Pressing towards Full Employment? the Persistence of Underemployment in Australia

By Campbell, Iain | Journal of Australian Political Economy, June 2008 | Go to article overview

Pressing towards Full Employment? the Persistence of Underemployment in Australia


Campbell, Iain, Journal of Australian Political Economy


The economic boom in Australia since the early 1990s has been accompanied by a steady increase in jobs and a reduction in official unemployment rates. This has sparked some excited commentary. Responding to the release by the Australian Bureau of Statistics (ABS) of the July 2007 labour force estimates, which cited an unemployment rate of 4.3 percent, the then-federal Treasurer, Peter Costello, announced that "we are pressing towards full employment" (The Australian, 9 August 2007). He was loyally echoed a week later by the Secretary of the Treasury, who pointed to the same figure and declared that "today the Australian economy is as close to full employment as it has been for more than 30 years" (The Australian, 16 August 2007).

This article examines an aspect of labour market restructuring that has been neglected in the flurry of recent commentary. Most attention has been narrowly focused on unemployment, but this article turns to the somewhat separate phenomenon of underemployment. The latter term can have different meanings in labour market analysis, but it is used here in its most familiar sense as 'time-related underemployment', broadly understood as 'insufficient hours of paid work' amongst workers classified as currently employed.

The article begins by presenting official labour force data that outline the extent of underemployment and its pattern of growth in Australia. Both unemployment and underemployment surged upwards in the last recession. However, in contrast to the pattern of unemployment, underemployment failed to recede during the subsequent period of economic boom and even increased slightly. The underemployment rate has more than tripled since thirty years ago, reaching a point where it now surpasses the unemployment rate. Moreover, the current level of underemployment in Australia seems high in comparison with the other advanced capitalist societies grouped together in the Organisation for Economic Co-operation and Development (OECD) (ILO, 2007). In short, underemployment has become a significant phenomenon, demanding careful analysis.

Though pushed aside in current political discussion, underemployment is recognised as an important issue by many labour market researchers, who have sketched out its main features (Watson et al, 2003; Wilkins, 2004, 2006, 2007). This article covers similar points of description, but it also seeks to push on into less familiar territory by exploring the dynamics behind the increase in underemployment, looking at how underemployment is influenced by cyclical movements in the economy and also by more fundamental structural factors. It shows the contribution of industry conditions and employer practices in producing part-time jobs that sustain underemployment, using the example of retail sales assistants and contract cleaners. It also draws out some implications of the analysis, stressing that the persistence of high levels of underemployment undermines exaggerated claims of labour market success. Finally, it poses important questions about the implications of economic growth and the quality of jobs in Australian labour markets.

Describing Underemployment

Unemployment and Underemployment

Researchers have known for a long time that the headline unemployment rate, which measures the unemployed as a percentage of the labour force, is a poor indicator of the efficiency of labour markets in utilising labour resources (De Neubourg, 1988; OECD, 1995; Mitchell and Carlson, 2000; Watson, 2000; Denniss, 2001). More than twenty-five years ago, Stricker and Sheehan (1981:26) pointed out that the Australian measure of the unemployment rate was 'totally inadequate'. Thus it does not capture the many persons who want to take up hours of paid work (and may respond to opportunities if these become available) but who do not meet the criteria to be included in the count of the unemployed. Instead, these persons are counted either as 'not in the labour force' or even as 'employed'. …

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