This
guide provides a brief overview of the different types of people who are not in
the labour force, gives an introduction to the key concepts and terminology,
and lists relevant data sources. This is one in a series of statistical quick
guides, designed to provide a basic understanding of Australian labour market
data. Other guides include labour force, employment
and unemployment,
which are available from the Parliamentary Library website.
What is the labour force?
The labour force is the sum of employed people and
unemployed people. The above-linked quick
guides provide definitions and concepts for each of these groups. A third group
of people, those not in the labour force, rounds out the mutually exclusive categories of the
labour force framework, which together sum to the civilian population (see
diagram below). The focus of this guide is on this third group.
Labour force framework
Source: ABS, Labour Statistics: Concepts, sources and methods, Feb
2018, cat. no. 6102.0.55.001
Who is outside of the labour force?
People of working age, who do not meet the criteria for
employed, nor unemployed, are not in the labour force. These people are of
interest due to their potential contribution to the labour market. For example,
is there anyone who could be motivated to look for work if certain conditions
were apparent, are they temporarily out of the labour force for a specific
reason (e.g. child rearing) or have they permanently left the labour force
(e.g. retirees)?
Distribution of population by
labour force status
The
Australian Bureau of Statistics (ABS) conducts a monthly Labour Force Survey. This household survey is designed to produce key
labour force estimates from a sample of approximately 50,000 people (aged 15
years and over). Headline measures from this survey include the unemployment
rate, the employment-to-population ratio and the participation rate. For more
information, see the separate quick guide.
People who are not in the labour force are equal to
the difference between the civilian population (100%) and the participation
rate. At June 2018 (average of 12 months ending), this difference was 34%
(rounded). However, the rate varies for men and women. Charts 1a and 1b provide
a breakdown of labour force status as a proportion of the civilian population by
sex. The employed plus the unemployed are equivalent to the labour force
participation rate (71% for men and 60% for women) and the remainder are those
not in the labour force (29% of men and 40% of women).
1. Labour force status by
share of civilian population (15 years and over), Jun 2018–annual average
| a. Men |
b. Women |
 |
Source: ABS, Labour force, Jun 2018, cat. no. 6202.0 (Table 1, original)
What are people doing instead?
Some common
scenarios for non-participation are:
- retirees, who no longer want to
work
- students, who are not actively
looking for work
- stay-at-home parents, who have no
attachment to a job
- anyone permanently unable to work
(e.g. incapacitated)
-
those who are voluntarily inactive
(i.e. not wanting to work), and
-
anyone currently in an institution
(e.g. gaol).
Where can I find relevant data?
The ABS provides two main sources
of data for the analysis of people not in the labour force:
These sources contain information on what people are
doing when they’re not in the labour force (reasons for non-participation and
main activity); difficulty in finding work; and job seeking behaviour (e.g.
types of activities). The second source also includes inducements that could be
used to elicit participation, as well as conditions required for participation
(e.g. suitable child care).
What other data is available on these people?
What are people mainly doing when they’re not in the
labour force?
People’s activities when outside the labour force vary
by age and sex. Generally, younger people tend to be engaged in some form of
education. Women are much more likely to be undertaking home duties (21%) or
caring for children (12%), while men are more likely than women to be outside
the labour force due to a long-term health condition or disability (15%
compared with 9%). Despite these differences, Chart 2 (below) shows that, in
2018, the most likely reason for men’s and women’s non-participation was retirement
(47% and 35%, respectively).
2.
Main activity of people outside the labour force by sex, Feb 2018—original
Note: there is a known perception bias with this
question and some people with young children indicated ‘home duties’ as their
main activity rather than ‘caring for children’. Data relates to people aged 15
years and over.
Source: ABS, Participation, job search and mobility, Feb 2018, cat. no. 6226.0
Who is more likely to participate –
the marginally attached
Some people
outside the labour force may be more likely to join, or re-join, than others. The
framework below highlights two groups of people who are of most interest, as
they have indicated some preference to be part of the labour force. These
people may call themselves ‘job seekers’, but they don’t meet the definition of
unemployed. They may have looked for work in the past, but given up looking.
These groups are marginally attached:
1. ‘Actively looking’ and
2. ‘Not actively looking’.
Group 1 would be ‘unemployed’ if they were able to
start work in the required period (i.e. the survey reference week). Group 2 was
available to start work within a specific period (four weeks of the survey reference
week), and could have been ‘unemployed’ if they had taken at least one active
step towards finding employment. Group 2 includes a sub-set of people referred
to as ‘discouraged job seekers’, who will be discussed later in this guide.
