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Understanding two structural changes within Queensland's Labour Market

Last week saw what has been regarded as positive news for the performance of Queensland’s labour market with total employment now growing after contracting across much of 2016.   In the latest growth cycle an additional 31,100 jobs have been created since October 2016 in the Sunshine State.

However there are two underlying trends within Queensland’s labour market that warrant explanation and need a torch shone upon them.  These issues should temper any view that we are now out of the woods.  There is no question that the Australian Bureau of Statistics is struggling at present to remove the volatility that is clearly evident on a monthly basis.  However the below issues are structural, embedded and are what many Queenslanders can see and feel.

The first issue that needs to be understood is that much of the improvement particularly in the State’s unemployment rate is the result of a falling participation rate.  Queensland’s participation rate which measures persons employed and unemployed as a percentage of the working age population (15 – 65 years of age) has been falling across the past decade.  Often described as the ‘discouraged worker effect’ individuals have given up looking for work to return to either educational studies or home duties.

Queensland’s participation rate has fallen from a high of 68 per cent in March 2009 to the current rate of 64.6 per cent in April 2017 and it was mid last year when the Sunshine State transitioned from having a higher participation rate than the national average to a lower one. 

As at April 2017 there are nearly 1.4 million Queenslanders of working age classified as “not in the labour force” and the ABS estimates approximately 20 per cent of these persons are actually wanting a job.  The fact that Queensland’s unemployment rate is not considerably higher is the result of a significant exiting of persons from the labour market that would otherwise be actively looking for work and unemployed.  If we were to reinstate those 71,000 persons* who have given up looking for work we would have a State unemployment rate at approximately 9 per cent and not the 6.4 per cent as reported at present.

The second issue that needs to be raised is that there has been a steady conversion from full to part-time employment and not necessarily by choice.  The percentage of part-time jobs to total employment has steadily risen from just under 28 per cent in mid 2008 to now register at 31.2 per cent.  This is not necessarily a bad outcome as many persons who may have lost their job have had their position preserved by a conversion to part-time arrangements. 

However many of the part-time workers who either voluntarily reduced their hours or could only find a job that was part-time actually want more hours of employment.  The ABS measures the number of underemployed persons in Queensland separate to those persons unemployed. Underemployed persons have risen from a low of 127,000 in August 2008 to now register at 215,000 persons.  At the same time ABS records an underemployment rate that has risen across the past decade to a rate of 8.5 per cent considerably higher than the State unemployment rate.  That is there are more persons who are employed looking for additional hours of work (215,000) than unemployed persons looking for work (163,000). Queensland’s underutilisation rate that adds the unemployment rate to the underemployment rate is nearly 15 per cent.

So to tie this all together the 163,000 Queenslanders officially classified as unemployed dramatically increases to 449,000 persons if we include those wanting more work (215,000) and those who have exited the labour market (71,000) but who really want to work.  Accordingly a more realistic Queensland unemployment rate is actually closer to 17.2 per cent. 

Despite an unemployment rate that is nearly three times higher than the offical measure there is a big something to be encouraged by in Queensland.  Rather than focusing on unemployment rates and total employed persons (which are admittedly important) a measure that adjusts for many of these issues and provides an overall indicator of what is happening in the Queensland economy is ‘total hours worked’. The picture here is encouraging with total monthly hours of work now starting to grow but the level of improvement is certainly not to the same extent as total jobs created.

I have never been one to be deliberately pessimistic but solutions can only be offered if there is recognition that a problem exists.  In summary the outlook for Queensland’s labour market is positive, with a rebounding domestic economy, but the reality is there remains considerable progress to bridge the gap to the national performance (please see my earlier post) and our labour market is masking extensive underemployment if you scratch below the surface.

 

All figures are cited in trend terms and are sourced from ABS Catalogue 6202.0 Labour Force Australia.

*assumes a decade average participation rate of 66.4 per cent

 

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