The Australian labour market in 2013

Abstract

The year 2013 saw slowing growth in the Australian economy and labour market, relative to 2012. Slower rates of increase in gross domestic product and employment led to rising unemployment and underemployment rates, fewer job vacancies, and increased caution on the part of the Fair Work Commission about the appropriate rate of increase in Australian minimum wages. Compared with other Organisation for Economic Co-operation and Development countries, however, the Australian labour market continued to perform well, with lower unemployment rates for all age groups and higher labour productivity growth. The main areas of weakness are falling male full-time employment, high youth labour force underutilisation, and rising earnings inequality associated with falling relative earnings for the lowest paid.

Keywords

Economic conditions minimum wage participation pay productivity underemployment unemployment

Introduction

This article reviews the major developments in the Australian labour market during 2013. The aim is to provide a brief but wide-ranging summary of recent changes in employment, labour force utilisation, and employee remuneration. The state of the Australian labour market is analysed through comparisons, both with the immediate past, and, where possible, with current outcomes in other developed economies. The main data sources are the Australian Bureau of Statistics (ABS) and the Organisation for Economic Co-operation and Development (OECD).

Macroeconomic conditions

The rate of aggregate economic expansion (or contraction) has a major influence on labour market performance. We therefore begin with a brief overview of Australian macroeconomic outcomes in 2013.

Table 1 presents selected indicators from the Australian National Accounts. The data are for financial years and represent the percentage changes over the preceding year. There was growth in all of these indicators during 2013. The ‘chain-volume’ measure of gross domestic product (GDP) (which removes the effects of changing prices) increased by 2.6%, and the measure of gross value added for the market sector increased by 2.3%. With one exception, all of the indicators in Table 1 point to a slowing of economic activity in 2013, relative to 2012. The rate of increase in GDP slowed from 3.6 to 2.6%, while the rate of increase in GDP per capita slowed from 2.0 to 0.8%. The exception to this general pattern of slowing was a modest increase in the rate of labour productivity growth: GDP per hour worked rose by 2.2% in 2013 compared with 2.0% in 2012. Increased effort and efficiency in the workforce was thus an important contributor to Australian economic growth in 2013.

Table 1.

Macroeconomic conditions in Australia and the OECD, 2011–2013.

Annual percentage change (%)	2011	2012	2013
Australia
Gross domestic product (GDP)	2.2	3.6	2.6
GDP per capita	0.8	2.0	0.8
Hours worked	2.6	1.6	0.4
GDP per hour worked	−0.3	2.0	2.2
Market sector
Gross value added (GVA)	2.3	4.3	2.3
Hours worked	2.1	0.9	0.2
GVA per hour worked	0.2	3.4	2.0
OECD
GDP	2.9	1.9	1.3
GDP per capita	2.3	1.3	0.8
Hours worked	0.8	1.0	0.9
GDP per hour worked	2.2	0.9	0.4

Sources: ABS (2013m); OECD (2013f).

Notes: (1) All figures are for financial years ending in the year shown, e.g. 2013 data are for the period from July 2012 to June 2013. (2) Australian GDP and GVA figures are chain-volume measures, which adjust for underlying changes in prices between years. (3) The market sector refers to all industries, except public administration and safety, education and training, and health care and social assistance. (4) OECD figures are for the 34 member countries. (5) OECD GDP figures are in constant prices, with 2005 as the base year.

While the growth of the Australian economy slowed in 2013, it is useful to place this domestic performance in the wider international context. The bottom rows of Table 1 summarise macroeconomic outcomes in the 34 OECD member countries over the past three years. The Australian economy matched or outperformed the OECD average in 2013. The growth rates of GDP and GDP per hour worked in Australia were well above the OECD averages, while GDP per capita – a measure of population living standards – increased at the same rate as the OECD.¹ Hence, while 2013 was a ‘slower’ year for the Australian economy relative to its performance in 2012, the 2013 results were favourable by global standards and by some measures were among the best achieved anywhere in the developed world (OECD, 2013f).²

Labour market overview

This section examines trends in labour force participation, employment, underutilisation, and vacancies. Figure 1 provides context for the analysis. It shows the past 10 years of labour force participation and employment rates for men and women aged 15–64 years. The participation rate is the percentage of the population that is in the labour force (employed or actively seeking work). The employment rate used here is the percentage of the population that is employed (i.e. the employment-to-population ratio). Figure 1 also shows data for the male full-time employment rate, as this remains the dominant (and generally preferred) mode of employment for men.

