Underemployment rising …

Today the Australian Bureau of Statistics released its underemployment data for September 2008 and it shows a major deterioration in the quality of employment since September 2007. The data shows that there are now 687,700 part-time workers (about 23 per cent of part-time workers) who want to work more hours but are unable to find them. The gender breakdown is 447,100 women and 240,600 men. There are some alarming trends in this data.

Here is the data for the last three years (in thousands). At the height of the boom we still had around 570 thousand employed workers not being able to find enough hours and between September 2007 and 2008 another 120,000 workers became underemployed – a very nasty deterioriation.

Of the 687,700 workers who wanted more hours, the majority (51 per cent) wanted to work full-time and on average they wanted 13.4 extra hours per week. While underemployment also declines with age, for prime-age men (45-54 years) there is a sharp spike upwards. 37 per cent of that cohort (who are working part-time) are underemployed. The data also shows that the duration of underemployment is higher as one gets older.

So as the economic deterioration continues, we are seeing the first adjustments being made by firms – convert full-time jobs into part-time jobs and make existing part-time jobs even more part-time. The quality of overall employment is dropping as fast as the quantity.

Remember you have to add the underemployed to the officially unemployed (who have no hours of work) to get the broad measure of labour wastage or underutilisation.

Given that official unemployment was estimated to be 541 thousand in January 2009, and if you extrapolate the likely further increase in underemployment since September 2008, then you probably now have around 1.3 million people without enough work as a conservative estimate. The figure is conservative because labour force participation rates are also falling as workers drop out of the labour force because there are no job opportunities for them (the so-called hidden unemployed). That group is probably around 2 per cent or around 250,000 persons.

I will have my own underemployment measures out soon for February 2009 (the CofFEE Labour Market Indicators) once the full data is available. I compute my estimates somewhat differently to the ABS annual series and so I can offer more timely updates of the trends in underemployment.