Updated 26 November 2018

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Penny Vandenbroek
Statistics and Mapping Section

Introduction

This guide provides a brief overview of underemployment, an introduction to the key concepts and terminology, and lists relevant data sources. This is one in a series of quick guides, designed to provide a basic understanding of Australian labour market data. Other relevant guides include employment and unemployment, which are available from the Parliamentary Library website.

In the labour force framework, the labour force is the sum of the employed and the unemployed. People who are neither working, nor actively looking for work, are therefore described as ‘not in the labour force’. Depending on the measure used, underemployed people are either employed or not in the labour force (see diagram below). The focus of this paper is on people who are currently employed and would prefer to work more hours.

Labour force framework

Source: ABS, Labour Statistics: Concepts, sources and methods, Feb 2018, cat. no. 6102.0.55.001

Underemployment

Being underemployed can have a significant impact on the financial, personal and social lives of individuals. While there are some people who are entirely without work (e.g. the unemployed), there is also a growing number of people who are in work but who want more work (i.e. underemployed). These workers are likely to be competing with the unemployed for available jobs.

Who are underemployed people?

The International Labour Organization (ILO) describes underemployment as the underutilisation of the productive capacity of the employed population. Underemployment may refer to a variety of situations, most commonly it refers to someone who is employed, but not in the desired capacity. The unmet need may relate to any or all of: hours of work, level of skill utilisation, application of qualifications or experience, or level of compensation (i.e. working in a lower paid job than qualifications would suggest the worker is suited to).

While there is a growing pool of research on skills mismatch, space constraints mean this theme will not be addressed here. The focus of this guide is employed people, who wanted to work more hours, and were available to do so within a specified period of time (i.e. time-related, or ‘visible’ underemployment).

Who counts as employed?

The ILO describes employed people as those above a specified age (i.e. 15 years and over) who performed any work at all, in a specified period, for pay or profit (or payment in kind), or who were temporarily absent from work. More information on employment is provided in Employment statistics: a quick guide.

What types of workers are considered underemployed?

The Australian Bureau of Statistics (ABS) identifies two distinct groups as underemployed:

• part-time workers who wanted to work more hours and could start additional hours either in the reference week or in the subsequent four weeks; and
• full-time workers who worked part-time hours in the reference week for economic reasons (such as being stood down or insufficient work being available). It is assumed these people wanted to work full-time and would have done so, had the work been available.

How is underemployment measured?

The ABS conducts a monthly Labour Force Survey, which is designed to produce key estimates of the labour force (employment and unemployment). The sample is approximately 50,000 people each month.

Underemployed workers are employed people aged 15 years and over, who want, and are available to work, more hours than they currently have.

Note: the Labour Force Survey excludes some groups of people, including members of permanent defence forces, certain diplomatic personnel, and overseas residents. More information is available from the ABS.

Where do I find underemployment data?

The ABS releases monthly trend, seasonally adjusted and original (unadjusted) estimates of underemployment via the ‘Downloads’ tab of the Labour force (cat. no. 6202.0, Tables 22 to 25). Estimates are available by a limited range of characteristics, including age, sex, state and territory. Labour force, detailed, quarterly (cat. no. 6291.0.55.003, Table 19) provides estimates of underemployed people by industry and occupation (main job).

What else do we know about underemployed workers?

The ABS provides more detailed information about underemployed workers through a supplementary labour survey. Since February 2015, estimates are available from Participation, Job Search and Mobility (cat. no. 6226.0). The survey release provides information on part-time workers who would prefer to work more hours and:

• number of hours sought
• types of steps taken to find more hours
• availability to work more hours and
• personal characteristics (e.g. sex, age, relationship in household, educational attainment).

Estimates prior to 2015 are available from Underemployed Workers (cat. no. 6265.0). While the ABS provides estimates for this survey alongside the current survey, analysis of changes over time should be undertaken with care, as the reference periods vary, some of the population groups are conceptually different and some data items have changed, see ‘Comparability with previous surveys’ in the Explanatory notes.

What are the key measures?

The number of underemployed workers (head count)

Graph 1 shows monthly (trend) changes in the number of underemployed people by sex.

1. Underemployed people—trend

Source: ABS, Labour force, Oct 2018, cat. no. 6202.0 (Table 22)

Underemployment rate

The rate is the number of underemployed people expressed as a proportion of the labour force (i.e. employed plus unemployed). Graph 2 shows monthly (trend) changes in the underemployment rate by sex.