Figure 1.

Labour force participation and employment trends, persons aged 15–64 years, by sex, 2004–2013. Source: ABS (2013n).

The contrasting experiences of men and women in the Australian labour market over the past decade are seen clearly in Figure 1. Male participation and employment rates have been steady or declining slightly since 2004. There was a sharp decline in men's total and full-time employment rates in 2008–2009, during the global recession, and neither rate has returned to its pre-recession level. Instead, further declines have occurred in 2013, particularly in the male full-time employment rate, which has fallen to 65% (its lowest level in the past 35 years).³ Australian women have fared comparatively well during the global recession and its aftermath. There has not been a similar employment reduction to that seen for men in Figure 1. Female participation and employment rates have been trending upwards, and both are noticeably higher in 2013 than they were in 2004. The labour market appears to be changing in ways that are more difficult for men (on the whole) to adjust to, and the mild economic downturn in Australia as a result of the global recession has amplified these difficulties.

The causes – and consequences – of women's strengthening labour market positions relative to men's deserve more consideration than this review can provide. One explanation is the ‘added worker effect’, which suggests that partnered women will increase their labour force participation (or work intensity) in response to their spouses’ job losses. Gong (2011) provides Australian evidence of this effect in the period 2001–2007, with increased working hours among already employed women being the most important contributor. Another explanation is that the mining-driven appreciation of the Australian dollar has adversely affected other trade-exposed industries, such as manufacturing, which are male dominated (Corden, 2012). Both of these explanations emphasise short-term influences, whereas the changing gender composition of the workforce is a long-term phenomenon. A full explanation would need to consider other economic and social factors, including educational attainment and family structure (Autor and Wasserman, 2013).

Table 2 provides more detail about Australian labour market changes in the past three years and provides comparisons with the OECD. Part-time employment and unemployment rates are added to the data already shown in Figure 1.

Table 2.

Labour force participation, employment, and unemployment rates, persons aged 15–64 years, by sex, 2011–2013.

Percentage (%)	Males			Females
2011	2012	2013	2011	2012	2013
Australia
Participation rate	82.8	82.6	82.3	70.6	70.4	70.4
Employment/population ratio	78.4	78.0	77.4	66.7	66.6	66.3
FT employment/population ratio	66.6	66.5	65.0	36.5	36.6	36.2
PT employment/population ratio	11.8	11.6	12.3	30.2	30.0	30.1
Unemployment rate	5.3	5.5	6.0	5.4	5.4	5.8
OECD
Participation rate	79.5	79.7	–	61.8	62.3	–
Employment/population ratio	73.0	73.2	–	56.8	57.2	–
FT employment/population ratio	64.8	64.0	–	41.4	40.9	–
PT employment/population ratio	5.7	5.7	–	14.0	14.0	–
Unemployment rate	8.2	8.1	–	8.1	8.2	–

Sources: ABS (2013n); OECD (2013b, 2013e).

Notes: (1) Australian figures are trend estimates for the month of October each year. (2) OECD figures are averages for the 12 months of each year. (3) The split between full-time and part-time employment is at 35 hours per week in the Australian data, but 30 hours per week in the OECD data.

There are several ways in which the Australian labour market differs from the OECD labour market. Australian participation and employment rates are higher, particularly for women. The total employment-to-population ratio is around 10 percentage points higher for women in Australia than for women in the OECD, while the difference for men is around five percentage points. The proportion of working-age Australians in employment of any kind is thus considerably higher than in the OECD as a whole. A second, related difference is that Australian unemployment rates are lower. While the OECD unemployment rate has been above 8.0% for both sexes since 2011, the Australian unemployment rate has not exceeded 6.0% (although it is rising). A third distinctive feature of the Australian labour market is a much higher prevalence of part-time employment for both sexes.⁴ This may be desirable if it reflects employer and employee preferences, or if it allows short-term adjustment to demand reductions, where the alternative is higher unemployment. But problems with underemployment will emerge if part-time employment is not what workers want.

Table 3 presents the extent of labour force underutilisation. Results are shown separately by sex for three age groups, to identify differences between younger (15–24 years), prime age (25–54 years), and older (55 years and over) people. Comparable OECD data are also included.

Table 3.

Labour force underutilisation rates, by sex and age, 2011–2013.

