Flexible Measures For a Flexible Labour Market

By Richard Denniss

The unemployment rate as an indicator of the state of the labour market is a seriously inadequate measure of the real state of the labour market.

The unemployment rate measure was designed for an era when the labour market in characterised by full-time male bread-winners. Deregulation and structural change have transformed the labour market radically. Underemployment of part-time and casual workers is now a serious problem, as is the issue of overwork. A proper understanding of these important trends is missing from public debate and policy-making because they are not captured in the official statistics.

Denniss proposes an alternative approach to indicating the real state of the labour market. This would incorporate information on how many hours people would prefer to work as well as how many hours they do work. By asking respondents to the ABS Labour Force Survey to state both the number of hours they worked and the number they desired to work it is possible to measure the nature and extent of unemployment, underemployment and overwork simultaneously.

(Australian Bulletin of Labour. vol. 29, no. 2, June 2003)