I am sure that there would be many who question the validity of the unemployment rate measures and some of the other labour market data that crosses our paths on a regular occurrence. Stats, damned stats and lies can always be used to tell a story and we are now quite adept at seeing data manipulation at play. However, our official unemployment rate data underpins some very serious decision making by individuals, households and businesses – and how can we be sure that we can trust what the data, and those who promote the data, tells us?
Let’s consider the plight of the recently, or soon to be unemployed – I’m talking about the vast range of workers from companies right across Australia, from large blue chip to small manufacturing – they certainly won’t take any heart in the ABS figures, or the politician’s speak, about how well the economy is going. They don’t have a job and many of their colleagues will also be in the same boat. But even though they are not going to work tomorrow, are they actually unemployed? Do the recently released unemployment figures accurately represent what is actually occurring in the labour market? The truth is, whilst we can all be sure of the integrity of the data that the ABS collects during their labour market surveys, some argue that the definition of ‘unemployed’ skews the data to mis-represent the current reality.
Some argue that the definition of ‘unemployed’ skews the data to mis-represent the current reality.
The ABS define ‘unemployed’ as persons aged 15 years and over who were not employed during the reference week, and had actively looked for full time or part time work at any time in the four weeks up to the end of the reference week and were available for work in the reference week; or were waiting to start a new job within four weeks from the end of the reference week and could have started in the reference week if the job had been available then. This is a fairly reasonable definition, however, what of the thousands of workers who have been laid off, but thanks to their tenure, were provided with a severance/ redundancy payout that allowed them the opportunity to take a break? Some may plan to take a holiday, some may wish to commence their outplacement programs and hold off rushing in to try to find a new job. Unless they actively commence their job search, they will not be deemed unemployed by the ABS. In fact, they won’t be unemployed until they embrace the job hunt – which could be many months away.
Sure, the ABS have built in measures to provide a broader and deeper level understanding of the prevailing labour market – including participation rates and monthly aggregate hours worked. And trend reporting also enables insight into the monthly variances. But the one number that the public understands and many use to their advantage (when it suits) is the unemployment rate. And this number can unfortunately miss the real story, or worse, be mis-representing the reality.
The real story will become clearer in a few month’s time – when the lag that occurs between an individual’s redundancy to the time when that individual becomes ‘unemployed’. Hopefully, when they decide to commence their job hunt, the economy will have created new roles for them. If not, we may well find that the truth lags behind our unemployment rate.