Labor ideas for a better Australia
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#changethestats

#changethestats: A new way of talking about unemployment

 

 
 

 

the stats are broken

#Changethestats. At first glance such a hashtag is not as sexy as the Australian Council of Trade Union’s #changetherules campaign to reform our workplace laws or #changethedate. Sexy it may not be but it’s crucial to tackling inequality, insecure work, stagnant wages, and securing our nation’s long-term economic prosperity.

For too long front-page statistics – the ones that impact people’s lives – have been hiding the real economic story. Consider the nation’s headline statistic regarding who is looking for a job, the monthly and quarterly unemployment rate published by the Australian Bureau of Statistics. The latest ABS unemployment data is ostensibly good news. The December 2018 rate fell by 0.1 per cent to five per cent, the lowest number since June 2011, on the back of what some term a ‘buoyant jobs market’ and Prime Minister Scott Morrison’s boast this week of leading a ‘jobs government’ and Abbotesque pledge to create 1.25 million new jobs within five years.

This sort of statistic tells us people should be popping champagne corks. But ask anyone who is working or looking for work and you’ll hear a different story. 

Putting aside the volatility of monthly data, the ABS figures should be treated with caution; they are merely a ‘survey’ providing estimates based on a sample of 50000. Unemployment is just as likely to curve upwards next month, and if it falls as it did in September and December, be driven by lower labour force participation, and population growth. Full-time work fell by 3000 in December, while those in part-time work rose by 24,600. Indeed, the long-term trend growth in jobs is geared towards part-time and casual work or so-called ‘gig economy’. Less than half of Australian workers hold down a full-time permanent job. 23 per cent are employed casually, the remainder are part-timers, labour hire and contractors. Many are denied job security, sick leave, holiday pay, and superannuation. All this on top of stagnant real wages.

The Uberisation of work can be discerned from other ABS data. Total hours worked across Australia rose by 1.5 per cent for the year. Yet hours worked per person continue their decade long decline. That is, we have more Australians categorised as underemployed — workers holding a job but who would like to work more hours. The rate of underemployment according to the ABS in December came in at 8.4 per cent. The underutilisation rate — unemployment and underemployment combined and a key indicator of wages growth — was steady at 13.3 per cent. Worryingly, the correlation between unemployment and underemployment – historically moving in tandem whereby the latter is two points higher than the former – is weakening. The differential is now around three per cent. As Greg Jericho has warned this indicates a permanent structural shift towards higher underemployment: bad for workers young or old, male or female. Youth unemployment is unacceptably high.  

stats matter

There are three kinds of lies: lies, damned lies, and statistics. It’s a familiar refrain. Yet people pay attention to the ABS’ published unemployment data. Unemployment down is ‘good news’; unemployment up not so much. They are simple to comprehend, and combined with growth numbers, gives an impression as to where the economy is heading, how the population is faring in good and bad times.

How we measure and talk about unemployment matters to the health of our nation’s economy and the millions of Australians who want a job or wish to work more hours or need pay rise. Yet many of our politicians, media pundits and the public remain fixated on pure unemployment data. This is data, moreover, measured by a near 60 year old International Labour Organisation standard – if you work for at least ‘one hour’ a week you are ‘employed’. Granted, this data provides us with internationally comparative and historically trackable data. The ABS acknowledge one hour’s work a week is ‘insufficient to survive on’. Yet the idea that unemployment is five per cent and employment is equal to one hour’s work is laughable. It’s real fake news.

the rise and fall of full employment

If you had told an Australian during the 1960s that five per cent unemployment was, in the words of Treasurer Josh Frydenberg, ‘something to celebrate’, you’d have been run out of town. In that decade unemployment reached a historic low: in 1966 it averaged 1.8%. Indeed, the post-World War Two, three decade-long boom hallmarked by large-scale infrastructure projects, bipartisan Keynesian economic management and expansion of manufacturing industries such as car-making saw the ranks of the jobless consistently remain below three per cent, bringing full employment to Australia for the first time since the nineteenth century. This was no accident. A primary economic goal of the wartime/post-war Curtin and Chifley federal Labor governments was full employment. In May 1945 Chifley Labor tabled a White Paper that set out this aim and the policy means of achieving it. In the same year, External Affairs Minister Doc Evatt played a major role at the San Francisco Conference that formed the United Nations, ensuring full employment was included in its Charter. Menzies’ Liberal regime elected in 1949 followed Labor’s lead.

The recession of the mid-1970s, long-term decline of manufacturing, structural economic change, dogmatic free-market economic policy, and (welcome) mass entry of women into the workforce (and baby boomers remaining), combined to rupture the full unemployment consensus. National unemployment increased to 6.3% in August 1978 and over the 1980s moved between 6 to 10%. It peaked during the early 1990s recession at 11.1%. The official rate began to decrease in the mid-1990s, falling to 7% in August 2001 and further to 4.2% in late 2007 during the mining boom years, before climbing amid the prolonged fallout of the Global Financial Crisis.

