One hour per week is employed?

A guest post today from a Canberra economist with significant expertise in analysing household dynamics, and the labour market in particular – let’s call her The Householder. She can be contacted at [email protected] *

Whenever unemployment statistics are released, there are invariably exclamations of disbelief from those whose personal experiences do not accord with their most recent movement.

If you’re of the camp who still think “My mate can’t get Newstart because the hubby/missus earns too much, so s/he’s not counted as unemployed so the unemployment percentage is rubbish”, please read Rumplestatskin’s summary of how unemployment statistics are calculated.

One of the more common complaints is that the ABS definition of ‘employed’ includes anyone who works for one hour or more in the reference week. After all, how can a person possibly provide for themselves, let alone any dependants, if they only work for one, two or three hours a week? Most of us full-time workers know that if we lost our current jobs and could only work for a few hours a week, we’d barely be better off than if we had no work at all.

This conjures up images of a primary breadwinner struggling to pay the rent or mortgage, taking whatever meagre casual work a labour hire firm can throw in his or her direction – and the ABS classifies them as employed instead of unemployed! Does this mean that unemployment statistics vastly underestimate the number of people who spend their days poring over job ads, just because they get a few hours’ casual work every now and then?

We can answer that question using data from the 2010 Household, Income and Labour Dynamics in Australia (HILDA) Survey. While the ABS underemployment and labour under-utilisation annual study uses a larger sample size (those who want to understand in more detail the slack in the labour arising in casual and part-time labour force, these ABS measures are there for your viewing pleasure), HILDA data are more detailed in some areas on worker preferences.

In short, the answer is a little bit, but not much. Over two-thirds of part-time workers work at least 15 hours (two days) per week, more than half work at least 20 hours per week, and the percentage of part-time workers who work less than five hours a week is less than 5 percent. Furthermore, most of those people who are working part time do not want more hours. The chart below shows the percentage of part-time employees by number of hours worked, and whether they would prefer to work more, fewer or the same number of hours:

So fewer than five percent of part-timers work for less than five hours per week (or about one and a half percent of the total employed), and of these, just over half do not want to work more hours. 55% of people working 5-9 hours per week do not want more hours. Only a minority of part-timers, even those only working a handful of hours, want to work more. But it’s still a substantial minority.

Shouldn’t we be concerned that these people are just picking up what work they can while desperately looking for full-time work, while still being counted as employed?

In short, no. Only ten percent of people who worked less than 15 hours a week and wanted more hours said they wanted a full-time job and this was all they could get. HILDA asks part-time workers why they work part-time instead of full-time; the chart below shows the responses of part-time workers who said they wanted to work longer hours. (Part-timers are grouped into two brackets because sample sizes get a little small when looking at detailed responses like this.)

Nearly two-thirds of people who worked less than 15 hours a week and wanted more hours were part-time because of other responsibilities in their lives – study, caring for children, elderly or disabled relatives or other family responsibilities; or their own illness or disability. In fact, people who worked 15-34 hours per week were nearly three times as likely as those on fewer hours to say they wanted and couldn’t find full-time work.

But these people still want to work more hours, right? Yes, but not much more. People working less than five hours per week who wanted more hours only wanted to work 16 hours per week on average. Those who wanted to work more than their current 5-9 hours per week wanted to work 20 on average, and those who felt their 10-14 hours per week wasn’t enough wanted 23 hours. Only five percent of people who worked for less than 15 hours per week wanted a full-time job.

So people who only work a few hours a week mostly do so because they want to; and of those that want more hours, most have other responsibilities that stop them from working full time and they only want a few more part-time hours. Assuming these proportions have not changed much since this HILDA survey was collected in 2010, this means of the 1.5% of the labour force who work less than 5 hours a week, only half (0.75% of the labour force) want to work more hours. Of these people, only 5 percent want a full-time job  – well under 0.1% of the total labour force. While there are people who are counted as employed even they only work a handful of hours and are looking for full-time work, they are such a tiny proportion of the labour force that they won’t make any noticeable impact on unemployment statistics.

Finally, of note is today’s ABS release explaining the proper use and interpretation of their time-series data, where they explicitly request users of their data, and I would guess in particular the media, focus their attention on trend estimates rather than seasonally adjusted estimates that “may be misleading” and which are ‘dominated by irregular noise”.

* Note that the data referred to in the post are unit record data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey. The HILDA Project was initiated and is funded by the Australian Government Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) and is managed by the Melbourne Institute of Applied Economic and Social Research (Melbourne Institute). The findings and views reported in this paper, however, are those of the author and should not be attributed to either FaHCSIA or the Melbourne Institute.

