Have you ever wondered why official labour statistics around the world classify someone who has worked one hour per week as employed?
"While on face value one hour may seem like a low threshold, it is important in counting everyone who is involved in production activities in the economy," said Bruce Hockman, Chief Economist at the Australian Bureau of Statistics (ABS).
"It is a measure of who is employed, not how fully employed people are, which is covered by other measures.
An article released by the ABS today shows that in 2018 around 1 in 1,000 employed people usually worked one hour per week. This has not changed much in recent years.
"It’s important to remember that 97 per cent of employed people usually work 7 hours or more per week," Mr Hockman said.
"While public attention may be focused on employment and unemployment, these two statistics alone cannot highlight whether people want more work, what their earnings are, and what employment conditions they are entitled to," Mr Hockman said.
"No single labour market measure can answer every question, which is why the ABS releases such a broad range of information throughout the year. In combination, these provide a greater understanding of Australia’s labour market."
INSIGHTS FROM THE ORIGINAL DATA
SAMPLE COMPOSITION
The Labour Force Survey sample can be thought of as comprising eight sub-samples (or rotation groups), with each sub-sample remaining in the survey for eight months, and one rotation group "rotating out" each month and being replaced by a new group "rotating in". This sample rotation is important in ensuring that seven-eighths of the sample are common from one month to the next, to ensure that changes in the estimates reflect real changes in the labour market, rather than the sample. In addition, the replacement sample is generally selected from the same geographic areas as the outgoing one, as part of a representative sampling approach.
When considering movements in the original estimates, it is possible to decompose the sample into three components:
- the matched common sample (survey respondents who responded in both November and December);
- the unmatched common sample (survey respondents who responded in December but who did not respond in November, or vice versa); and
- the incoming rotation group (survey respondents who replaced respondents who rotated out in November).
The detailed decomposition of each of these movements is included in the data cube 'Insights From the Original Data'.
In considering the three components of the sample, it is important to remember that the matched common sample describes the change observed for the same respondents in November and December, while the other two components reflect differences between the aggregate labour force status of different groups of people.
While the rotation groups are designed to be representative of the population, the outgoing and incoming rotation groups will almost always have somewhat different characteristics, as a result of the groups representing a sample of different households and people. The design of the survey, including the weighting and estimation processes, ensures that these differences are generally relatively minor and seeks to ensure that differences in characteristics of rotation groups do not affect the representativeness of the survey and its estimates. Monthly estimates are always designed to be representative of their respective months, regardless of the relative contribution of the three components of the sample.
INCOMING ROTATION GROUP
In original terms, the incoming rotation group in December 2018 had a higher employment to population ratio (62.4% in November, up to 62.9% in December 2018) than the group it replaced, and was lower than the ratio for the entire sample (63.0%).
The full-time employment to population ratio of the incoming rotation group was lower than the group it replaced (43.0% in November, down to 42.4% in December 2018), and was lower than the ratio for the entire sample (43.3%).
The unemployment rate of the incoming rotation group was 0.8 pts higher than the whole sample (5.6%, compared to 4.8%), and it replaced a group with a lower rate (4.5%). Its participation rate was above that of the sample as a whole (66.6%, compared to 66.1%), and above the group it replaced (65.3% in November 2018).
OUTGOING ROTATION GROUP
In looking ahead to the January 2019 estimates, the outgoing rotation group in December 2018, which will be replaced by a new incoming rotation group in January 2019, has a higher employment to population ratio (63.6% in December 2018) than the sample as a whole (63.0%) in original terms. The full-time employment to population ratio (43.6%) is higher than the ratio for the entire sample (43.3%).
The unemployment rate for the outgoing rotation group in December 2018 is lower than the whole sample (4.1%, compared to 4.8%). The participation rate for the outgoing rotation group in December 2018 is higher than the sample as a whole (66.3%, compared to 66.1%).
THE IMPORTANCE OF TREND DATA
As the gross flows and rotation group data are presented in original terms they are not directly comparable to the seasonally adjusted and trend data discussed elsewhere in the commentary, and are included to provide additional information for the original data. Since the original data are unadjusted, they have a considerable level of inherent sampling variability, which is specifically adjusted for in the trend series. The trend data provide the best measure of the underlying behaviour of the labour market and are the focus of the commentary in this publication.
ROTATION GROUP ANALYSIS FOR STATES AND TERRITORIES
In recent months, a number of users of this information have asked whether the ABS also undertakes state and territory rotation group analysis, given the above summaries generally focus analysis for the entire sample and the related national estimates. In addition to analysis across the entire sample, the ABS also undertakes similar analysis for the responding sample in each state and territory each month, and highlights where there is a notable change for users to be aware of. For example, in the release of July 2018 data, on 16 August 2018, the ABS noted that “the rotation group effects in July 2018 were most pronounced in Queensland, Tasmania and the ACT.”
As for its reporting for the entire sample, where the ABS has not highlighted a notable incoming rotation group effect, any larger changes should therefore be considered to reflect a broader change across the sample.