What is the Labour Force? Components which make the labour market and how they are related.

One of the key measurements of employment, which is typically reported in the news, is the “unemployment rate” which is a part of complicated set of scales which balance employment, unemployment and not participating in the labour force across all people aged 15 and over.

Unemployment is a subset of the labour force which excludes anyone who is not in the labour force (NILF) – as the figure to the left (Source: RBA) illustrates.

In Australia, the Australian Bureau of Statistics (ABS) undertakes a monthly survey (the Labour Force Survey) to collect labour market data. The survey collects information from around 50,000 people about their participation in the labour market. Since COVID-19, the Labour Force trend data has been discontinued due to the large scale labour force changes observed.

Regional data relies on 12 months of averaged original data (due the smaller sample sizes and volatile data) which distorts the impact and recovery from COVID-19

The purpose of this data visualisation is to look at the labour force and additional information which has been made available since March 2020 which can assist in looking at the impact of COVID-19 in regional areas.

Labour Force Data Queensland Employed 2000 to 2020

The next three figures show the changes to each of the key components of the labour force:

• Employment;

• Unemployment; and

• Not in the labour force (NILF).

As we can see from this ABS Labour Force Survey October data, employment and continually increased over time (as population increase), and previous 5 years (shown in deeper blue) have the highest employment levels of the past 20 years.

However, from March to May 2020 (2020 is shown in red), as we saw a number of COVID-19 restrictions put in place we saw employment take the steepest decrease observed on record, dropping by over 200,000 people and losing close to 5 years of employment growth.

However, as COVID-19 restrictions were lifted, we have seen employment levels slowly return to pre-COVID-19 levels (with October 2020 being 500 higher in employment than March 2020).

Labour Force Data Queensland Unemployed 2000 to 2020

We have kept the Unemployment data on the same scale as the Employment data just so we can see the relative changes in numbers.

When we look at unemployment, we cannot see a large increase from fall in employment which occurred through April and May.

Instead, we see unemployment increase slowly through to July where it peaks at 235,000 in total (reflecting an increase of only 80,000 people since March 2020) indicating that only a small proportion of people who lost employment due to COVID-19 were appearing in the unemployment rate.

In October 2020, we still see unemployment much higher than March 2020 and October in the previous year.

Labour Force Data Not in the Labour Force 2000 to 2020

And we can see here, that the growth in not in the labour force corresponds with the drop in Employment observed earlier. The 1.427M people aged over 15 year who were not in the labour force in March grew to 1.593M people in May (an increase of over 160,000 people in 2 months).

If all of the people who left employment in March 2020 had have moved to the ranks of the unemployed, we would have seen an Unemployment Rate of over 13% in May 2020 (0.26M Unemployed compared to 2.358M) rather than the 7.8% reported.

Like with the employment data, we see that by October 2020 the number of people not in the labour force has returned to below March 2020 levels.

New Data Releases

Several administrative data sets have been release this year which shed more light on the impact of COVID-19. Over the next sections, we will look at a couple of these sets and how they compare to the regional labour for data.

DSS People on Employment Benefits Number of people on employment benefits compared to Estimated Resident Population of working age

The first data set we will examine here is the Department of Social Services (DSS) which has been releasing a monthly profile of JobSeeker and Youth Allowance (Other) (which excludes student and apprentice recipients)) recipients since March 2020. These reflect the people who are on unemployment benefits and supposed to be seeking employment (although some of the job seeking requirements were eased during restrictions periods).

Because of the administrative nature of the data is can be released at relatively low geographic levels (compared to regional ABS Labour Force data which can only be provided at an SA4 level and have very high standard errors, particularly for regions with smaller populations).

This data shows the percentage of people on unemployment benefits compared to the estimated resident population (ERP) over the age of 15 years (effectively the labour market) and we can see some key points:

• The proportion of the population on unemployment benefits ranges significantly from a low of 2.2% in Brookfield-Kenmore Hills to a high of 42.0% Kowanyama-Poumpuraaw.

• The 10 highest SA2 locations were all in regional SA4s.

DSS People on Employment Benefits Comparing DSS Data to the ABS Labour Force

Currently, we are comparing the DSS Unemployment Benefit data to the working aged Estimated Resident Population (ERP), whereas the unemployment rate is the number of people unemployed compared to the labour force rather than the labour market.