Comments

  1. The author is arguing that the phenomonen known as “under-employment” is not really statistically significant?

    • There’s definitely significant underemployment out there Lef-tee. This post is arguing that people who only work a few hours a week are a small proportion of the labour force, they are mostly not underemployed, and of those that would prefer more hours, most don’t want full-time work.

      • Thanks Householder. I was rushing to get out the door when I posted this morning, didn’t read everything closely.

        Can I ask you – what do you think of the take on the employment situation held by professor Bill Mitchell and his research centre (CoFEE)?

          • Well specifically, what do you think of his staunch argument for a job gaurantee as government policy?

            Perhaps I’m having a little difficulty understanding your charts – they seem to suggest that while underemployment does exist in Australia, it is a very minor problem and little would be gained by the introduction of such a policy measure.

      • dumb_non_economist

        Hi Mrs/Ms/Miss The Householder,

        I find this a little bit hard to grasp. If I go back to the early 80’s where part-time work was limited to mainly restaurants and bar work etc, and compared it to today where p/t work has expanded hugely I find a conflict. P/T work has taken up a large number of jobs available, but a large percentage of p/timers not only don’t want to work more hrs, they don’t have a need to! What does this say about employment levels, or should I say about the actual need for work?

        I may have not articulated very well my question.

        • A good question DNE. I do recall having a conversation with prof Mitchell a number of years ago regarding that issue, though I can’t recall exactly what his argument was.

        • Hi DNE,
          The total labour force participation rate has increased from around 60% in the late 70s/early 80s to around 65% now. This is from a big increase in female participation, offset slightly by a smaller reduction in male participation. Over this time the percentage of employed persons who worked part-time increased from around 15% to 30% (women are more likely to work part-time than men).

          Two big social factors that come to mind that have driven demand for part-time work are primary carers wanting to maintain income and a labour force connection while raising children, and the increasing importance of post-compulsory education for young adults, who often work part-time while studying.

          • dumb_non_economist

            Hi Householder,

            Thanks for the response.

            While I can see the increase in the need for p/t work from more uni students having to support themselves and I suppose mainly mothers taking on p/t work due to their carrying most of the primary care load etc, what I would like to ask is the following: I look at the UE rate today and compare it to say the 80’s and then compare the level of p/t work then and now and wonder what impact the increase in p/t work has had on modifying the UE rate one way or the other. i.e. if you reduced the level of p/t back to the 80’s what do you affect do you think it would have on UE? I would have thought it would show an increase in the rate, but would not av hours worked reduce and I think that this isn’t the case, so what’s happening? Because of those issues I’ve felt the present UE measure is bs. I’m happy to be told that isn’t correct as my view isn’t politically held.

            Thanks.

          • DNE, if you follow the link in the post to Rumplestatskin’s discussion of unemployment, he’s got a chart of underemployment back to 1978. Underemployment gradually increased from just over 2 percent in 1978 to around 7 percent in the early 90s recession, and has hovered between 6 and 8 percent since. HILDA data only goes back to 2000 though, which goes into more detail on working hours preferences and the reasons for them.

          • So the participation rate increasing from 60% to 65% as more women entered the workforce is mostly responsable for a doubling of the percentage of the workforce working part-time, to around a third of the workforce?

            As I understand it, the approximate time when the “part-timing of the workforce” first began was about the time that full employment as a policy goal – which had stood since WW2 – was abandoned.

            I’m not spoiling for a fight Householder – I’m just not yet convinced that the part-timing of the workforce (and therefore, underemployment) is largely a voluntary phenomonen.

            I can see that you do not wish to engage in a discussion about Bill Mitchell and CoFEE so I’ll leave it at that.

          • I reckon you have a good point there Lef-tee. When in a boom part of a cycle, the type that demands labour and can’t get enough of it. Many people will work as many hours for as much pay as they can get.

            JobService providers haven’t filled there books with people cause there is a choice at hand here.

            The ground level isn’t being reflected in statistical methodolgy.

    • May be more that the total extra hours wanted (the degree of underemployment) amounts to a very small amount of full time equivalent unemployment (based on this 2010 data)(say only 1.5%), unlike the US where it might be equal to the level of full time unemployment (say 7.5%). So in Oz the full time equivalent unemployment might be say 7% but in the US maybe 15%).

      That’s what I think they are saying anyway.

  2. Unemployment statistics have really been meaningless since the days of Bob Hawke when they decided to change to the current definition of ‘one hour per week is not unemployed’. Although not technically unemployed you might struggle to keep the power on or a roof over your head if you were relying on (say) 15 hours per week or cleaning or personal care work. There’s also lots of tricks that the Department of Employment and Workplace Relations (DEEWR) use to disguise or warehouse the unemployed such as “Work for the Dole” (not unemployed – they get paid $20 a week to do it) and various busy-work courses that are subsidised or run by Job Network.

