To coincide with the US Bureau of Labor Statistics release of the May 2016 Employment Situation I updated my analysis on the pay characteristics of the net job creation in the US labour market – see Bias toward low-wage job creation in the US continues. The overwhelming finding was that the jobs lost in low-pay sectors in the downturn have more than been offset by jobs added in these sectors in the upturn. However, the massive number of jobs lost in above-average paying sectors have not yet been recovered in the upturn and do not look like being so, given the labour market is slowing again. In other words there is a bias in employment generation towards sectors that on average pay below average weekly earnings. In the last 12 months, 86 per cent of the net jobs added in the Australian labour market have been part-time and underemployment has risen, suggesting a rise in casual work as well. Further analysis in this blog reveals that this accelerated trend towards part-time employment creation has been accompanied by a disproportionate shift towards low-pay employment (and below-average employment in general). The shifts over the last 6 months, in particular, towards below-average employment has been alarming. So come on down to Australia as our politicians take us on a race to the bottom in the part-time nation with low-pay, that barely grows at all. We are a very stupid nation supporting the policy structures that deliver this poverty of outcomes.
Over the 12 months to July 2016, the Australian labour market added only 219.8 thousand (net) jobs. 190.1 thousand of them have been part-time – that is 86.5 per cent.
In that time, underemployment (part-time workers who cannot find enough hours of work to satisfy their desires) rose from 7.8 per cent (951 thousand persons) to 8.9 per cent (1133.7 thousand persons).
So there is now an extra 182.6 thousand workers who are in part-time employment but not working to capacity.
These trends have led me to refer to Australia as the ‘part-time employment nation – see Australian labour market – the part-time employment nation
The following graph shows the acceleration of part-time employment over the three or more decades since 1980. In February 1978, 15.3 per cent of workers were part-time. This ratio had risen to 31.9 per cent by July 2016.
The Australian Bureau of Statistics does not collect data on ‘casual employment’ in the monthly Labour Force survey.
The (latest data for casual arrangements is for May 2104, when the Australian Bureau of Statistics estimated that 21.6 per cent of the 9,898.9 employees at that time were causal.
Total employment in May 2014 was 11,503 thousand so the incidence of casualisation will be even higher.
Since 1992, the percentage of employees without paid leave entitlements (one of the several characteristics that define casual work) has risen from 21.3 per cent to 23.9 per cent in 2013 (latest data).
On average an underemployed worker desires an additional 15 odd hours per week – so the labour wastage implied by the massive number of unemployed workers is no trifling matter.
A question that you will not see answered in the usual press coverage is the pay characteristics of the net jobs being added to the Australian labour market.
It is one thing to say that Australia is becoming a part-time employment nation but another dimension worth considering is the trends in pay.
We know that the overall wages growth in Australia is at record low levels. But the employment trends within the distribution of average weekly earnings is also interesting.
That is what the rest of the blog examines.
The Australian employment by industry data can be obtained – HERE.
The average weekly earnings data by industry can be obtained – HERE.
In a related study I have done for the US economy – see US jobs recovery biased towards low-pay jobs and the updated version – Bias toward low-wage job creation in the US continues – the questions asked were slightly different.
The following graph tells us why.
It shows total employment in the US (blue line) and Australia (red line) from the pre-GFC peak (January 2008) until June 2016.
In the case of the US, my analysis compared the number of jobs lost in the downturn up to December 2009 by their pay characteristics to the number of jobs gained in the upturn from the trough of December 2009.
That allowed me to conclude as in the introduction – that net job creation in the US has been biased towards sectors that on average pay below average weekly earnings.
Clearly an examination of the graph shows that the Australian path after the GFC began was more of a slowdown and as a result of of the early and large fiscal stimulus, employment continued to grow.
So for Australia I have examined three periods:
1. The period since the peak (January 2008) to July 2016.
2. The last 12 months.
3. The last 6 months.
Has the trend to low-paid jobs accelerated over those three time horizons? Is the dominance of part-time work over the last 12 months a sign of more low-paid jobs relative to higher paying jobs?
The following tables tell the story.
The first table looks at the industry distribution of total earnings as at May 2016 using the top level ANZSIC (Australian and New Zealand Standard Industry Classification).