Percentage (%)	Males			Females
2011	2012	2013	2011	2012	2013
Australia
Unemployment rate
15–24 years	11.9	12.1	13.0	10.9	11.0	11.0
25–54 years	3.5	3.8	4.2	4.4	4.3	4.7
55 years and over	3.1	3.3	3.6	2.5	2.8	2.8
Total 15 years and over	4.8	5.1	5.5	5.3	5.3	5.5
Long-term unemployment rate
15–24 years	14.0	15.0	14.4	11.5	10.5	13.2
25–54 years	22.8	20.9	19.9	20.7	19.6	18.7
55 years and over	35.3	33.2	33.2	33.0	35.5	35.8
Total 15 years and over	20.5	19.9	19.3	18.0	17.4	18.1
Underemployment rate
15–24 years	11.3	11.8	11.7	15.4	15.9	16.5
25–54 years	4.0	4.1	4.2	7.9	8.4	8.3
55 years and over	4.6	4.6	5.1	6.0	5.9	6.8
Total 15 years and over	5.3	5.5	5.6	9.0	9.4	9.5
OECD
Unemployment rate
15–24 years	16.7	16.8	–	15.7	15.7	–
25–54 years	7.1	7.0	–	7.4	7.5	–
55 years and over	5.6	5.5	–	4.7	4.7	–
Total 15 years and over	8.0	7.9	–	8.0	8.1	–
Long-term unemployment rate
15–24 years	22.0	23.4	–	20.5	21.1	–
25–54 years	36.8	36.7	–	36.4	37.3	–
55 years and over	44.1	43.8	–	43.1	43.9	–
Total 15 years and over	34.0	34.4	–	33.2	34.1	–
Underemployment rate
15–24 years	4.0	3.9	–	6.1	6.1	–
25–54 years	1.5	1.6	–	4.3	4.3	–
55 years and over	2.2	2.0	–	4.0	5.2	–
Total 15 years and over	1.8	1.9	–	4.4	4.6	–

Sources: ABS (2013j, 2013k, 2013o); OECD (2013c, 2013d, 2013e).

Notes: (1) Unemployment and underemployment rates are expressed as proportions of the labour force, while long-term unemployment rates are expressed as proportions of total unemployment. (2) ‘Long-term’ unemployment is defined as a period of one year or more. (3) OECD data on underemployment refer to involuntary part-time employment among persons working less than 30 hours per week, while Australian data include persons working less than 35 hours who prefer to work more hours and regular full-time workers who worked part-time during the survey reference week. (4) All Australian data are original series. (5) Australian unemployment and long-term unemployment rates are averages of the 12 months to September of each year. (6) Australian underemployment rates are averages of the four quarters to August of each year. (7) OECD data are averaged over the months/quarters of each calendar year; OECD 2013 estimates were not available at time of writing.

The standard unemployment rate is the first variable presented in Table 3. The standout result is high youth unemployment, both in Australia and in the OECD. The age difference is most noticeable for young men, whose unemployment rate is about three times that of prime-age men in Australia and more than double that of prime-age men in the OECD. The Australian unemployment rate has increased over the past two years, for all age groups. This contrasts with the broader OECD trend, where the unemployment rate is stable, but at a much higher level than in Australia. The probability of joblessness in Australia remains much lower than in the OECD.

The second variable in Table 3 is the long-term unemployment rate, which indicates the proportion of all unemployed people who have been out of work (and looking for work) for one year or more. Australian long-term unemployment rates are much lower than in the OECD, for both sexes and for all age groups. In Australia, about one in every five unemployed people was long-term unemployed in 2013; in the OECD, the figure is about one in three. Unlike the unemployment rate, the long-term unemployment rate rises with age. Young people are thus more likely to be unemployed at a single point in time, but less likely to remain unemployed for long periods. Part of the explanation is that many young people have a weaker attachment to the labour market while completing their formal education.⁵

The third variable in Table 3 is the underemployment rate. In Australia, the underemployed are mainly part-time workers who want more hours. They may or may not wish to work full-time. The closest comparator for the OECD is ‘involuntary’ part-time work. Table 3 suggests that there is substantial ‘spare capacity’ in the Australian labour market. The underemployment rate in Australia is high compared with the OECD and has increased slightly in the past two years. Women and youths, who have the highest part-time employment rates, also have the highest underemployment rates.

