How the ABS defines unemployment away

August 22, 2022
According to the ABS, people are “employed” if they work one hour or more in the week. Photo: Pexels/

In the lead-up to the federal government’s Jobs Summit in September, the Australian Bureau of Statistics’ (ABS) misleading monthly unemployment figures give comfort to the boosters of cheap migrant labour — the Business Council of Australia (BCA) and the Reserve Bank of Australia — that will put up interest rates again and again until unemployment and under-employment rises and the economy slows, or grinds to a halt.

One must question if this Devil’s bargain is the best economic system available.

This article debunks a number of economic tenets born from false interpretations of the ABS unemployment methodology and a rising survey non-response.

Around 26,000 households are randomly selected to complete the labour force survey each month. That’s about 50,000 people, or one in every 312.

The ABS counts unemployed people as “all persons aged 15 years and over who were not employed during the reference week and had actively looked for work and were available to work or were waiting to start a new job”.

People are also “employed” if they work one hour or more in the reference week.

All OECD countries, including Australia, use the same methodology and roughly the same definitions.

More than 7.3 million people were classified last year as being in the “not in the labour force” category.

They comprised retirees, a full-time parent or carer, a student, permanently disabled, travelling, a discouraged job seeker or in prison.

About 2.7 million retirees are 65 years of age and over, who are not intending to work. They comprise 37% of that category.

The other big group belongs to the 3.6 million people who were not employed and who didn’t look for work. They comprise about 48% of the not in the labor force category. Just because those people didn’t look for work doesn’t mean they don’t want to work.

More than 110,000 of them were discouraged job seekers. Nearly 140,000 were parents — predominantly women — who couldn’t find suitable childcare and so couldn’t look for paid work.

In February, 1.8 million people were not working but wanted to work. Around 821,000 part-time workers were underemployed: they wanted to work more but couldn’t.

Imagine you are a pilot of a large airliner called “Australia”. You are belting down the runway and you look at your gauges: productivity is middling to fair, but wages are going backwards. You’re worried by rising inflation, but driving up interest rates will throw another 100,000 people on to the dole. The nose starts to lift, but the plane is sluggish.

You didn’t calculate the weight of the almost 2 million people in the back to the plane who wanted to work, but were not working.

There are also terrible screaming sounds from the passengers who find they cannot pay their mortgages, because they never thought interest rates would pass 5%. The end of the runway is looming up fast.

That’s where we are now.

Rising non-response to labour force surveys

The rising non-response in the Labour Force Survey data has not been reported. The ABS states that between 5-7% of people fail to complete the survey. This is an extraordinarily low non-response rate compared to other nations using the same methodology.

In Britain, the non-response rate to the Labour Force Survey rose to 20% in the early 1990s and is now around 40%. Those who dropped out were mainly in the 20-29 age group and unemployed.

In the United States, the non-response rate is around 12-15%. Non-response in some of its largest national surveys is climbing because poorer Americans have lost faith in their political system.

The federal government is not held in high regard by the unemployed and underemployed. The longer one is unemployed, the greater the antipathy.

They are excluded from the count and “adjusted” later in the weighting process. Weighting is a mathematical technique that makes the results reflect variables, such as non-responders.

Data from previous local population surveys is used to “fill in” the missing information and is massaged to show validity rather than accuracy.

Statistical validity is not the same as representative truth.

Even the non-responder votes in the House or Representatives has been rising for the past 30 years. In 1993, 96% of the eligible population voted in the House of Representatives. In the last election, it had fallen to 89%. Why? Disenchantment and apathy.

The establishment media’s fetish for numbers coincides with a decline in understanding how the statistics are created and what they mean.

Statistics are a shadow of the phenomena they claim to represent, not the thing itself. A dangerous and foolhardy veracity is ascribed to them.

The labour market has been undergoing radical changes since the mid 1980s including: the atomisation of various industries; the decline in full-time jobs; the casualisation of the workforce; the rise of the gig economy and robot jobs; people dropping out of the workforce; and the fallout from the global financial crisis.

There will also be significant long-terms effects in the labour market from the Coronavirus pandemic.

The unemployment figures are massaged and weighed through a statistical machine that feeds delusion rather than clarity. Australia is carrying a burgeoning precariat of unemployed and underemployed people.

[Malcolm King works in employment services in New South Wales and South Australia.]

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