Download Effects of Excess Labour Supply and Demand on Australian Wages

Understanding
Underemployment
Growth in Australia
Seminar presented
By Dr Greg Connolly and Ana Sikoska
at the NATSEM Seminar Series
on 11 October 2016
University of Canberra
Introduction
Who are the Underemployed?
Employed persons who are…
1. Willing to work more hours
and actively seeking to work additional hours
2. Available to work more hours
within a specified period (reference week)
3. Working hours below a threshold
which is defined as 35 hours per week (full-time)
This includes:
Part-timers who
want to work more
hours
Full-time workers
forced to work parttime for economic
reasons
Introduction
Broader definitions of underemployment extend
beyond the ABS’ time-related definition.
Inadequately
Employed
Underpaid
Overeducated
Over-skilled
Overqualified
Low Skill
Utilisation
Low
Reemployment
Quality
These are examples of invisible underemployment situations.
Introduction
Employment growth in year to…
Part-Time
60%
Part-Time Full-Time
75%
25%
Full-Time
40%
June 1979
June 2016
10.0
9.0
8.0
Share of Involuntary Part-Timers in Employment
Australia
OECD countries
8.9
7.0
6.0
17.9 %
5.0
4.0
3.0
Youth
Underemployment Rate
3.5
2.0
1.0
0.0
1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
August 2016
Methods
Looking at the underemployment share of total
employment
ABS: Underemployment Ratio
Analysis ranges from:
2016 Q2
for men
1978 Q1
for women
1982 Q3
Two-step errorcorrection model
long-run results
short-run results
0.08
0.04
Jun-77
Jun-78
Jun-79
Jun-80
Jun-81
Jun-82
Jun-83
Jun-84
Jun-85
Jun-86
Jun-87
Jun-88
Jun-89
Jun-90
Jun-91
Jun-92
Jun-93
Jun-94
Jun-95
Jun-96
Jun-97
Jun-98
Jun-99
Jun-00
Jun-01
Jun-02
Jun-03
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Share of Employment
Dependent Variables
Underemployment Shares
0.14
0.12
0.1
Underemployment Share
of Female Employment
0.06
Underemployment Share
of Male Employment
0.02
0
0.4
0.1
Jun-77
Jun-78
Jun-79
Jun-80
Jun-81
Jun-82
Jun-83
Jun-84
Jun-85
Jun-86
Jun-87
Jun-88
Jun-89
Jun-90
Jun-91
Jun-92
Jun-93
Jun-94
Jun-95
Jun-96
Jun-97
Jun-98
Jun-99
Jun-00
Jun-01
Jun-02
Jun-03
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Share of Employment
Determinants
Labour Market Structure
- Full-time unemployment rate
- Part-time unemployment rate
Share of Part-Timers in Female and Male Employment
0.5
0.45
Female Part-Time Employment Share
0.35
0.3
0.25
0.2
0.15
Male Part-Time Employment Share
0.05
0
0.24
Jun-77
Jun-78
Jun-79
Jun-80
Jun-81
Jun-82
Jun-83
Jun-84
Jun-85
Jun-86
Jun-87
Jun-88
Jun-89
Jun-90
Jun-91
Jun-92
Jun-93
Jun-94
Jun-95
Jun-96
Jun-97
Jun-98
Jun-99
Jun-00
Jun-01
Jun-02
Jun-03
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Share of Real GDP
Determinants
Economic Growth Indicators
- Output gap
- Cumulative falls in the log of real non-farm GDP/adult
- Investment and household consumption shares of real GDP
General Government Consumption
0.23
0.22
0.21
0.2
0.19
0.18
5
Jun-77
Jun-78
Jun-79
Jun-80
Jun-81
Jun-82
Jun-83
Jun-84
Jun-85
Jun-86
Jun-87
Jun-88
Jun-89
Jun-90
Jun-91
Jun-92
Jun-93
Jun-94
Jun-95
Jun-96
Jun-97
Jun-98
Jun-99
Jun-00
Jun-01
Jun-02
Jun-03
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
(% points)
Determinants
Financial Conditions
- Real interest rate on 90 day bank bills
- Four quarterly growth rate of business debt finance
Yield Curve
4
3
2
1
0
-1
-2
-3
-4
-5
-6
Mar-16
Mar-15
Mar-14
Mar-13
Mar-12
Mar-11
Mar-10
Mar-09
Mar-08
Mar-07
Mar-06
Mar-05
Mar-04
Mar-03
Mar-02
Mar-01
Mar-00
Mar-99
Mar-98
Mar-97
Mar-96
Mar-95
0.2
Mar-94
Mar-93
Mar-92
Mar-91
Mar-90
Mar-89
Mar-88
Mar-87
Mar-86
Mar-85
Mar-84
Mar-83
Mar-82
Index
Determinants
Supply-Side Variables
- Dwelling investment in real non-rent GDP
- Income earned from wealth
- Proportion of LF who are NESB Migrants
Real Childcare Fees
0.18
0.16
0.14
0.12
0.1
0.08
0.7
Jun-77
Jun-78
Jun-79
Jun-80
Jun-81
Jun-82
Jun-83
Jun-84
Jun-85
Jun-86
Jun-87
Jun-88
Jun-89
Jun-90
Jun-91
Jun-92
Jun-93
Jun-94
Jun-95
Jun-96
Jun-97
Jun-98
Jun-99
Jun-00