The next table shows the distribution of net job changes across industry for the three periods analysed matched with their place in the pay distribution.
The bold entries in the Below Average AWE column are those industry sectors that are 75 per cent or less of the All Industries AWE (that is, our low wage sectors).
The slowdown in the last 6 months is apparent as is the sectoral decline in Manufacturing, Wholesale Trade, Information, Media and Telecommunications.
There has also been a collapse in Professional, Scientific and Technical Services in the last 6 months, which is consistent with the declining full-time employment growth over that period.
These are all above-average paying industry sectors.
The following graph summarises the results for the three periods.
For the overall period since January 2008, which incorporates the slowdown after the GFC, the expansion on the back of the fiscal stimulus, and then the slowdown up until July 2016 as the fiscal stimulus was withdrawn and mining investment collapsed, the following results are found:
1. Low Pay sector jobs change account for 16.3 per cent of the total change in employment (at May 2016 these jobs accounted for 20 per cent of total non-farm industry employment).
2. Below-average AWE jobs change account for 70.4 per cent of the total change in employment (at May 2016 these jobs accounted for 50.9 per cent of total non-farm industry employment).
3. Above-average AWE jobs change account for 29.6 per cent of the total change in employment (at May 2016 these jobs accounted for 49.1 per cent of total non-farm industry employment).
Over the last 12 months, the following results are found:
1. Low Pay sector jobs change account for 28.7 per cent of the total change in employment (at May 2016 these jobs accounted for 20 per cent of total non-farm industry employment).
2. Below-average AWE jobs change account for 71.7 per cent of the total change in employment (at May 2016 these jobs accounted for 50.9 per cent of total non-farm industry employment).
3. Above-average AWE jobs change account for 28.3 per cent of the total change in employment (at May 2016 these jobs accounted for 49.1 per cent of total non-farm industry employment).
Over the last 6 months, the following results are found:
1. Low Pay sector jobs change account for 28.6 per cent of the total change in employment (at May 2016 these jobs accounted for 20 per cent of total non-farm industry employment).
2. Below-average AWE jobs change account for 85.2 per cent of the total change in employment (at May 2016 these jobs accounted for 50.9 per cent of total non-farm industry employment).
3. Above-average AWE jobs change account for 14.8 per cent of the total change in employment (at May 2016 these jobs accounted for 49.1 per cent of total non-farm industry employment).
Overall conclusions from the analysis:
1. It is clear that in the more recent periods, the bias towards low-pay work has intensified along with the rising part-time ratio and the rising underemployment.
2. Over the last 12 months, the low-pay jobs are being created in far greater proportion than one would expect from their overall place in the jobs distribution as at May 2016.
3. Over the last 6 months, the disproportionate growth in below-average paying jobs has been accentuated.
In a similar vein to the results I found for the US (albeit with slightly different research questions), the analysis of the Australian labour market over the last several years shows a bias towards the net creation of low-paid and below-average pay jobs, which would have to be considered a disturbing trend given the implications for long-term productivity growth and material prosperity.
This trend has intensified over the last 12 months and especially the last 6 months.
So not only has Australia become a part-time employment nation, it is also heading the way of a low-pay nation with the commensurate negative impacts on productivity that will follow from that.
The race to the bottom that has been spawned by the simmering fiscal austerity in the face of weak non-government spending growth is now in full flow.
Far from being a clever nation, Australia is allowing its politicians to reduce our future prospects at a fairly alarming rate.
The conservatives constantly rave on about flexibility and choice when confronted with the reality that 86 per cent of jobs created in net terms over the last 12 months have been part-time.
But they cannot run that line when we understand that an alarming increase in underemployment has accompanied that trend.
And today’s analysis shows the disproportionate shift in that part-time work world towards below-average paying jobs and, within that cohort, low pay jobs (less than 75 per cent of the All Industry Average).
Clearly, this analysis is at the aggregated 1-digit ANZSIC level and a richer story could be told if we used the two-digit and three-digit typed drill downs into the industry classification.
That sort of analysis is more time-consuming than is feasible for a blog post.
That is enough for today!
(c) Copyright 2016 William Mitchell. All Rights Reserved.