When are unemployment statistics ‘employment’ numbers?

IF YOU DON’T know the size of the problem, how can you decide on the scope of the solution?

Such a dilemma currently faces Australia. The biggest single economic challenge right now is to develop an environment that creates jobs. 

For many years, the size of that challenge has been masked by the fairly innocuous unemployment numbers that seem to show we have about six-or-so percent unemployment across the board. Political leaders of all persuasions like to tout those reputable figures from the Australian Bureau of Statistics as showing how fortunate we are compared with many other countries.

That may be so, but eventually the facts seem to be overrunning the numbers – both here and in the oft-compared United States.

 The problem, as Business Acumen has highlighted in past editorial columns, is that those numbers do not reflect the average Australian’s understanding of what a job is. For example, if a person has completed more than two hours work in any fortnight, they are statistically regarded as ‘employed’.

Most members of the public still think the ABS works out the unemployment figures by somehow counting the hands held up in the air at Centrelink. Not so. It is a randomly chosen sample that drops a percentage of people on and off the list on a regular basis and polls them predominantly by home phone.

Yes, home phone … ask Telstra how many of those devices have come off out of their directories in recent years. Perhaps this also explains why the statistics hardly reflect unemployment numbers of mobile equipped youth.

For many years, Business Acumen has advocated business leaders take more notice of Roy Morgan Research’s unemployment numbers – which have been complied the same way since their inception in 1948 – which shows unemployment regularly at around 10 percent in Australia and underemployment closer to 20 percent.

Arguments about real numbers and methodology that is too uncomfortable for the political sector to risk change have suddenly sparked in the US along the same lines. This may lead to a desirable wake-up call in Australia too.

When the chairman and CEO of respected polling researcher Gallup comes out and says, “Here’s something that many Americans – including some of the smartest and most educated among us – don’t know: The official unemployment rate, as reported by the US Department of Labor, is extremely misleading,” then people tend to sit up and take notice.

Jim Clifton, who also wrote a book on the subject called The Coming Jobs War, published by his own Gallup Press, puts it bluntly in a recent Linkedin post:

“Right now, we’re hearing much celebrating from the media, the White House and Wall Street about how unemployment is ‘down’ to 5.6%. The cheerleading for this number is deafening. The media loves a comeback story, the White House wants to score political points and Wall Street would like you to stay in the market.

“None of them will tell you this: If you, a family member or anyone is unemployed and has subsequently given up on finding a job – if you are so hopelessly out of work that you’ve stopped looking over the past four weeks – the Department of Labor doesn’t count you as unemployed.

“That’s right. While you are as unemployed as one can possibly be, and tragically may never find work again, you are not counted in the figure we see relentlessly in the news – currently 5.6%. Right now, as many as 30 million Americans are either out of work or severely underemployed. Trust me, the vast majority of them aren’t throwing parties to toast ‘falling’ unemployment.

“There’s another reason why the official rate is misleading. Say you’re an out-of-work engineer or healthcare worker or construction worker or retail manager: If you perform a minimum of one hour of work in a week and are paid at least $20 – maybe someone pays you to mow their lawn – you’re not officially counted as unemployed in the much-reported 5.6%. Few Americans know this.

“Yet another figure of importance that doesn’t get much press: those working part time but wanting full-time work. If you have a degree in chemistry or math and are working 10 hours part time because it is all you can find – in other words, you are severely underemployed – the government doesn’t count you in the 5.6%. Few Americans know this.”

Sound familiar? It should. Not a lot of Australians know this.

Australia’s unemployment statistics are very similarly compiled as those in the US. Roy Morgan Research has been highlighting issues such as these for many years, but has been fobbed off.

If politicians want to genuinely understand the electoral turmoil that has engulfed Australia in recent years, they only need to look at the official unemployment numbers they are presenting – note that these days officials try to refer to them as the ‘employment’ figures – and compare them with what the public is actually experiencing.

The disjoint is manifest.

Again, it’s eerie hearing the same arguments that have been ignored and discounted in Australia for many years finally surface in the US. You can easily substitute Australia for America in what Gallup’s Jim Clifton says.

“A good job is an individual’s primary identity, their very self-worth, their dignity – it establishes the relationship they have with their friends, community and country,” Mr Clifton said. “When we fail to deliver a good job that fits a citizen’s talents, training and experience, we are failing the great American dream.

“Gallup defines a good job as 30-plus hours per week for an organization that provides a regular paycheck. Right now, the US is delivering at a staggeringly low rate of 44%, which is the number of full-time jobs as a percent of the adult population, 18 years and older. We need that to be 50% and a bare minimum of 10 million new, good jobs to replenish America’s middle class.

“I hear all the time that ‘unemployment is greatly reduced, but the people aren’t feeling it’. When the media, talking heads, the White House and Wall Street start reporting the truth – the percent of Americans in good jobs; jobs that are full time and real – then we will quit wondering why Americans aren’t ‘feeling’ something that doesn’t remotely reflect the reality in their lives. And we will also quit wondering what hollowed out the middle class.”

Who, in Australian politics, is brave enough to press the reset button to consider and articulate the true scale of this problem? Answer: someone who wants to be re-elected for a second term to genuinely start solving those problems.

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