Figure 1 shows the history of the unemployment rate in Australia since the 1960s. Clearly, the historical average until the mid 1970s was about 2 per cent but rose almost continuously until the early 1980s.

Source: Australian Bureau of Statistics, Labour Force, cat no 6203.0, 6202.0

Since the early 1990s over 15 years of extraordinary economic growth (by OECD standards) have been accompanied by a decline in the unemployment rate to about 4.3 per cent in June 2007 (when the AFPC was considering its second decision) or 472 000 people.^[2]

At a time when the unemployment rate is the lowest for over 30 years it would be tempting to conclude that joblessness is no longer a problem in Australia. However, as I hope to demonstrate by examining a broader range of statistics than simply the unemployment rate, this is far from the case.

The shortcomings of the unemployment rate as an estimate of excess supply of labour are well known to labour economists but not widely understood by the community as a whole or even among those regarded as informed commentators. For instance, in the ABS Labour Force Survey, from which the unemployment estimates are derived, it is only necessary to have worked for one hour in the survey week to be classified as employed. In order to be classified as unemployed, respondents must pass a number of tests regarding their readiness for work and their efforts to actively seek work.

There are a number of other measures which shed light on the extent of under-utilisation of labour. One of these is the underemployed, those who are either part-time workers who want (and are available for) more hours of work than they currently have; or full-time workers who worked part-time hours during the reference week for economic reasons. In September 2006, when the AFPC was considering its first decision, the number of underemployed was put at 544 600, raising the labour force under-utilisation rate to 9.8 per cent compared to an unemployment rate of 4.8 per cent (ABS 2006).

Another measure is the marginally attached, who want work but do not satisfy the strict availability criteria. They are those who were actively looking for work, but not available at the time of the survey or were available to start work but did not believe they could find a job. Another definition of marginal attachment used by the ABS relates to those who are looking for work, available for work or would look for work if they could. In September 2006, the number of such people stood at 274 000.

While the unemployment rate has fallen significantly over the 1990s and 2000s, the underemployment rate actually rose (from 5 per cent in 1993 to over 6 per cent in 2006), while there has been little change in the marginally attached. Adding the underemployed and the marginally attached more than doubles the official number of unemployed to about 1.3 million.

The number of those on social security payments is another possible indicator of unemployment. The ABS bases its estimates of the unemployed according to individual responses to survey questions. However, eligibility for social security payments is determined by an individual’s awareness of, and the ability to convince Centrelink of, eligibility for benefits. Figure 2 shows how the number receiving certain categories of benefit (namely, sole-parent, disability and unemployment benefit) changed over time. There are some interesting features of these data in respect of the number of recipients at any given time and with respect to trends over time.

Note: The Unemployed in the above figure are those on unemployment benefit, not those classified as unemployed in the Labour Force survey.

Source: Winter (2000) Social Security Recipients, 1970–2000, http://www.aph.gov.au/LIBRARY/pubs/rn/2000-01/01RN15.htm, and Australian Bureau of Statistics, Australian Social Trends, Cat No. 4102.0.

The number of people on unemployment benefit tracks roughly the ABS unemployment estimates shown in Figure 1. However, in every year the number of people receiving unemployment benefits exceeded the number unemployed. The number of people receiving single-parent pensions more than doubled over the 20 years up to 2000, and continued to rise by 2005. Perhaps most interesting is the rise in people on disability pensions in inverse relation to those on unemployment benefit. There appears to have been a movement from unemployment benefits to pensions which, while reducing the figures for those on unemployment benefits, is costly for government since pensions are indexed to male total average weekly earnings while unemployment benefits are indexed to the Consumer Price Index.

In summary the extent of the unemployment problem is somewhere between 500 000 (the Labour Force Survey) and 1.7 million people (those on benefits).

Further, significant changes have occurred in the composition of employment since the 1980s. Perhaps the most significant impact has been on employment of males. Table 1 shows the annualised rate (not compounded) of growth in employment between 1981 and 2007.

Source: Labour Force, ABS Cat. No. 6203.0, 6202.0

The major trend in the Australian labour market is that the demand for full-time workers, particularly males, has not kept pace with supply. There has been a substitution of females, particularly part-time females, for full-time males. For particular groups, the changes in demand have been particularly noticeable. For instance, a full-time job for anyone 15–20 years old is now an exception rather than the rule and employment prospects are poor for many displaced older males (Lewis 2002).