The Bogus Australian Unemployment Rate You Read about Every Month

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Do you want a direct reflection of how a bloated and pampered bureaucracy over-regulates and over-governs us?

Well, it’s obvious in the OECD voting Canberra the best place to live in the world…again.

Canberra is a town purpose built for government and public servants. If we lived in a world of efficiency and minimal red tape, Canberra would be a shadow of its current self.

Canberra is, to put it bluntly, a parasite feeding off the host. While the parasite luxuriates, the host has to struggle on.

For example, regional towns are suffering due to the stifling red tape emanating from the bureaucrats inhabiting the world’s supposed best place to live.

Ask the cattle farmers — fair dinkum workers with their own money on the line — what they think of Canberra. After all, Joe Ludwig closed down their livelihoods overnight.

Then there’s the environmental bureaucrats adversely impacting countless agricultural businesses. And of course Canberra’s predominantly useless bureaucracy touching just about every nook and cranny of our lives.

In principle, if Australia was run with a lean government, Canberra should be a regional town winning the occasional Tidy Town award.

Instead we get politicians and ‘services’ like the Australian Bureau of Statistics.

In case you missed it, the Australia Bureau of Statistics concedes that there’s a minor problem with the unemployment data. No kidding.

The following is an extract from the ABS website on how the unemployment figure is guesstimated.

KEY POINTS:

  1. The ABS uses internationally agreed standards in defining unemployment and the key indicators have been measured in a consistent way since 1966.

  2. To be classified as unemployed a person needs to meet the following three criteria:

  3. – not working more than one hour in the reference week;

  4. – actively looking for work in previous four weeks; and

  5. – be available to start work in the reference week.

  6. The ABS produces a range of measures, in addition to the unemployment rate, to help users understand the extent of underutilised labour supply, such as underemployment.

Firstly, the ABS uses internationally agreed standards. Agreed by whom? Other governments!

Politicians the world over have been cooking the unemployment numbers for years. So one day they sat down and had a little pow-wow to decide what’s in and what’s out.

Presto, we have internationally agreed standards.

Secondly, you are ‘employed’ if you work ‘more than one hour’ in the week. One hour?

Wait until you hear the ABS’s justification for this definition of employment:

From an economic perspective, any time in paid work, no matter how small, contributes to economic production and is therefore included in the national accounts. Fundamentally, labour force statistics are economic indicators and need to be coherent with other economic measures.

Socially, it is recognised that employment is associated with improved psychological and social wellbeing. It is therefore important to distinguish between those who have any work (even if a small number of hours) and those who do not.

Really?

Here’s a test: how about we reduce the ABS staff to one hour a week and then measure their social wellbeing?

To make them feel better we can also reassure them they are making a valued contribution to our nation’s economic production.

Thirdly, you need to have been actively looking for work in the past four weeks. Too bad if you were sick or a family member needed care. Nuts to you, technically you are not unemployed!

For the record, selected households participate in the ABS survey over an eight month period. Each month, new data is added and the ABS feed the lot into the following flow chart:





That gives them the official unemployment figure…seasonally adjusted of course.

This is meant to smooth out the lumps and bumps in the data due to seasonal factors. For instance, Christmas time may create more retail jobs.

Historical patterns are used to adjust the data to account for these vagaries.

In the same vein, historically the numbers are tortured to give the politicians the answer they want…a low figure.

But consider this…

Roy Morgan research has been conducting its own unemployment surveys since 1992.

According to their website, they classify a person as unemployed if they are simply looking for work. Nor are the results seasonally adjusted.

Below are the 2014 results of the Roy Morgan Unemployment estimates compared to the ABS estimates.







No surprise the private sector data is at odds with the public sector’s. In addition to the 9.9% unemployment rate, Roy Morgan estimates the underemployment rate for September 2014 is 8.3%.

Tally these two figures together and we have 18.2% un- and underemployed. This highlights the huge shift to part time and casual employment

From the Roy Morgan report (emphasis mine):

The Roy Morgan September employment estimates show Australian full-time employment now represents 65.1% of employed Australians (7.17 million) and part-time/casual employment represents 34.9% of employed Australians (3.85 million).

These figures are extraordinary and show that over the last seven years Australian full-time employment has barely changed whilst part-time/casual employment has increased by about 900,000. In raw percentage terms part-time/casual employment has increased 29.6% whilst full-time employment is virtually unchanged.

Little wonder the underlying economy lacks confidence if all the jobs growth in the past seven years has been like this.

This trend is repeated in Europe, the US and Japan. Employers the world over — burdened by restrictive labour laws and economic uncertainty — want labour force flexibility. Who can blame them?

The economic repercussion of this trend is part-time employees, on average, are less likely to make major commitments (home loans, marriage, children, etc.) compared to those in full-time employment. Slower growth ensues, which feeds into more economic uncertainty and more employers opting for part-time/casual employees. A negative feedback loop is created.

However, for those firmly ensconced in the world’s most liveable city this is hardly any cause for concern.

That is of course until the income tax revenues start to dry up. Then some of the happy little Canberran vegemites may find themselves as part of the unemployment stats…unless that is, they are fortunate enough to work one hour a week for their social wellbeing.

Have no doubt the remaining bureaucrats will find away to define out of existence any unsightly numbers that could embarrass their political masters. Stay tuned for new ‘internationally agreed standards’ that exclude ex-public servants from the data.

Vern Gowdie

For The Daily Reckoning Australia

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Vern Gowdie

Vern Gowdie

Vern Gowdie has been involved in financial planning in Australia since 1986. In 1999, Personal Investor magazine ranked Vern as one of Australia’s Top 50 financial planners. His previous firm, Gowdie Financial Planning, was recognized in 2004, 2005, 2006 & 2007, by Independent Financial Adviser magazine as one of the top 5 financial planning firms in Australia. He is a feature contributing editor to The Daily Reckoning and is Founder and Chairman of the Gowdie Family Wealth advisory service and editor of the Gowdie Letter To follow Vern's financial world view more closely you can you can subscribe to The Daily Reckoning for free here.
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