    The reason there’s so many under-employed people who are happy with (say) 8 or 10 hours per week is because their income is usually topped up with Disability Support Pension (DSP), Parenting Payment or their partner’s income. If you took those things away then 10 hours per week would leave you unable to pay utilities or rent. Part-time work is usually a luxury that only people with other means of support can afford.

    I haven’t been taking unemployment statistics seriously for years just because they’re subject to a lot of manipulation. It’s like the ‘road toll’; nowdays they remove a lot of fatalities such as deaths on private property or suspected suicides – hence the road toll has been falling.

    • You make a very good point Sean. There is a big difference between someone not wanting to work more than 5-9 hours because it will reduce their Newstart/pension/allowance, and someone who doesn’t want more hours because they cannot (due to other responsiblities/constraints).
      This may mean that the respondents are saying they don’t want more work, but really would like more if it did not affect their welfare payments negatively.
      I’m pretty sure it’s an issue to most people onwelfare who work very few hours per week.

      • Hi Mr X,

        The survey question on which the second chart above is based did ask whether people worked part-time because they were concerned that their welfare payments were affected. Very few people gave this as a reason for working part-time, so I lumped them into ‘Other’.

        • Thanks for clarifying that. The percentage of “other” appears quite low, and consistent for both hours-worked ranges. It would appear that it’s not as much of an issue as I had assumed.

      • Mr X, Centrelink and DEEWR spent a lot of money a few years ago to try and find out why people on DSP kept cycling on and off that benefit (that is, they would work full time for 6 months and then go back on DSP). They found that (surprise surprise) many DSP recipients found full time work too difficult to sustain and had to drop back to one or two days a week because that was all they could cope with. Centrelink tops up their part time work more generously than the dole because there’s always a chance that while they are engaged in the workforce they will eventually work enough hours to take them off DSP entirely down the track.

    • Yes Sean G, in addition the fact that you are registered with a JobService provider, may get you off the unemployment count with DEEWR. DEEWR does not count the people walking in the offices of their approved JobService providers for very good reason. Instead they count unemployment by other means.

      Those work courses often involve sitting at home watching animations of work place dynamics like, how to write and send an email, picking up the phone, treating everyone with respect, and yes! Even how to stamp an envelope and send it.

      I have done two small jobs for two JobService providers (Mission Australia, and ORS Group), what they see, and what DEEWR and the media say, are indeed very different things. The ground is always different to statistics.

  3. Excellent breakdown, thanks a lot. We might have to find another meme to explain the wide gap between the ABS and Roy Morgan measures now 😀

  4. The ‘headline unemployment’ number, which is useful for seeing trends. The ABS actually have other numbers which includes underemployment and those how have given up, and is available for those who are interested in seeing beyond the headline number.

    That however does not prevent people from believing it’s all part of a government conspiracy, simply because they’re too lazy to visit the ABS website.

    • The other point such people miss is that it would have to be an international government conspiracy. The ABS definition of unemployment is an internationally agreed standard. The whole point of having such a standard is (a) it is easy to measure on an empirical basis (b) it allows international comparisons and (c) it allows comparisons within a country over time. Point (a) is particularly important for countries with limited statistical resources.

      As you point out, the ABS has other measures which capture the finer nuances of unemployment.

  5. As the second most casualised workforce on the home planet, our nation was able to ‘flex’ as a whole when the GFC hit. Million of people lost hours or work but were not sacked. Strong banking system was bs, it was the nature of our workforce that got us through.

    • willy…and the fact that we were able to both borrow more and cash assets to foreigners to pay ourselves to maintain our current lifestyles. If we hadn’t the mining assets to flog we’d be in an entirely different boat.

  6. While it may not appear statistically significant, it is noteworthy that the average hours sort by those on 1-14 hrs/wk and wanting more work is 16-23 hrs/wk.

    There does appear to be some relationship to pensions / other benefits – up and down.

    The pension bonus kicks in at 20 hrs. Childcare benefits ramp up at 15 hrs.

    There are a lot of $ based limits which may be worth looking at versus relevant wage levels to convert them into hours/week worked. This has the impact of keeping individuals under a certain number of hours per week – suggest the magic number is 24? Anyone want to do the math?

    The opposing force is keeping
    The is definitely an underemployment trap keeping some at low hours. There are a lot of $ based limits which may be worth looking at versus relevant wage levels to convert them into hours/week worked.