Why business does not believe unemployment statistics

EDITORIAL - The disjoint between what Australian business people witness daily in operating environments and what is presented in upbeat government economic figures has its roots in statistical changes made during the Howard Government era.

That has been highlighted in the recent website re-posting of an unpublished letter to the Australian Financial Review in 2003 from Roy Morgan Research.

Titled 'It's Time' for a Realistic Measure of Unemployment in Australia, the letter by Roy Morgan Research executive chairman, Gary Morgan, responds to articles questioning changes to the way unemployment statistics were created at the time.

It is now clear that the anomalies raised in this letter have morphed even further towards a rose-coloured glasses approach to unemployment and underemployment measures by successive Australian governments, including the current Federal Labor Government.

It also explains why an exchange on a recent edition of ABC Television's Q&A program, in which Liberal National Party Senator Barnaby Joyce was taken to task by a Labor Government panellist for questioning the Australian Bureau of Statistics' unemployment figures, suddenly petered out.

It is astonishing that such a myth of 'low 5.5 percent' unemployment in Australia is being perpetuated when the country is facing the sorts of economic challenges that demand a clear picture.

The fact is, both sides of politics know the figures do not reflect the reality of unemployment in Australia today.

But who in politics would be brave enough to step up and say so?

Small and medium business people deal with the real numbers every day. It is no wonder they are becoming increasingly cynical of messaging coming from the Federal Government when there is a clear example in these 'enviable' unemployment statistics that the books are still being cooked.

In fact, today they are being cooked in a reflection of the distractive 'reality TV' era of Masterchef and My Kitchen Rules.

Small and medium business is where effective employment growth will come from. That is a present-day as well as historical fact.

The sort of change and initiatives within the economy that SMEs need to do that will not emerge while political decisions are mis-directed because of misleading numbers.

-Mike Sullivan, Managing Editor, January 2013.

Here is the text of the 2003 letter, as presented on the Roy Morgan Research website:

Roy Morgan 'Paper No. 20030801 - Letter to the Editor, Australian Financial Review.: August 22, 2003'

Peter Saunders' commentary on unemployment figures (1) addressed only part of the problem with the official unemployment statistics.

By re-classifying some unemployed people as permanently disabled (or by inventing a Youth Allowance that disguises youth unemployment figures), the official statistics hide a huge number of people who would actually like to be employed.

But re-classification of people on welfare benefits is only part of the masking problem.

Hugh Morgan's weekend essay correctly pointed out that "the monthly unemployment statistics…understate the numbers of people who are seeking more work, or would like to get a job but did not fit the official definition of unemployed"(2).

The Australian Bureau of Statistics Unemployment Estimate classifies an unemployed person as part of the labour force only if, when surveyed, they have been actively looking for work in the four weeks up to the end of the reference week and if they were available for work in the reference week.

That instantly cuts out those who have become disenchanted with the process of looking for a job and so are not regularly seeking employment — not because they don't want a job but because they have given up hope of finding one.

It is obvious that these people must be included in the unemployed if Australia is to have an accurate picture of the true state of unemployment.

As pointed out in Michele Levine's article in September's New Investor (3), these unemployed people are included in the Roy Morgan Unemployment Estimate.

By asking respondents who are not employed if they are actually looking for a paid job (regardless of whether they've looked in the last four weeks), the Roy Morgan Unemployment Estimate (4) obtains a more accurate number than the official ABS figure.

This was pointed out by Dr Peter Brain, Executive Director of the National Institute of Economic and Industry Research, after the Institute released a report on unemployment in Australia's regions in 2001 (5).

"Underemployment" is another issue that also needs to be measured properly. The ABS Estimate does not take into account people who have been employed for a small amount of part-time work but would like to work additional hours.

The Australian Council of Social Service (ACOSS) and other commentators have estimated that by taking into account "hidden" and "underemployment" the real level of joblessness is approximately double that given by the official data (6).

Even the ABS's Labour and Statistics Branch acknowledged in 2001 that the official unemployment rate alone may provide a misleading picture (7).

Unfortunately, no Government will change the way unemployment is measured if the "number" is higher.

But until the Government is honest with the electorate, the problem of joblessness will not receive the attention that it deserves.

The unemployment measurement issue is too important to ignore for the sake of political expediency.

Mr Tony Abbott, Minister for Employment and Workplace Relations, knows the ABS unemployment figure is deceptively low. He must show leadership by correcting an ongoing error.

- Gary C. Morgan, Executive Chairman, Roy Morgan Research.

Footnotes:

1. Saunders, P. (2003) 'Lies and Statistics - It is easy to fudge a low employment rate (PDF 48kb)', AFR, August 16-17, p. 71.

2. Morgan, H. (2003) 'Unlocking jobs is key to sustaining growth (PDF 111kb)', AFR, August 16-17, p. 70.

3 Levine, M. (2003) 'A delicate balance - national security and domestic issues (PDF 495kb)', New Investor, September pp. 14-15.

4 Roy Morgan Research (2003) Unemployment still low despite slight rise to 8.0%, July 2003. Retrieved August 21, 2003 from /news/polls/2003/3654/ .

5 Milburn, C. (2001) 'Is unemployment at 10%? (PDF 473kb)', Age, June 13, p.13.

6 ACOSS Paper 325: Overcoming joblessness in Australia: 12 Budget priorities, February 2003. Retrieved August 21, 2003 from 7 Long, S. (2001) 'Hidden jobless could bring Howard down (PDF 411kb)', AFR, June 15.

http://www.roymorgan.com/news/papers/2003/20030801/

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