As the treasurer lauds supply-side economics, a once-controversial recovery theory is gaining traction.This is the essence of modern monetary theory – that government budgeting is nothing like household or business budgeting, for the simple reason that government can create money.
ABS unemployment figures overlook the hidden jobless
Sleeping rough on the streets of Adelaide, Aimee Rose didn’t feel like she counted for anything. The Australian Bureau of Statistics (ABS), it seems, was inclined to agree with her.
Despite being jobless and periodically homeless for most of her teenage years, Rose did not meet the official definition of what it is to be unemployed.
Deduced from the monthly Labour Force Survey, the unemployment rate represents only the percentage of people “actively” looking for a job in the four weeks leading up to the reference week, and who are available to start work that same week. The survey defines actively looking for work as applying for work, attending job interviews or taking steps to start a business. Checking job advertisements doesn’t count, and nor does hoping for a steady pay cheque while curled up inside a sleeping bag.
First, Rose gave up looking; then she gave up hoping. As far as she could see, it was something of a catch-22 situation.
“Not getting work and not getting housing kind of fed into each other,” she tells The Saturday Paper. “No one wants to hire someone who doesn’t have a home, and it’s hard to get a house without being able to put down any income on the form.”
Also hard was cobbling together enough change to pay for the bus to the library and the fee for printing job applications. The effort hardly seemed worth it given the dearth of employment options open to someone with no qualifications or connections. Increasingly plagued by mental health issues, Rose stopped asking.
Only when the shame she felt about her circumstances overwhelmed her to the point that she attempted to take her own life did the system intervene – the state’s Child and Adolescent Mental Health Service stepping in to provide accommodation and support.
Rose returned to and completed her schooling, and now, aged 19, she is preparing to start her own health and wellbeing business, activity that finally qualifies her as eligible to be counted among the unemployed.
“It makes me feel really annoyed,” she says. “Those statistics are used for allocating budgets and that kind of stuff, and they disregard the most vulnerable members of societies. They are the people that need to be counted the most and whose problems need to be addressed the most.”
The chief executive of the South Australian Council of Social Service, Ross Womersley, says the jobless who don’t qualify as unemployed in a statistical sense are often the hardest to help. Which is exactly the problem.
“We need to acknowledge they exist, and also to acknowledge what needs they have to get back into the employment market,” he says.
“If they’ve fallen out of the system completely, it speaks to something drastic going wrong – poor physical or mental health, limited education – and that kind of person is not necessarily the first candidate employers want to select.”
There are hundreds of thousands of people who have stopped regularly applying for work around Australia, although not all find themselves in quite as difficult a place as Rose did. They are all relevant in regard to the unemployment rate’s core function as an indicator of economic health.
At the other end of the so-called “hidden unemployed” spectrum is 61-year-old Brisbane man Michael Heritage. A recently retrenched pipeline project manager, Heritage, after being rejected for the few roles available in his area of expertise, decided he would rather attempt to ride out the resources sector downturn with his own savings than apply for hospitality and trades jobs each fortnight, as per the expectations of his employment agency.
Then there’s 57-year-old Kat Lee, who lost her Adelaide takeaway business 23 years ago and hasn’t been able to find work since, deciding in recent years to focus her efforts on running a neighbourhood charity instead of firing off unanswered applications.
She characterised the ABS refusing to factor people such as herself into the unemployment rate as underselling the seriousness of the situation.
“It makes people think the problem isn’t as bad as it is, and therefore people are saying, ‘There are jobs out there – why don’t you get a job?’ ” she says.
Heritage and Lee face different circumstances, but what unites them is their shared belief that the unemployment rate is being fudged so those in power can claim they’re doing a good job.
In a statement, the ABS defended the Labour Force Survey by noting it features some of the highest response rates in the world, drawn from a sample size of 26,000 households across Australia, including remote areas, and that methodologies are communicated transparently.
“In the design and management of the Labour Force Survey, the ABS follows international standards, many of which are based on International Labour Organisation resolutions (through the International Conference of Labour Statisticians),” the statement read. “Our methodology can be described as international best practice.”
