Work is becoming a more popular pastime
HO, HUM. Another month, another rise in employment. Do you realise that, since the recession of the early 1990s, 2.5 million additional jobs have been created?
We weren’t always as complacent about jobs growth as we are now. During the depths of that recession many people wondered where on earth any extra jobs would come from.
So let’s take a closer look at where they did come from, with the help of an article from the Reserve Bank Bulletin, Trends in Employment and Labour Supply.
Of those 2.5 million extra jobs, almost half have been part-time although recent years have seen full-time jobs far outnumbering part-time. And remember that many of the people looking for jobs are looking for part-time jobs.
Employment in agriculture and manufacturing hasn’t changed much and employment in mining has grown strongly only in the past few years. Employment in the construction industry has grown strongly over the whole period, to employ roughly as many people as in manufacturing.
But the really big growth in jobs has come from the same part of the economy it’s been coming from for decades: the services sector specifically, retail and wholesale trade, education and health, and finance, property and business services.
Now, where did the workers come from to fill all those extra jobs? From the ranks of the unemployed, of course, but also from growth in the population of working age (15 years and older) and from a higher proportion of people in the working-age population choosing to work.
The greatest single source of labour supply, and also the steadiest, has been growth in the population of working age, contributing at least 1.5 percentage points to total employment growth each year.
The working-age population grows because of natural increase but also because of immigration, which has been more important in recent years. Turning to the rate of unemployment, it has fallen from almost 11 per cent in 1992 to a bit over 4 per cent. In terms of people, that’s a decline from 930,000 to 460,000.
Long-term unemployment (people unemployed for more than a year) rises during recessions and then can take a long time to decline. It’s gone from a peak of almost 4 percentage points of the total unemployment rate in the early ’90s to only about 0.75 percentage points today.
So the decline in long-term unemployment accounts for more than half the overall fall in the unemployment rate. Unfortunately, however, we can’t be sure that all the long-termers who left the ranks of the unemployed did so by getting a job. Some would have gone on to the disability pension and some the age pension.
The proportion of people who are unemployed for between 13 and 52 weeks also shoots up during recessions, but tends to fall back a lot faster when the economy recovers. They reached a peak of roughly 4 percentage points of the total unemployment rate in the early ’90s, but have fallen to 1.25 percentage points today.
That leaves the people unemployed for under 13 weeks. These people rarely account for more than 3 percentage points of the total unemployment rate and have now fallen to a generational low of 2.25 per cent.
So this group largely reflects “frictional” unemployment people who are just moving between jobs. The rate of frictional unemployment is fairly steady, regardless of which stage the business cycle is at. It’s nothing to worry about; it is unavoidable, even in the best-run economies.
The third source of labour supply is the rate at which people of working age choose to participate in the labour force by holding or seeking a job. The overall participation rate stayed surprisingly steady at about 63.5 per cent for most of the past 15 years, but since 2004 has shot up to 65 per cent its highest level.
The stability of the overall participation rate, however, concealed a continuing decline in men’s participation, offset by a continuing rise in women’s participation.
Each successive age group of women is better educated and more inclined to want to work and keep working after child-bearing. But, until recently, each successive age group of men was less inclined to work because of rising sickness and disability and, to a lesser extent, a greater willingness to stay home minding children.
But for prime-age workers (those aged 25-54), the decline in men’s participation has now stopped. That’s the first reason for the rise in the overall participation rate since 2004.
The other reason is a relatively recent rise in the participation rate of men and women aged 55 and over.
In other words, we’re seeing a dramatic reversal of the trend to early retirement (voluntary or involuntary).
The main explanation seems to be cyclical the economy’s protracted strong growth leading to shortages of labour.
But this also involves attitudinal change: more workers wanting to keep working and adding to their retirement savings and employers now far more anxious to retain the services of their older staff.
