Australian economy
Grogonomics

Unfortunately, right now underemployment is a better predictor – and it’s at 8.5%
Underemployment, which mostly measures part-time workers who want to work more hours, was long seen as a second-order issue. But as the wages of all workers struggle to rise by more than inflation, the level of underemployment has become in some ways more important than unemployment – and it is an issue that is widespread across genders and areas of the country.
One reason underemployment was not considered much of an issue was because it moved pretty much in line with unemployment. Through the good times of the mining boom, the bad times of the GFC and even the slow, mediocre recovery, underemployment rose and fell in line with unemployment. It was simple – you don’t need to worry about underemployment specifically when doing things that reduce unemployment will in turn reduce underemployment.
And then in 2015 it all went rather askew. The unemployment rate began to fall, and underemployment rose.
We now have a situation where the level of underemployment is not far below record highs – and higher than anything seen before 2015 – while the unemployment rate is lower than it has been for the past five years:
Consider that in February 2013, when the unemployment rate was also at the current rate of 5.4%, the underemployment rate was 7.3%, compared with the current level of 8.5%.
But given this is still mostly about part-time workers wanting more hours, why is it a big issue? Most people who work part-time are happy with the level of hours they get – only around 25%-30% want more hours and they, on average, want to work around 13 and a half more hours a week (underemployed men on average want to work a couple more hours a week more than women do).
The reason this is a big issue is those extra desired hours are a measure of spare capacity in the labour market. The more people who want to work more hours, the fewer people need to be hired to do new jobs – employers can (should they wish) just give more hours to those already working for them, and they don’t need to increase the hourly wage to entice them to work more hours.
It is why spare capacity is a strong determinant of wage growth and why underemployment at the moment is a much better gauge of how wages will rise than unemployment:
So what is driving this rise in underemployment?
Unfortunately it is rather widespread, both in terms of age, gender and geography.
Because women are more likely to work part-time, their underemployment rate is higher (because it is calculated as a percentage of all men and women in the labour force):
So when the level of male part-time employment rises, it has a bigger effect on underemployment, and there has been a strong rise in part-time male employment in the past decade. But women remain the biggest drivers of total underemployment.
Since the middle of 2015, when the level of unemployment and underemployment began to split, women aged 15-24 have accounted for the largest share of the growth of underemployed workers. Just over a quarter of the increase in underemployment comes from that segment of workers. And while this not a surprise, given they are largest segments of overall underemployed, they have contributed more than would be expected.
Women aged 25-34 and 45-54 have also contributed more to the number of underemployed in the past three years than would have been expected but, somewhat surprisingly, underemployment actually fell for women aged 25-34 and those aged over 55 – the only two age groups to see underemployment go down:
So it is not just an issue of worrying about women workers in the two industries that have the highest level of underemployment – the retail trade and accommodation and food services.
And it is not just an issue related to a certain area, although the mining states of Western Australia and Queensland have seen their underemployment rates rise since May 2015, while others have remained steady or seen some slight falls:
This suggests we could just see it as an issue mostly about the end of the mining boom. For if we exclude WA and Queensland, the “national” rate of underemployment falls from 8.5% to 8.1%:
And when we look at the relationship of unemployment and underemployment even when we exclude the two mining states, we see, if anything, a worse split from 2015 onwards:
The unemployment rate, excluding the mining states, of 5.1% is as low as it has been since February 2011, and yet the relative underemployment rate of 8.1% is higher than it has been anytime before the middle of 2014.
Since February 2015, the unemployment rate of the non-mining states has fallen 1.2% points while the underemployment rate in that time has fallen just 0.5% points.
It adds up to a nationwide, all-encompassing issue.
And one that needs to be addressed if all of us are to start seeing our wages grow by more than they have over the past three years.

• Greg Jericho is a Guardian Australia columnist