Gary Morgan disagrees. The executive chairman of Roy Morgan Research wants his simpler method of measuring unemployment to become the national standard, a methodology he is keen to emphasise is based on face-to-face interviews rather than the ABS practice of over-the-phone and online surveys.
“Our definition is pretty simple – if you’re looking for a job and not working, then you’re unemployed,” he says.
“The ABS definition is more complex than that with more conditions, which is why it is miles lower.”
Indeed it is – the Roy Morgan unemployment rate hit 11 per cent in March, well up on the ABS rate of 5.8 per cent.
Morgan is not one to miss an opportunity to stick the boot into rival statisticians, and does so on a monthly basis in the release of his agency’s unemployment figures.
The March numbers were accompanied by observations from Morgan that the ABS has its “head in the sand” and “lacks credibility” given the various job losses taking place across Australia. The latest round includes the 8000 roles in jeopardy as steelmaker Arrium enters administration, the 500 Optus employees facing redundancy nationally, and the closure of electronics retailer Dick Smith and the Masters Home Improvement outlet.
“The major problem facing the Australian economy is that the Turnbull government, like all governments before them, continues to base their economic modelling on the wrong unemployment data, and because of this they will fail to advocate the policy reforms that need to be undertaken to ‘free up’ the Australian economy,” he wrote.
“In addition, by continuing to use ‘wrong data’ there will be a large group of people (unemployed and underemployed) who will be disenfranchised and angry with the government of the day.”
The rise of contract and casual working arrangements has seen the phenomenon of underemployment deservedly placed under the spotlight, but at a time when steelworks and car assembly lines are set for the scrapheap, hidden unemployment is also a growing concern.
John Spoehr, director of the Australian Industrial Transformation Institute at Flinders University, says the decline of manufacturing in particular is a worry.
“Particularly for middle-aged men in manufacturing, historically they find it difficult to transition to alternative work and are more susceptible to giving up,” he says.
“We also know that a high proportion of mature-age workers go on to be long-term unemployed, which we saw in the recessions of the 1980s and 1990s, and which we are likely to see with the closure of the auto and steel industries if that is to happen.”
A source at the ABS joked that perhaps Morgan was being a little ambitious.
“Morgan wants the unemployment numbers to be 11 per cent,” the source said.
“That’s interesting. I wonder whether either of the major political parties would go for that?”
University of Newcastle economics professor William Mitchell, director of the Centre of Full Employment and Equity, says the issue isn’t how the ABS calculates the unemployment rate but what people think it represents and the way in which the media communicate it.
“I think it is fine, but then I know its uses and limitations, and it is grossly misused as an indicator,” he says.
According to Mitchell, the unemployment rate shouldn’t serve as a standalone “headline statistic”, but should be viewed in the context of other ABS numbers such as the economic participation rate (overall number of people employed) and measures of the type of employment, to provide a useful indication of what is happening.
“For instance, if the unemployment rate rises but is accompanied by a rise in the economic participation rate, that’s actually a good thing,” he says.
He refuses to pick a side in Roy Morgan’s crusade against the ABS, arguing that both organisations employ methodologies in regard to unemployment that are useful in their own way, with the ABS’s use of seasonal adjustments valuable for long-term comparisons and Roy Morgan’s rejection of them helpful in communicating exactly what is happening at a given moment.
All well and good, but the ABS unemployment rate continues to stand alone as the most prominent statistic in Australia, echoing across the evening news and political press releases, utterly fundamental to the average citizen’s understanding of how their society is travelling.
An understanding that simply does not extend to Rose and others like her, the hidden jobless lurking somewhere out there in the statistical wilderness.
Lifeline: 13 11 14
This article was first published in the print edition of The Saturday Paper on Apr 30, 2016 as "Con jobless".
A free press is one you pay for. In the short term, the economic fallout from coronavirus has taken about a third of our revenue. We will survive this crisis, but we need the support of readers. Now is the time to subscribe.