Slack in the System: The Economic Cost of Underemployment

May 21, 2020

Work and Workers

Executive Summary

This new discussion paper estimates the economic cost of underemployment in Australia, both before and during the COVID-19 pandemic.

The ABS Labour Force data for April 2020 revealed the depth and breadth of the COVID-19 pandemic’s economic impact on the lives of working Australians.

Youth unemployment jumped to 13.8%, and the number of Australians abandoning the labour market rose an unprecedented 2.4% – that is almost half a million people who are not only out of work, but have stopped looking for a job altogether.

Perhaps most sobering was the steep rise in underemployment: the month-on-month increase to April was 50%, or over 600,000 people. Just under 15% of the Australian workforce is now underemployed. Combined with the unemployment rate, Australia now has a labour force underutilisation rate of 19.9% – meaning one in five Australians does not have sufficient work to support themselves and their families.

Slack in the System, a new discussion paper from Per Capita, puts these statistics in perspective, noting that well before the arrival of COVID-19, the significant slack in the Australian labour market was suppressing wages and productivity, and leading to a crisis of insecure work.