Ricardo's Business

SBS Presenter Ricardo Goncalves with the latest in finance.

How the ABS determines the unemployment rate

14 February 2013, 18:25 PM | Source: Ricardo Goncalves, SBS

I'm a bit of a statistics nerd, so when the ABS released some details about how it determines the unemployment rate, I took a look, and found it interesting, that one of the most watched indicators of the strength of our economy, the unemployment rate, is determined by 60,000 people.

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Last week's steady headline unemployment rate of 5.4% surprised many, with some economists predicting a higher figure.
 
A closer look showed that a fall in the participation rate and a rise in part-time jobs skewed the result.
 
While debate rages about the accuracy of the numbers, the collection method used by the Australian Bureau of Statistics follows international guidelines so that it can be compared with other countries.
 
In a release today, the ABS detailed how it collects the labour force data.
 
It noted, that the composition of the pool of workers has changed dramatically over the past fifty years.
 
In the 1960's, the majority of Australian workers were men working full-time and only 30 per cent were women.
 
These days, 45 per cent of working Australians are women, and overall, more are taking part-time or casual work.
 
To be classified as employed, according to international standards, you only need to work for one hour or more for pay or profit a week, and that includes for example, a teenager who works after school, or a parent at a tuckshop.
 
The ABS also noted, employment data doesn't take into consideration a person picking up a second part-time job, rather, just the number of people working. What that means, is when commentators refer to the labour report and say that "X amount of jobs were created", that is technically wrong.
 
To get the unemployment rate, the ABS collects a sample, and it's quite large. In fact, behind the Census, the Labour Force Survey is the largest household collection undertaken by the ABS.
 
Around 30,000 homes are surveyed as well as a selection of hotels, hospitals, boarding schools, colleges, prisons and Indigenous communities to acquire the data.
 
These are mainly done face-to-face or over the phone, although, the ABS is trialling an online survey for one-eighth of the survey sample, although only around 25% of those given the option to do it online, have taken it up.This trial will continue for a few more months before a decision on whether the online survey is rolled out for the full Labour Force Survey sample.
 
All up, data from 60,000 people is gathered from a board range of areas with diverse backgrounds, with questions asked which allows for the calculation of the unemployment rate, and other variables.
 
The ABS is however looking to expand the data availability and frequency.
 
From 2014, two other important figures, among others, will be released monthly.
 
One, is the underemployment rate. This will reveal the proportion of the labour force who work part-time, but would prefer to work full-time. It means a measure to reveal the hidden potential in the labour force will be published monthly. In a slowing economy, some people may lose they jobs, while others may just have their hours cut, so this can be a better indication of the willingness of people to work.
 
The other read which will be published monthly from 2014, is the labour force underutilisation rate. It combines the unemployment rate and the underemployment rate into a single figure that represents the percentage of the labour force that is willing and able to do more work.
 
More numbers, more stories, and a greater accuracy of Australia's labour pool.
 

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Your Comments

Unemployment Rates

Ajax - from Frankston, 3 months ago

This comment is a wow. The other related item is foreign exchange rates, now apparently the so called unemployment figures play a huge role. It's glaringly obvious that some countries have strong currency when there is an excess of any sort of work be it casual part time or whatever. Now it doesnt matter that they are literally bankrupt, just take a peek at some of our neighbors .

unemployment is a lot more than reported

June - from sydney, 3 months ago

Reporting the underemployment and underutilisation rates is long overdue. As the drift to part-time work is not new (its been going on for a long time), getting a second job is now much more a necessary than it once was. In short the current published data is rather meaningless and not appearing in the unemployment numbers just because you work 1 hour (or more) a week is farcical.

swinging voter

swinging voter - from aspley, brisbane, 3 months ago

somehow i dont think 5.4 % is even the tip ofthe iceberg of unemployed. Perhaps it time to have another look at which geographic areas and psychographic groups are targeted for the survey? perhaps its time to look a tlittle closer at the classification to be called unemployed?

unemployment percentage unaccurate

Dorothee - from Perth, 3 months ago

Some years ago, I studied economics at Uni; I was surprised to learn how the unemployment % was being calculated; I also wondered how a person working four hours a week can be said to be employed? I would like to know if the other countries that are part of OECD calculate their un-employment the same way. We are often told that Australia's % of employment is so much higher than other developed countries.

Why Change?

OneHour Australian - from Mascot, NSW, 3 months ago

So politicians who work one hour per week are essentially employed? I would like to argue that one hour of a politician's speech in parliament does not portray employment, but rather a consumer of taxpayer's funds for amusement. can we divert these funds to our comedians or satirists who do a better job.