To simulate an unemployment rate we can apply the participation rate from the ABS Labour Force survey to the Queensland Government Statistician’s Office Estimated Resident Population and the calculations for each of the components is shown to the left.

Some things to consider in this comparison:

• The number of people on unemployment benefits is only a subset of all people who are unemployed (some people may not be eligible for benefits due to spouse income, age or resident status);

• People on unemployment benefits may undertake some work and retain some benefits (the Labour Force Survey considers even an hour per week work as employed); and

• The labour force determination of whether a person is in or out of the labour force is determined by whether the respondents has looked for work in the previous week. (Some people who are on unemployment benefits may have reported they were not looking for work) .

DSS People on Employment Benefits Comparison

This bubble chart shows each SA4 region with:

• Labour force survey unemployment rate (x axis);

• Synthesised unemployment rate from unemployment benefit data (y axis);

• Total population (size of bubble); and

• Whether the region in in South East Queensland or Regional Queensland.

The line indicates the point at which the two rates are equal to each other.

Some of the key observations:

• The synthesised unemployment benefit unemployment rate is higher the Labour Force Survey unemployment rate in every SA4 region except Brisbane - West (unemployment benefit rate: 5.79% cf LF rate: 7.35%); and

• The synthesised unemployment benefit unemployment rate is at times over 10 percentage points higher the Labour Force Survey unemployment rate, for example Cairns (unemployment benefit rate: 5.87% cf LF rate: 16.0%).

ATO Weekly Payroll Data from Single Touch Payroll the change in payroll jobs indexed from March 2020

Around the same time as the trend data from the ABS Labour Force Survey was discontinued, the ABS began releasing ATO Weekly Payroll data which is based on the Single Touch Payroll (STP) data reported to the ATO by businesses. It is estimated that 99% of medium to large businesses and 77% of small businesses report via STP.

This is report is comparing the jobs and wages reported compared to the index baseline of March 2020.

As with the Welfare Benefits data, this administrative data is able to be reported at much lower regional levels than Labour Force Survey data.

The key observations from the change in Weekly Payroll between March and October at an SA3 level data include:

• The variance between regions is less than for other many other indicators with only 5.9 percentage points difference between the biggest decrease Outback-South - down 6.9% and Bowen Basin-North - down 1.0%.

• The biggest SA4 drop in payroll was recorded on the Gold Coast (down 4.45% on average across the region) followed by Brisbane - Inner (down 4.40% across the region).

ATO Weekly Payroll Data from Single Touch Payroll Comparing Change in Payroll to Change in Labour Force Employment

As with the Unemployment Benefits data, we are able to create a variable which can be compared to the results of the Labour Force Survey.

Since the ATO Payroll data reports the number of jobs in October compared to the number of jobs in March, we can likewise compare the number of people in employment in October compared to the number of people in employment in March.

Some things to consider in this comparison:

• The ATO Payroll data compares jobs rather than people (the Labour Force Survey asks people if they have worked in the previous week) so a person who is working more than one job may be counted twice in the ATO Payroll data;

• Anybody who has become self-employed and is not paying themselves via payroll will not be counted in the ATO Payroll data.

ATO Weekly Payroll Data from Single Touch Payroll Comparison

This bubble chart shows each SA4 region with:

• Labour force survey number of people in employment in October compared to March (3 month average) (x axis);

• ATO Payroll data comparing number jobs in October compared to March - as a proxy for employment change (y axis);

• As with the DSS comparison - Total population (bubble size); and region (bubble colour).

Some of the key observations:

• The ATO Payroll change in employment varies by only 2.5 percentage point (from Brisbane - Inner, down 4.7%, to Central Queensland, down on 2.2%) while the Labour Force Survey employment varies by almost 30 percentage points (from Queensland Outback, down 15.2%, to Toowoomba, up 14.3%);

• Almost half (9 of the 19 SA4 regions) recorded an increase in employment based on the Labour Force Survey while no regions recorded an increase based on the ATO Payroll data.

CONCLUDING COMMENTS

Both administrative sets of information show quite different results to the ABS Labour Force data which are useful in stimulating discussion and promoting further investigation of where issues may arise.

Additionally, it would be useful if the ABS could conduct investigation as to how the sets relate to Labour Force to potentially moderate some of the data with high standard errors to provide better regional data.