Open and hidden unemployment both rising

March 17, 1993
Issue 

By Sean Malloy

The release of February labour force figures on March 11 showed unemployment still rising. The Australian Bureau of Statistics put the seasonally adjusted figure at 11.1%. This was a rise of .1% on the January figure, which the ABS revised from 10.9% to 11%.

More worrying was the loss in February of 66,900 jobs. The ABS recorded a growth of 62,400 jobs in January.

And these figures don't tell the full story. Recent studies show real unemployment to be double the official figure and the loss in wealth resulting from unemployment to be around $42 billion for 1991-92.

The ABS in September recorded 2,026,800 people who wanted to work. Only 984,400 of those were recorded as officially unemployed. The other 1,042,400 were "not actively looking for work" for reasons such as lack of child-care or discouragement from job seeking.

ABS figures also indicate that the number of discouraged unemployed increases as the total number of unemployed increases.

Australian National University academics P.N. Junankar and C.A. Kapuscinski, in an Economic Planning Advisory Council document, The Costs of Unemployment in Australia, using different criteria than ABS, have also calculated levels of "hidden" unemployment.

"These estimates of the hidden unemployment", note Junankar and Kapuscinski, "indicate that a substantial proportion of the labour force withdraws from the official labour market during the recessionary periods".

According to the authors' calculations, during the 1982 recession 40% of unemployment was "hidden", while in 1991 it was 30%.

The Costs of Unemployment in Australia contains a detailed assessment of the economic cost of joblessness. Using three different methods to assess the loss, Junankar and Kapuscinski outline the enormous waste of potential wealth.

"We find that the cost to the economy in terms of lost output is immense: if unemployment in 1991-92 had been at 6.5% our GDP would have been about six percent higher." In 1991-92, 6% of

GDP was around $22.6 billion.

The three methods applied by Junankar and Kapuscinski yield different numerical results but the trends drawn from each method correspond.

The average wage method calculates the potential earnings unemployed people could have obtained at average wage rates. Junankar and Kapuscinski calculate on this basis that the total output loss to the economy was $24.94 billion in 1991-92.

They also use the average product of the employed labour force to calculate the value of what could have been produced if the unemployed had been working. The result of this method is a loss of $42.72 billion in 1991-92. The difference between the average wage method and the average product method reflects the profits of business. This method is the clearest measure of wealth lost.

Junankar and Kapuscinski's final method uses "Okun's law" which is considered discredited by some economists. This method calculates the loss for 1991-'92 as $124.15 billion.

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