Not
in the labour force: whether someone wants to work
(a) Includes people who had a job to go
to, but could not start work during the reference week.
(b) Includes 515,900 people who were
permanently unable to work.
(c) Not available to start work in the
reference week. Does not include about 722,000 people who were classified as
unemployed.
(d) Available to start work within four
weeks.
(e) Not available to start work within
the specified timeframe.
Source: ABS, Participation, job search and mobility, Feb 2018, cat. no. 6226.0
Of those wanting to work,
the ABS
estimated about 1.1 million people were marginally attached, at February 2018.
This represents approximately 16% of all people not in the labour force (this
proportion has been fairly consistent since 2000). The breakdown of this group
is shown in the above framework and includes people who were waiting to start a
new job, but were not available during the reference week (so not technically
employed, but also not unemployed).
The framework also provides figures for people who did
not meet the definition of marginally attached, as they were not actively
looking for work and were not able to start work in the near future (i.e.
within four weeks).
Chart 3 (below) shows there were differences in
marginal attachment by sex, as well as age. Women were much more likely to be
out of the labour force, but still have some connection to it, while in their
peak child bearing and rearing years.
3.
Marginally attached persons by sex and age, Feb 2018—original
Source: ABS, Participation, job search and mobility, Feb 2018, cat. no. 6226.0
Who are discouraged job seekers?
Another group of people who are not in the labour
force are those described as discouraged job seekers. They are a sub-set of the marginally attached, who
the ABS defines as those who want to work and could start work within a
specific period (four weeks of the reference week) if offered a job, but who
have given up looking for work for labour market reasons. Labour market reasons
are those related specifically to jobs or employment; for example, people with
school aged children who could not find a job they could do within the hours
they required.
At February 2018, the ABS estimated
there were around 103,000 discouraged job seekers aged 15 years and over,
representing approximately 2% of people not in the labour force—this figure has
been fairly stable since the early 2000s. The main reasons people did not
actively look for work were:
- considered too young/too old by
employers (33%)
- no jobs in locality/line of
work/no jobs at all (24%) and
- no jobs in suitable hours (12%).
As the data relates to a small group, the estimates
are of varying quality. Caution should be used when interpreting the data. For
additional information refer to ABS, Participation, job search and mobility.
What are some useful measures?
Participation rate
The participation rate is available from the monthly
publication, Labour force (cat. no. 6202.0).
Labour force underutilisation rates
In addition to the unemployment and underemployment
rates, the ABS publishes two supplementary measures of labour underutilisation:
Underutilisation rate (UUR) and Extended underutilisation rate (EUR). The first
of these (UUR) combines the unemployed and the underemployed and expresses them
as a proportion of the labour force. Data is available from Labour force (cat. no. 6202.0), see Tables 22 to 25. The second rate (EUR) is discussed
below.
Extended underutilisation rate (EUR)
The EUR
captures information on two groups of people with marginal attachment to the
labour force, as well as those who are unemployed and underemployed. Data is
available from Participation, Job Search and Mobility (cat. no. 6226.0), see the ‘Special table’ (published
in 2017).
The EUR expresses
the below-listed groups (A + B + C) as a proportion of the labour force, which
has been augmented by the marginally attached (A).
A. Marginally attached:
- People who were actively looking
for work, who could not start work in the reference week, but could start within
four weeks, and
- Discouraged job seekers.
B. Unemployed: People who were not working, who were actively
looking for work and were available to start work within a defined period.
C. Underemployed: The ABS defines the underemployed as:
- Part-time workers (i.e. those who worked fewer than 35 hours per week),
who wanted to work more hours and were available to do so within a defined
period, and
- Full-time workers who worked fewer
than 35 hours in the reference week due to economic reasons (e.g. being stood
down, insufficient work being available). A separate Library quick guide covers underemployment.
Chart 4 (on
the next page) provides the EUR as a time series.
4.
Extended underutilisation rate (EUR) by sex, Sep 1994 to Feb 2017—annual
average
Notes on time series
The ABS introduced the EUR in Measures of labour underutilisation information paper,
February 2002 (cat. no. 6296.0).
From 2003 to 2013, the rate was published annually in Australian labour market statistics (cat. no. 6105.0). In 2017, the ABS published the rate,
including historical data. The estimates represent an annual average nearest to
the noted reference month. Care should be taken when analysing the series, as
there have been changes in scope (e.g. age restrictions) and to the survey
questionnaire (2001 and 2014). The main changes are highlighted as ‘series
breaks’ in the chart. For more information see the Special table’s Explanatory
notes.
Source: ABS, Participation, job search and mobility, Feb 2017, cat. no. 6226.0