2. Underemployment rate—trend

Source: ABS, Labour force, Oct 2018, cat. no. 6202.0 (Table 22)

Graph 3 shows monthly (trend) changes in the rate by selected age groups.

3. Underemployment rate by age (years)—trend

Source: ABS, Labour force, Oct 2018, cat. no. 6202.0 (Table 22)

Graph 4 shows the trend underemployment rate by state and territory (of usual residence) for the most recent period, and the trend unemployment rate for the equivalent month. This highlights differences between the two measures and provides an indication of overall underutilisation (see also, Graph 6).

4. Underemployment and unemployment rate by state/territory (usual residence)—trend, Oct 2018

Source: ABS, Labour force, Oct 2018, cat. no. 6202.0 (Table 23)

Note: estimates of underemployment are not generally available at sub-state levels.

Underemployment ratio

The ratio is the number of underemployed expressed as a proportion of total employed. The ratio narrows the focus of underemployment, providing a measure of people who are employed but have insufficient work hours. The ratio mirrors the rate, but sits at a higher level, given that it is expressed as a proportion of a smaller overall group. Graph 5 shows monthly (trend) changes in the ratio by sex.

5. Underemployment ratio—trend

Source: ABS, Labour force, Oct 2018, cat. no. 6202.0 (Table 22)

What is meant by labour underutilisation?

Underutilisation is a broader measure of spare labour capacity than the official unemployment rate. The underutilisation measures produced by the ABS extend beyond the underemployment rate and ratio, to cover additional groups of people, including some who are currently outside the labour force (i.e. neither employed nor unemployed).

To improve understanding of potential additional labour capacity, the ILO suggests consulting a range of labour force indicators, including employment-to-population ratio, participation rate/inactivity rate, status in employment, and labour productivity. Analysing data by personal characteristics, such as age distribution, family composition, the presence of children, education level, and migration status, can also assist in assessing underutilised labour capacity.

What are the key measures?

Underutilisation rate

The rate is the sum of the unemployed and the underemployed, expressed as a proportion of the labour force. Graph 6 shows monthly (trend) changes in the rate by sex.

6. Underutilisation rate—trend

Source: ABS, Labour force, Oct 2018, cat. no. 6202.0 (Table 22)

Volume measures (hours sought)

Capacity for hours can be measured through the difference of the hours usually worked by employed people and the unused potential hours of labour available. Hours include those sought (by the unemployed) and additional hours preferred of people whose labour is not fully utilised (i.e. the underemployed). Estimates are available from August 2014 onwards in Labour force, detailed, quarterly (cat. no. 6291.0.55.003, Tables 23a and 23b). The hour estimates relate to a one week period of the relevant quarter month. Key volume measure rates include the unemployment rate, underemployment rate and underutilisation rate. The release also includes the number of hours sought by the unemployed, the underemployed and in total. Selected personal characteristics are also provided (e.g. age, sex).

What other information is available?

Parliamentary Library, Monthly Statistical Bulletin (1.9 Underemployment), updated each month.

A Heath, ‘The Evolving Australian Labour Market’, Speech (on behalf of the RBA), Business Educators Australasia 2018 Biennial Conference, Canberra, 5 Oct 2018.

ABS, ‘Underemployment in Australia’, Labour force, Sep 2018, cat. no. 6202.0.

S Jackson, ‘The problem isn’t unskilled graduates, it’s a lack of full-time job opportunities’, The Conversation, 17 Jan 2018.

R Wilkins and I Lass, The Household, Income and Labour Dynamics in Australia (HILDA) Survey: Selected findings from Waves 1 to 16, Melbourne Institute: Applied Economic & Social Research, University of Melbourne, 2018.

N Cassidy and S Parsons, ‘The rising share of part-time employment’, RBA Bulletin, Sep quarter 2017.

RBA, ‘Box B: Underemployment and labour market spare capacity‘, Statement on Monetary Policy, Feb 2017.

ABS, ‘Spotlight on underemployment’, Labour force, Nov 2016, cat. no. 6202.0.

S Otterback, M Wooden and YK Fok, ‘Working-time mismatch and mental health’, Melbourne Institute Working Paper no. 11/16, University of Melbourne, Mar 2016.

 

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