For policy purposes, it is important to recognise that the total number of working hours sought by the unemployed is much higher than the additional number sought by the under-employed.⁶ This is particularly true among youths. ABS ‘volume’ measures of labour underutilisation for 2012 (the latest data available at time of writing) show that the unemployed (of all ages) were available to work 19.3 million hours, while the underemployed wanted 12.3 million additional hours. Among 15–24-year-olds, the figures were 6.7 million and 3.8 million hours, respectively.⁷ Reducing youth unemployment should thus be a higher priority than reducing underemployment, although the personal consequences of the latter may still be severe for part-time workers who want, but cannot get, a full-time job (Wilkins, 2007).

Having examined labour force underutilisation rates (or ‘over-supply’), Table 4 now considers the evidence of possible ‘undersupply’, in the form of job vacancies. There has been an ‘easing’ in all the job vacancy indicators during 2013. The number of vacancies fell sharply relative to 2012, in total, in the private sector, and in skilled occupations. Similarly, the proportion of advertised vacancies that are filled quickly (within four to six weeks) has continued to increase compared to 2011 and 2012, although the proportion is still somewhat lower in the trades (66%) than in the professions (76%). Finally, there has been an increase in the average number of ‘suitable’ applicants per vacancy (as judged by employers). Together with the previous evidence, Table 4 suggests that the supply of workers has become more abundant, relative to the demand, in much of the Australian labour market during 2013.

Table 4.

Job vacancies and skill shortages, 2011–2013.

2011	2012	2013
Number of vacancies ('000) (trend)
Total (ABS)	184.0	174.1	137.9
Private sector (ABS)	166.5	160.6	126.5
Internet vacancy index – total	243.7	196.0	161.8
Internet vacancy index – skilled occupations	102.9	80.5	63.6
Change from same period in previous year (%)
Total (ABS)	1.2	−5.4	−20.8
Private sector (ABS)	1.2	−3.5	−21.2
Internet vacancy index – total	−5.3	−19.6	−17.4
Internet vacancy index – skilled occupations	−3.5	−21.8	−21.0
Proportion of vacancies filled (%)
All occupations assessed	61	65	70
Professions	61	73	76
Technicians and trades	62	61	66
Number of suitable applicants per vacancy (%)
All occupations assessed	1.5	1.9	2.3
Professions	1.7	2.2	2.9
Technicians and trades	1.5	1.7	2.1

Sources: ABS (2013h, 2013i); Australian Government (2013a, 2013b).

Notes: (1) ABS estimates of job vacancies are from a telephone sample survey of employers. The data are for the August quarter of each year. (2) Internet vacancy index (IVI) data are counts of new online job advertisements lodged on major recruitment websites during the month. The data are for the month of October each year. Skilled occupations in IVI are professional and technician/trades occupations. (3) Data on vacancies filled and number of suitable applicants per vacancy are collected in the Department of Education, Employment and Workplace Relations (DEEWR) Survey of Employers who have Recently Advertised, for a selection of skilled occupations.

Detailed employment patterns

This section reviews changes in the composition of the Australian workforce. The analysis is restricted to employees.⁸ Estimates of change are presented both in terms of numbers of people employed and number of hours worked. Australia's high part-time employment rate means that changes in the first (‘headcount’) measure may not correspond to similar changes in the second (hours-based) measure.⁹

Table 5 presents estimates of employment growth and decline for the past three years. The estimates are of percentage changes in employment and hours worked between the August quarters of each year. For instance, in the four quarters to August 2013, employment increased by 1.1% in terms of headcount and by 1.4% in terms of hours worked.

Table 5.

Changes in composition of the Australian employee workforce, by selected characteristics, 2011–2013.

Percentage change on same quarter of previous year (%)	Change in employment			Change in hours worked
2011	2012	2013	2011	2012	2013
Overall	2.6	1.7	1.1	3.5	0.7	1.4
Sex
Male	2.4	1.9	0.7	3.5	1.3	0.2
Female	2.7	1.5	1.5	3.4	−0.4	3.1
Age
15–24 years	2.4	−2.3	−0.9	4.2	−5.6	−1.8
25–54 years	1.8	1.9	1.6	2.3	1.3	1.9
55–64 years	4.0	3.7	0.7	6.2	2.4	0.8
65 years and over	19.3	15.3	4.5	24.8	10.2	8.1
Working hours
1–15 per week	−3.5	3.2	4.6	−5.5	4.6	2.2
16–34 per week	0.3	1.9	2.7	−0.4	2.0	3.3
35–49 per week	5.3	−0.3	0.0	5.3	−0.4	0.2
50 or more per week	3.2	1.2	1.6	3.4	1.5	2.4
Employment type
Full-time, non-casual	1.9	1.6	–	–	–	–
Part-time, non-casual	5.9	1.7	–	–	–	–
Full-time, casual	1.5	−0.7	–	–	–	–
Part-time, casual	2.2	−1.6	–	–	–	–
State/territory
New South Wales	3.2	1.1	2.3	2.3	0.8	3.1
Victoria	2.2	0.9	0.1	3.3	−0.5	−0.5
Queensland	3.6	1.3	0.8	6.8	−0.6	1.1
South Australia	0.9	−0.8	0.9	2.0	−3.3	0.9
Western Australia	2.1	7.6	1.2	2.5	8.0	2.5
Tasmania	0.0	−1.1	−2.3	1.3	−2.5	−4.0
Northern Territory	−1.7	5.6	2.4	−1.9	3.8	3.9
Australian Capital Territory	1.4	1.7	−0.3	4.7	−0.4	−1.6

