Slack in the System: The Economic Cost of Underemployment

Slack in the System: The Economic Cost of Underemployment

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.