Did you know you're counted as "employed" if you work one hour a week?
When you first hear that, it can sound shocking.
It can make you suspect the government is manipulating the unemployment data to make the labour market appear in better health than it is.
But let me explain why it's not a problem.
It's a perfectly logical definition for "employed".
Then, after I'm done with that, let me show you some ways in which you can be led astray by the government.
It regards the unemployment rate itself.
The 'one-hour rule'
When the Bureau of Statistics takes its monthly survey of the labour force, it's trying to find out how many people are employed, who are employed, and what types of jobs they have.
But it has to start somewhere.
So it starts by asking if you worked "one hour or more" in the past week.
Why? Because it needs to know if you have a job before it can ask you questions about that job.
Was it full-time? Part-time? Casual?
Once the ABS knows you have a job, it will ask you if you're satisfied with the hours you're working or if you'd like more hours.
If you'd like more hours, that's how the ABS knows you're "underemployed."
Underemployment is a problem in the economy. It's a sign the economy isn't working at full potential and workers could be getting paid less than what they need to survive.
However, this next bit is important.
You're only "underemployed" if you want to be working more hours but can't get them.
You're considered "fully employed" if you're satisfied with the hours you're working and don't want any more.
Someone who's only working one hour a week can be fully employed.
If they're happy with the arrangement, and don't want more hours, they're satisfied with their work situation.
Also, it's important to know that the definition of employed as working "one hour or more in the past week" is not the ABS's definition.
It's the internationally recognised definition set by the International Labour Organisation (ILO), a United Nations agency, decades ago.
There are 187 member countries in the ILO, and they all use the same definition of "employed."
It helps countries like Australia to compare their employment data internationally.
What type of person would be 'fully employed' while only working one hour a week?
Working one hour a week could actually be the dream, if you think about it.
Imagine being in the position where you owned your own business, the revenue was pouring in and you only had to log onto your computer for one hour a week to check your accounts to ensure everything is running smoothly.
Then you could go back to playing golf or whatever you love doing.
Or think of another situation.
Perhaps your partner's working a full-time job, so your household has a regular income, and you have a little job on the side that provides a bit of extra money.
You're happy with the arrangement and don't want more hours.
Who are these people who are happy working one hour a week?
According to the ABS, roughly 15,700 people in Australia only work one hour a week, on average.
That's around 0.1 per cent of all employed people.
They are predominantly female, aged 55 and over, and running their own business (or working in the family business).
And guess how many are satisfied with the hours?
Roughly 72 per cent (or 11,300 people).
Nearly three quarters of the people who work one hour a week are fully employed.
Just over a quarter of the people working one hour a week (4,400 people) would like more hours, and are therefore underemployed.
See the chart above.
It shows the amount of underemployment among people who work between one and nine hours a week.
Here's how to read it: there were 26,700 people working 3 hours a week last year who were "fully employed", and there were 20,100 people working three hours a week who were "underemployed."
Notice how underemployment is a bigger problem for people working more than one hour a week.
One genuinely confusing element of unemployment statistics
Now, let's get to the bit where the government can mislead you.
See the graph below?
I'll show you how it works.
It shows a simplified model of the labour force framework.
It's what Treasury officials, Reserve Bank officials, ABS statisticians and economists use to find the unemployment rate.
First, the ABS finds out how many people are 15 years of age or older. They comprise the civilian population (or working-age population).
Then, the ABS finds out how many people are in the "labour force."
You're in the labour force if you have a job (employed), or if you're actively looking for work but haven't found a job yet (unemployed).
In March, there were 13,860,800 people in the labour force (economists think of the labour force as the "supply of labour").
Over on the right-hand side of the graph is all those people who aren't economically active.
You can be in this group for heaps of reasons: you could be retired, permanently unable to work, a full-time carer, a stay at home parent, studying full time, travelling, in prison, or in a contemplative religious order.
Or maybe you've become so discouraged by the depressing job search that you've given up looking for work.
In March, there were 6,990,400 people in this group (economists think of this group as the potential supply of labour because some of the people in it could potentially join the labour force in the future).
How to work out the unemployment rate
Now, when the ABS works out the unemployment rate, it excludes from its calculations all those people on the right-hand side of the graph "not in the labour force."
Strange, huh?
It means nearly 7 million people who aren't "economically active" aren't included in the unemployment rate.
But here's how to find out the unemployment rate.
Take the number of people who are "unemployed" and divide it by the number of people in the "labour force" (and then multiply it by 100 to turn it into a percentage).
In March, there were 789,900 people considered officially unemployed.
The size of the labour force was 13,860,800.
Therefore, take 789,900, divide it by 13,860,800 then times it by 100.
That gives you an unemployment rate of 5.7 per cent.
You can experiment with different numbers in the different bubbles to see how they affect the unemployment rate.
But here's the trick to remember.
Just because the unemployment rate goes down doesn't mean the economy's improving.
Imagine a situation in which the economy is in such dire straits that millions of people leave the labour force and join the "not in the labour force" group, leaving just 1,000 people in the labour force, 10 officially unemployed people and 990 employed people.
In that scenario, the unemployment rate would be 1 per cent.
But it wouldn't be a good thing. Your economy would have collapsed.
What happened to the unemployment rate last month?
Last month's unemployment data was the first month to capture most of the effects of the end of the JobKeeper wage subsidy in March.
Here's what happened.
In April, the size of the "labour force" actually shrank by 64,000 people.
And the size of the economically inactive group "not in the labour force" swelled by 108,100.
That means lots of people shifted across from the left-hand side of the labour force model to the right-hand side of the model, where they are no longer counted in the unemployment rate.
Also in April, the number of employed people fell by 30,600, while the number of officially unemployed people fell by 33,700.
What happened to the unemployment rate?
Well, since the size of the labour force shrank by thousands, and the number of unemployed people also shrank, but by a smaller amount, the unemployment rate actually fell from 5.7 per cent to 5.5 per cent.
Was that a good thing?
It's more complicated than it appears.
Economists say it was a better outcome than feared. A few months ago, Treasury officials feared the end of the JobKeeper program could see 100,000 to 150,000 people lose their jobs.
So the number of employed people "only" falling by 30,600 last month is a welcome outcome.
However, the fact that the "not in the labour force" group swelled by 108,100 people is a genuine concern.
Why? Because they've joined the ranks of people who are now hidden from the unemployment rate.
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2021-05-22 22:05:21Z
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