Sources: ABS (2012, 2013c, 2013f, 2013g).

Notes: (1) All figures are for employees and refer to the August quarter of each year. (2) Employment type estimates exclude owner managers of incorporated enterprises. (3) Employment type estimates not available for 2013 at time of writing. (4) Employment type composition cannot be expressed in terms of hours worked.

There has been a slowing in the rate of growth (but not a reduction) in the headcount measure of overall employment for the past three years. The rate of growth in 2013 (1.1%) was slower than in 2012 (1.7%) and much slower than in 2011 (2.6%). This slowing rate of employment creation helps to explain the earlier results of increasing labour force underutilisation and declining job vacancies. When expressed in terms of hours worked, however, employment was expanding in 2013 relative to 2012. A sharp decline in the growth of hours worked between 2011 and 2012 was reversed, and the growth rate doubled from 0.7 to 1.4% between 2012 and 2013. While the hours worked result is more positive than the headcount result, neither suggests that 2013 was a particularly strong year for employment growth.

The other figures in Table 5 show how various employee groups have fared relative to the overall changes in employment. In general, women fared better than men in 2013. This is particularly evident in terms of hours worked, where the female growth rate was 3.1% and the male growth rate close to zero (0.2%).

There is further discouraging evidence about the youth labour market in Table 5. For the past two years, employment has declined for 15–24-year-olds both in terms of jobs and hours. This result is especially concerning when employment on the whole is expanding and the youth unemployment rate is already high. For prime-age workers, there was a 1.6% increase in headcount employment and a 1.9% increase in hours during 2013. Employment of older workers (those aged 55 years and over) has been expanding for the past three years, with exceptionally strong growth among the oldest group (65 years and over). The result has been a slight increase in the average age of the employee workforce and a reduction in the proportion of employees who are young.¹⁰

There has been further polarisation in working time during 2013. Employment has been expanding most rapidly in part-time jobs (especially 1–15 hours per week), and in long full-time jobs (50 hours or more), but not in standard full-time jobs (35–49 hours). The number of standard full-time workers declined slightly during 2012 and did not change at all during 2013. This shift hints at continuing uncertainty about the state of the labour market. Full-time employees have become more likely to work long hours, perhaps as a way of covering recruitment shortfalls in their firms, while part-time employees have become more likely to work short hours, perhaps as a way of retaining employment until demand improves.

The latest figures (for 2012) show that employment has declined in the casual workforce and expanded only for permanent and fixed-term arrangements. If this trend reflects the replacement of some casual positions by non-casual positions, it may be beneficial for job security. Richardson (2013) finds that more than half of Australian casual employees have no say over their days of work, no assurance of minimum working hours within a week, and variable earnings from pay to pay. The consequences of these forms of unpredictability were examined by the Howe Inquiry (2012). If the decline in casual employment is due to employers' reluctance to hire, however, this may be contributing to the current problems in the youth labour market, where many casual jobs are found.

Finally, Table 5 indicates that New South Wales was the best performing of the State labour markets in 2013. Compared to recent years of strong growth, the workforces of both Queensland and Western Australia grew less quickly in 2013, and the Victorian workforce did not grow at all (hours worked fell).

Table 6 looks at changes in employment by industry. There is considerable variability across industries and within industries from year to year.¹¹ Many industries have experienced slowing growth, and in some cases declines, in 2013 relative to earlier years. This slowdown is most evident in Mining, but has also occurred in Health Care and Social Assistance, Financial and Insurance Services, and Administrative and Support Services. Industries with consistent recent growth include Professional, Scientific and Technical Services; Public Administration and Safety; and Education and Training. Manufacturing is the only industry in which employment has declined consistently (in persons and hours) for the past three years. The industry's prospects have deteriorated further with the news that Holden will close its Australian vehicle manufacturing plants by the end of 2017 (The Conversation, 2013).