Jun-01
Jun-02
Jun-03
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Ln (Labour Costs)
Determinants
Demand-Side Variables
- Ratio of female to male AWOTE wages
Real Unit Labour Costs
0.65
0.6
0.55
0.5
Male Results
Male Underemployment increases due to increases in:
• Full-time male unemployment rate
• Part-time share of male employment
• Real unit labour costs
• The ratio of female to male wages
• The real interest rate on 90-day bank bills
Male Results
In the long-run:
The male
share
increases
by 0.96%
… if the male part-time employment share
increases by 1%
A 1% increase in real unit labour
costs is estimated to…
The male
share
increases
by 0.25%
Increase
the male
share by
1.01%
… if the male full-time unemployment rate
increases by 1%
Male Results
Male Underemployment is reduced by increases in:
• Government consumption share of GDP
• Investment share of GDP
• Actual real GDP, relative to attainable real GDP
• Growth of business debt finance
• Male part-time unemployment rate
• Income earned from wealth
Male Results
In the long-run:
A 1% increase in Actual versus
Attainable Real GDP is estimated
to…
The male
share
decreases
by
0.20%
Decrease
the male
share by
3.44%
… if the share of investment in real
non-rent GDP increases by 1%
A 1% increase in the General
Government Consumption share
of real non-rent GDP is estimated to…
Decrease
the male
share by
1.43%
Male Results
The Short-Run
Adjustment (to long-run) parameter: - 0.417
⟹ Short term shocks are corrected relatively
quickly
⟹ Almost half the adjustment occurs in one
quarter
Many of the elasticities were
also strong in the short term.
Female Results
Female Underemployment increases due to increases in:
• Full-time female unemployment rate
• Part-time share of female employment
• Dwelling investment share of GDP
• Real unit labour costs
• Real child care fees
• The proportion of the labour force who are
migrants from a non-English speaking
background
Female Results
In the long-run:
… if the female full-time unemployment
rate increases by 1%
The female
share
increases
by 0.18%
A 1% increase in the female part-time
employment share is estimated to…
The female
share increases
by 0.07%
Increase
the
female
share by
1.49%
… if the real childcare fees increase by 1%
Female Results
Female Underemployment is reduced by increases in:
• General Government Consumption share of real GDP
• The difference between the logs of actual and attainable
real GDP
• The job vacancy rate
• The yield curve
• Income earned from wealth
• Growth rate of business debt finance
Female Results
In the long-run:
A 1% increase in actual versus
attainable real GDP is estimated
to…
The
female
share
decreases
by
0.80%
Decrease
the
female
share by
2.30%
… if the share of General Government
Consumption in GDP increases by 1%
A 1% increase in the Job Vacancy Rate is
estimated to…
Decrease
the
female
share by
0.11%
Female Results
The Short-Run
Adjustment (towards long-run) parameter: - 0.585
Short term shocks are
adjusted faster for females
than for males
Short-run elasticity of female underemployment to the Proportion of
the Labour Force from a non-English Speaking Background is 0.3.
⟹ But the effect is not significant in the long run
Two Main Drivers
For Men
For Women
Share of Part-time Workers contributed:
78 % pts
52 % pts
to the total growth rate
Cumulative Falls in the Logarithm of Real NonFarm GDP contributed:
30 % pts
114 % pts
to the total growth rate
Offsetting Factors
These Drivers Subtracted from Growth:
Men and Women
• Real Unit Labour Costs
Women Only
• Full-time Unemployment Rate
• Job Vacancy Rate
• Dwelling Investment Share of GDP
Conclusions
The share of part-time employment has a very close association
with the rise in the underemployment shares
Economic recessions have a persistent effect in raising the
underemployment shares
Other economic factors have also impacted the rising
underemployment shares in Australia
The labour supply side determinants of underemployment are
different for men and women