work in the survey week. People who are not in the labour force are not part of the unemployment rate calculation. However, being counted as ‘not in the labour market’ does not mean you don’t want to work.

‘Not in the labour force’ includes marginally attached workers such as ‘discouraged workers’ who have actively looked for work at some point in the past twelve months, but did not in the four weeks before the survey, although the definition of actively looked for work is itself contentious.. People who are seen as passively, rather than actively, looking for work are not counted as unemployed. For other workers, the question of whether they have been actively looking for work is not straightforward. Some casual workers and those engaged in consultancy work might not actively look for work because their regular employer(s), or clients, usually contact them and if they did not work in the survey week, these workers would count as ‘not in the labour force’, rather than ‘unemployed’ even though they had a job to go to. Other marginally attached workers not counted as part of the labour force are those who have looked for work in the past four weeks but are not able to commence work immediately, for example, because it will take longer than a week to make alternative care arrangements for their family. The survey also does not make a distinction between those who are regular employees and those who are in non-standard employment arrangements, such labour hire workers, or self-employed contractors (known as ‘gig-workers’), who have no guarantee of regular employment or income, and people who are employed but not working, such as those receiving workers’ compensation. These latter groups could appear in any one of the three categories depending on what had happened in the week of the survey.

By excluding marginally attached workers, the unemployment rate therefore can substantially under-represent the count of unemployed people and over-represent the count of people who are not in the labour force. The effect of this is to shrink the labour force calculation considerably. For example, in February 2022, there were 13,363,000 Australians in economic work and 561,000 who were unemployed equalling a total workforce of 13,924,000. In the same month however, there were 1,056,000 people who were counted as ‘not in the workforce’ but who had a marginal attachment to the workforce for some of the reasons described above. If these were counted as ‘unemployed’ rather than ‘not in the workforce’ the total workforce would increase to 14,980,000 and the unemployment rate would have been approaching 11 per cent, , not the much vaunted 4 per cent

Lies, damned lies, and a Minister’s media office.

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