Table 6.

Changes in composition of the Australian employee workforce, by industry, 2011–2013.

Percentage change on same four quarters of previous year (%)	Change in employment			Change in hours worked
2011	2012	2013	2011	2012	2013
Agriculture, forestry, and fishing	−0.5	5.9	−6.8	0.2	5.4	−4.9
Mining	17.0	23.5	1.6	16.7	23.2	2.2
Manufacturing	−2.5	−0.6	−2.0	−1.9	−0.7	−2.5
Electricity, gas, water, and waste services	9.4	3.6	−4.8	6.8	4.2	−6.8
Construction	4.3	−0.5	4.3	4.8	−0.5	4.7
Wholesale trade	−2.4	1.4	5.0	−2.6	0.7	3.8
Retail trade	3.4	−2.2	2.5	3.6	−2.0	1.6
Accommodation and food services	3.5	−1.4	4.4	2.7	−0.8	4.0
Transport, postal, and warehousing	3.1	−4.2	8.2	2.4	−4.8	7.7
Information media and telecommunications	−0.1	5.2	−4.3	0.1	7.1	−5.0
Financial and insurance services	2.5	3.9	−0.9	1.4	4.0	−1.6
Rental, hiring, and real estate services	8.5	5.1	−6.1	9.6	7.0	−4.9
Professional, scientific, and technical services	2.0	4.6	3.2	0.5	4.3	4.5
Administrative and support services	3.5	1.9	−2.6	3.5	2.1	−2.7
Public administration and safety	2.9	0.8	2.6	2.2	2.8	2.2
Education and training	0.9	2.8	3.4	−0.4	1.1	4.0
Health care and social assistance	7.0	4.2	1.8	7.6	5.1	0.3
Arts and recreation services	5.2	4.5	−0.6	3.8	6.3	−2.6
Other services	−4.2	2.3	1.0	−3.7	2.3	1.1
All industries	2.7	1.7	1.8	2.4	2.1	1.4

Source: ABS (2013g).

Note: All figures are for employees and refer to the four quarters up to and including the August quarter of each year. For instance, the data for 2011 are the average of the November 2010, February 2011, May 2011, and August 2011 quarters (inclusive). Averaging reduces the quarter-to-quarter volatility of the original data.

Wages and wage setting

This final section looks at changes in compensation for different groups of employees, including recipients of the National Minimum Wage (NMW).

Table 7 presents the extent of employee earnings inequality. The first set of results expresses the median weekly earnings of selected employee groups as a percentage of the overall median weekly earnings.¹² For instance, the earnings of men in full-time, non-casual jobs were 133% of (or 1.33 times) the earnings of all employees in 2012. Non-casual workers earn consistently more than casual workers. Among full-time workers, male earnings are substantially higher than female earnings. Among part-time workers, the gender differences are small and now slightly favour women.

Table 7.

Earnings inequality measures, 2010–2012.

Percentage (%)	2010	2011	2012
Median earnings of group relative to overall median
Full-time non-casual males	133	133	133
Full-time non-casual females	116	111	112
Full-time casual males	104	106	106
Full-time casual females	89	89	85
Part-time non-casual males	61	56	60
Part-time non-casual females	64	63	64
Part-time casual males	29	31	29
Part-time casual females	31	31	31
Full-time earnings distribution
Ratio of 90th to 10th percentiles (overall inequality)	279	–	281
Ratio of 90th to 50th percentiles (top-half inequality)	178	–	178
Ratio of 50th to 10th percentiles (bottom-half inequality)	157	–	158

Sources: ABS (2011a, 2011b, 2012, 2013b, 2013c).

Notes: (1) All estimates are for employees, excluding owner managers of incorporated enterprises. (2) Earnings ratios data are for August of each year and refer to weekly earnings in main job. (3) Earnings percentiles data are for May of each year and refer to the distribution of weekly total cash earnings for full-time, adult, non-managerial employees. (4) Data for 2013 were not available at time of writing. (5) The ABS Survey of Employee Earnings and Hours was not conducted in 2011.

