Australia’s unemployment rate is worse than it looks: why workforce participation is falling

Source: www.smartcompany.com.au

Adapted from an article by Myriam Robin

Australia’s unemployment rate is described to be steady at 5.8%; however with a closer inspection workforce participation is falling.

December 2013 experienced:

• 31,000 full-time jobs lost
• 9,000 part-time jobs created

The workforce participation rate in Australia has been falling for close to a decade now; this could be because jobseekers are getting discouraged and just ‘giving up’, joining the ranks of what are commonly called the hidden unemployment, or it could be down to people choosing to do other things that work.  However some of the decline has been avoidable due to our ageing population. 

According to Bank of America Merrill Lynch chief economist Saul Eslake, the participation rate peaked during the financial crisis, but has since been on the decline.

Stating a few reasons for this;

• Impact of demographic change – more people are in older age groups where workforce participation has traditionally be lower
• Rise in the number of people ages 60 and over who remain in the workforce – 10 years ago, the participation rate among those 60 and over was 15%; now, it’s almost 26%
• Decrease in the number of young people in the workforce ­– this is the biggest source to the fall in workforce participation.  The participation rate among 15-24 year olds peaked at around 75.7% in late 2002, which fell to 68% last year.

Looking back at December’s figures we can see that there has been a decrease in full-time jobs, however there has been an increase in part-time jobs created.  This can suggest why more flexible working arrangements may be the savior of our economy; increasing contracting, part time and temp positions.  Action should be taken to harness the economic power of our ageing population.  We can increase the participation rate of older Australians – the silver generations might just be Australia’s silver lining to the gathering economic clouds.