 
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haves and haves not

Obviously, the economy and our society has changed dramatically over the past half a century, and especially the past two decades. Yet the method by which the ABS monitors labour force statistics and the ways they are used by politicians and media hasn’t. We are still living with the white picket fence standards and assumptions of the 1960s. ABS figures don’t really take into account the increasing divergence between the new ‘haves’ and ‘haves not’ in Australian economy. The ‘haves’ enjoy secure full-time employment and the financial and emotional benefits it brings, the ‘haves not’ are subject to vagaries of insecure work, underemployment, and lower paypackets. This is the lived reality of more and more Australian workers and their families. And, yes, there are degrees of underemployment. Some employees might be working 24 hours a week and desire say four hours more, while others might be working eight hours a week and desire two to three extra days labour. 

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Statistics matter, especially in view of declining trust in our institutions. When the perception of reality on the street is so out of step with the technocrats within the Canberra beltway, political mistrust, cynicism and anger builds. It breeds the sort of nihilistic fury that saw Donald Trump elected into the White House. Federal Labor leader Bill Shorten put it well in his speech to the party’s 2018 national conference. His party’s biggest challenge was not simply fighting the Coalition or the Greens, but restoring faith in democracy. “Our deeper opponents are distrust, disengagement, scepticism and cynicism.” “Our Labor mission is not just to win back government; it is to rebuild trust in our very democracy, to restore the meaning to the fair go.”

the ubi is not the answer

It’s time to talk honestly about unemployment data and insecure work, how we measure it, and whether it is fit-for-purpose in 2019. Where does such a discussion fit with debates around a living wage and a universal basic income? The solution is not the latter, favoured by some ‘progressives’, a non-means tested amount which would be paid by the government to every adult Australian. Internationally, it hasn’t been proven to tackle rising inequality; it is potentially enormously expensive, hundreds of billions of dollars ripped from other spending priorities; it encourages a greater burden on fewer wage earners; and further tax avoidance by wealthy Australians. A UBI undermines the inherent dignity and value of work. Work is important; it provides dignity. When prime minister Scott Morrison says that the best form of welfare is a job he is right. A UBI may be a Trojan horse too given some of its right-wing supporters – such as the late economist Milton Friedman – to undermine our targeted welfare state in favour of private provision of social goods.

changing the stats

We must radically rethink the way we talk about and define unemployment. As a first step federal and state government must recommit to a genuine target of full employment, something Shorten advocated for at the 2016 election, in addition to new promises made to tackle insecure employment through a crackdown on labour hire pay and conditions, reviewing enterprise bargaining, boosting casual rights and reversing penalty rate cuts. As a start, this means defining full employment simply. For economist Graham White it is the ‘absence of unemployment that is due to an insufficient number of jobs relative to jobseekers, including the absence of structural unemployment and underemployment.’ Because what really matters from a macroeconomic perspective is how well we’re using our labour supply. Full employment will necessitate targeted, large-scale nation-building infrastructure projects such as investment in renewable energy, tech-savvy manufacturing, combined with massive reinvestment in and quality improvements to our TAFE and vocational sectors. Second, we also need to pay more attention to Persons Not In Labour Force (NILF) data. While many NILFs are not in the labour force due to ill-health, family circumstances, or lifestyle choices, statistics show 22% of them ‘wanted to work’, more people we could probably add back into real unemployment figures. Then there is a large cohort of NILFs forced into the higher education system due to not being able to find employment. Technically they are not unemployed, but a lot of them are building up HECS debts, prolonging education, simply because they cannot find a job, not because they are proactively enhancing their work skills. Finally, The one hour a week definition should be swept into statistical bin of history. The basis of any definition of employment should be the ability of a citizen and her or his dependants to earn a ‘living wage’, rather than an outdated ‘minimum wage’, a version of the famous Harvester judgement crafted for the precariat age.

This new living wage must be premised on citizens having the freedom to live a dignified life, free from fear of want and insecurity. Low wages and insecure work are bad for the economy and corporate earnings, bad for individuals and families, bad for those seeking to buy their own house or cover the rent, to pay for essential utilities and services, in short to live a good, meaningful and secure life. From this view underutilisation is arguably the statistic we, as a polity, should use as a benchmark in the twenty first century. The cost of not acting to protect Australia’s most precious asset – its working people – and the economy at large is too great to ignore or talk dishonestly about. Our job statistics are broken. It’s time to #changethestats.

Dr Nick Dyrenfurth is Executive Director of the John Curtin Research Centre. Nick wishes to thank Remy Davies for his research assistance on this project.