The second set of results in Table 7 shows ratios between percentiles in the full-time weekly earnings distribution for non-managerial, adult employees.¹³ Earnings are ranked and divided into 100 groups of equal size (percentiles). The 10th percentile is 10 places from the bottom, the 50th percentile is in the middle (i.e. the median), and the 90th percentile is 10 places from the top. The ratio of the 90th and 10th percentiles is a common measure of overall inequality. In 2012, this ratio was 2.81, meaning that employees near the top of the distribution earned 2.81 times as much as employees near the bottom. This ratio has increased slightly since 2010. The other two ratios in Table 7 suggest that the overall increase in inequality is most likely to be due to changes in the bottom half of the distribution (i.e. below median earnings). The ratio of the 50th and 10th percentiles has increased, while the ratio of the 90th and 50th percentiles has not changed. There is still considerably less inequality in the bottom half of the distribution than in the top half, however. The highest-paid workers are much further above the median than the lowest-paid are below it (ratios of 1.78 and 1.58, respectively).

Comparable OECD inequality data are not available in exactly the same form as those in Table 7, and neither are there average estimates for the whole of the OECD. But an indication of how Australian earnings inequality compares with the rest of the world can be obtained from data on the percentile ratios of the full-time earnings distribution in selected OECD countries. In this dataset, which includes managerial employees, the ratio of the 50th and 10th percentiles was 1.70 in Australia in 2012, and the ratio of the 90th and 50th percentiles was 1.99 (OECD, 2013a). The 50:10 ratio was narrower in Australia than in Canada (1.95), the United Kingdom (1.80), and the United States (2.14), but wider than in New Zealand (1.55). In contrast, the Australian 90:50 ratio was wider than in all of these countries except the United States (2.44). These comparisons suggest that the Australian full-time earnings distribution is compressed in the bottom half, but dispersed in the top half. A contributor to top-half earnings dispersion that warrants closer investigation is executive compensation. This is an issue on which high-quality data are scarce, and on which there is consequently little recent research (see Shields, 2005, for an earlier contribution).

An Australian feature relevant to compression in the bottom half of the wage structure is the annual adjustment of minimum wages by the national industrial tribunal. On 3 June 2013, the Minimum Wage Panel of the Fair Work Commission (FWC) published its 2012–2013 Annual Wage Review decision. The decision gave a 2.6% increase in the NMW and continued the recent practice of increasing other modern award minimum wages by the same percentage. The Panel noted that its decision would deliver a ‘small improvement’ in the real value of minimum wages, but that a smaller increase had been given on this occasion than in previous years, due to concerns about slowing GDP growth and rising unemployment (FWC, 2013: 12). While moderating the rate of growth in minimum wages for 2013, the Panel also emphasised that future reviews would need to deal with the problems of ‘widening dispersion in earnings and the declining relative position of employees reliant on award wages’ (FWC, 2013: 15).

Table 8 presents information that is relevant to the Commission's concerns about the deteriorating relative position of Australian minimum-wage recipients. Since 2010, the value of the NMW has increased ahead of the rate of inflation as given by the change in the Consumer Price Index (CPI). The real value of the NMW (and of other modern award minimum wages) has thus been increasing, as the Commission's 2013 decision observed.¹⁴ These increases have not been sufficiently large, however, to match the general pace of wages growth. First, the all-industries Wage Price Index (WPI), which measures changes in ordinary-time hourly pay rates for a constant set of jobs, has increased more rapidly than the NMW for the past three years.¹⁵ On the other hand, NMW increases in the past three years have been much closer to the rates of pay growth in the two industries that employ the largest numbers of minimum-wage workers: Accommodation and Food Services, and Retail Trade.¹⁶ This suggests that, while the lowest paid have fallen behind pay growth for the Australian workforce as a whole, they have not always lost ground when compared with workers in the same industry. Second, the NMW has fallen as a proportion of full-time, adult average weekly cash earnings (AWCE) to 42.5% in 2013. AWCE has increased rapidly in recent years and has exceeded the labour productivity growth rate presented in Table 1. This implies that employers' wage costs are rising and that highly paid workers are capturing a larger share of the gains from productivity growth. Finally, OECD data show that the Australian NMW has fallen as a proportion of full-time median earnings since 2010. Australia's NMW remains comparatively high, but has been moving in the opposite direction to its equivalents in Canada, New Zealand, and the United Kingdom (but not the United States).

Table 8.

Changes in the real and relative values of the National Minimum Wage, 2010–2013.

