Unemployment 101: It’s time to get REAL

Western leaders misleading their citizens. Feeding the people gruel and calling it tiramisu. Chuckling heartily within the confines of parliament, at the expense of an ignorant public. Where is Wikileaks when we need it?

Last Thursday when Australia’s jobless figures were published nationwide inboth the Fairfax and News Ltd press. They weren’t. Media outlets fell over themselves crowing that the jobless rate fell to 5.1 per cent in January, from 5.2 per cent in the previous month.  

In unison they cooed, that in January the number of employed rose by 46,300, with full time employment increasing by 12,300 and part time workers climbing by 34,000.

The media downplayed or ignored that in the last year, employment has grown by a tiny 0.3 per cent. That is, it barely moved.

Many commentators expected the jobless rate to rise marginally to 5.3 per cent and were gobsmacked with the news of a fall in jobless numbers. After all, companies up and down the eastern seaboard are shedding labour: Alcoa, Kell & Rigby, Pacific Brands, Qantas, ANZ, Heinz, Ingham, Holden and Toyota. With others like Caltex and Air Australia possibly next to cull their staff numbers.

Officially, at 5.1 per cent, January's unemployment rate fell to the lowest level since July 2011.

But unofficially - and we’ll define that in a minute - the number of truly jobless Australians grew to 10.3% or 2.21 million. This is 0.7per cent higher than for December’s unofficial rate. So why the discrepancy between official and unofficial figures?

For starters, politicians are allergic to bad news and do their utmost to immunise the public from the brunt of it. Lest the public vent its rage at the ballot box.

Former Labor Prime Minister Paul Keating was a master of this deception. Towards the end of his term he grew more and more unhappy with the march northward of the consumer price index (CPI). The CPI after all is a measure of the change in prices paid by households for goods and services for consumption purposes. In general the greater its strut northward the lower the living standard enjoyedby the punters.

Keating removed (the volatile and mostly climbing) house prices as a variable in determining the CPI and replaced it with (far steadier) “imputed rent on owner occupier homes”. This way, he misrepresented living standards and cunningly misstated that people were better off than they really were. The charade continues to this day.

But such wicked behaviour is not solely the domain of the Labor Party. Back in the winter of 2003, the highly regarded pollster Gary C. Morgan of Roy Morgan Research attempted to shame the then Howard government for telling porky pies about the number of unemployed Australians with their snouts in the welfare trough. The claim was that the Howard government was intentionally understating these numbers.

Morgan put forward his argument to the Australian Financial Review on 22 August, 2003, claiming that by reclassifying some unemployed people as permanently disabled or by conjuring up a potion called “Youth Allowance” (which is little more than a mask for the jobless), the official statistics hid a huge number of people who would actually like to be working.

In addition to the re-classification of people on welfare benefits, countless Australians who sought more work, or wanted to get work, did not fit the official definition of unemployed. This was because the Australian Bureau of Statistics Unemployment Estimate, narrow that it is, classified and still classifies an unemployed person as part of the labour force only if, when surveyed, they have been actively looking for work in the four weeks up to the end of the reference week and if they are available for work in the stipulated week.

That instantly cuts out those who have long ago become disenchanted with the process of looking for a job as well as those only passively looking because they are growing frustrated with each passing day.

A true measure of the unemployed would include all those not working regardless of their efforts to find jobs, the duration of their exclusion from the workforce and irrespective of any welfare camouflage they are asked to wear by the government.

"Underemployment" is another critical issue that also needs to be correctly measured and currently is not.

The ABS estimate does not take into account people who have been employed for a few hours of part-time work per week but would like to work more hours. To the ABS, these folk are happily ‘employed’. The Australian Council of Social Service (ACOSS) estimated that by taking into account "hidden" and "underemployment" the real level of joblessness is approximately double that given by the official data.

Surely such people must be included in any measure of the jobless, if the government want an accurate feel of the nation’s economic pulse.

Regrettably, the AFR chose not to publish Morgan’s revelations. Perhaps Fairfax didn’t want to get on the wrong side of the then Minister for Employment, Tony Abbott. Or perhaps Morgan’s logic offended the publication’s bias. Who knows? What is known is that no politician will willingly change a common indicator that will make him look worse, no matter the public interest.

Gary Morgan calls his patently valuable concept the ‘Roy Morgan Unemployment Estimate’ but sadly it is rarely mentioned in the press. I prefer to call it the Roy Morgan Estimate of Aggregated idle Labor (REAL) as in REAL Unemployment Index.

The REAL Unemployment Index, currently 10.3 per cent is far, far more meaningful than the government manufactured ABS statistic, which is not ‘wrong’ per se, but too narrow to truthfully convey much of real value.

While the media and the government portray the most recent jobs number — 5.1 per cent unemployment — as good economic news, more sober minds understand what's really going on.

One such mind is Newcastle University Centre of Full Employment and Equity’s Director Professor William Mitchell. But then again, Mitchell isn’t your run-of-the-mill commentator as his blog bears out.

Amongst other observations, on 15 February Mitchell was quoted in the Daily Telegraph as calling for a class action by a “union of the unemployed” to haul the sorry derrière of the RBA’s Governor into court to explain why the RBA now uses unemployment as a policy tool rather than a policy target. Good luck with that. Really, good luck.

Truth in statistics is in the gift of the media and not politicians. If we’re ready to fight for the truth, that is.

Unless we command politicians to reveal the accurate levels both of Australia’s use of labour and its underuse of available labour, we will never get a handle on just how good or how miserable the state of the labour market really is.

When it comes to unemployment, it’s surely time to get REAL.