2010	2011	2012	2013
National Minimum Wage (NMW) ($ per week)	569.90	589.30	606.40	622.20
NMW change on previous year (%)	4.8	3.4	2.9	2.6
CPI change on previous year (%)	3.1	3.5	1.2	2.4
AWCE change on previous year (%)	–	4.3	3.2	4.5
WPI change on previous year (%)
All industries	3.1	3.8	3.7	2.9
Accommodation and food services	2.0	3.0	3.3	2.6
Retail trade	2.8	3.3	2.7	2.7
NMW % of average weekly cash earnings in Australia
Full-time, adult, ordinary-time – males	41.1	40.6	40.6	40.0
Full-time, adult, ordinary-time – females	49.3	48.9	48.7	47.8
Full-time, adult, ordinary-time – persons	43.8	43.4	43.3	42.5
MW % of median full-time earnings in selected OECD countries
Australia	54.3	53.6	52.7	–
Canada	43.6	44.5	45.1	–
New Zealand	58.8	58.8	59.9	–
United Kingdom	46.1	46.7	47.2	–
United States	38.8	38.3	37.8	–

Sources: ABS (2013e, 2013l, 2013p); FWA (2010, 2011, 2012); FWC (2013); OECD (2013g).

Notes: (1) NMW rates take effect on 1 July each year. (2) CPI data are for the June quarter of each year and show the change in ‘All groups CPI’ from the same quarter of the previous year. (3) WPI data are for the June quarter of each year and show the change in ‘Ordinary-time hourly rates of pay, excluding bonuses’ from the same quarter of the previous year. (4) AWCE data are for May of each year and show full-time, adult ordinary-time weekly earnings. (5) OECD 2013 data not available at time of writing.

Conclusion

In their review of the Australian labour market in 2012, Jefferson and Preston (2013) highlighted patterns of declining male full-time employment, increasing labour force underutilisation, and persistent earnings inequalities as factors leading to ‘diverging outcomes … both across the economy and within particular industries’ (pp. 352–353). These themes remain central to an understanding of how the Australian labour market has developed in 2013. Against the background of a global recession, slower domestic economic growth, and a continuing high dollar, the labour market performed well by international standards but with signs of weaker demand indicated especially by rising unemployment rates and falling job vacancy rates. The main areas of weakness still relate to male full-time employment losses, labour force underutilisation (especially among youths), and rising earnings inequality associated with falling relative earnings for the lowest paid. These problems, which were present in 2012, were exacerbated in 2013 by the uncertainties of a slowing domestic economy and by other temporary factors, including the change of Federal government.

Looking ahead to 2014, there are several issues that deserve closer scrutiny. The easing in Asian demand for Australian mineral resources will have widespread ramifications, both for employment and investment in mining and, via the exchange rate, on other export-oriented industries. Further depreciation of the Australian dollar will relieve some of the current pressures on Agriculture, Manufacturing, Tourism, and Retail Trade (among others). And improving conditions in these industries will have uneven benefits for the different states and territories, and for different groups of employees (e.g. men in manufacturing, young people in retail trade). But even a more favourable exchange rate may not arrest the secular decline of employment in the Australian manufacturing industry. The management of this decline by governments at all levels, and the success with which displaced workers are reabsorbed into other industries, will be focal points for Australian labour market analysis in 2014, and beyond.

Footnotes

Funding

This research received no specific grant from any funding agency in the public, commercial, or not-for-profit sectors.

Acknowledgement

I thank Matt Cowgill, Keith Hancock, and Sue Richardson for helpful comments on an earlier draft of this article.

Notes

Biographical note

Joshua Healy is a Research Fellow at the National Institute of Labour Studies, Flinders University. His research interests lie at the intersection between industrial relations and labour economics, including minimum wages, gender pay inequality, and bargaining decentralization. Dr Healy has contributed to many research consultancies for the Australian government, employers, and other research bodies. His work is published in leading journals and has been covered in the national media.

References

Australian Bureau of Statistics (ABS) (2011a) Employee Earnings and Hours, Australia, May 2010, Canberra: ABSData cubes, Table 8, ‘Methods of setting pay, Weekly total cash earnings – Distribution of full-time non-managerial adult employees’. Cat. no. 6306.0.

Australian Bureau of Statistics (ABS) (2011b) Employee Earnings, Benefits and Trade Union Membership, Australia, August 2010, Canberra: ABSCat. no. 6310.0.

Australian Bureau of Statistics (ABS) (2012) Employee Earnings, Benefits and Trade Union Membership, Australia, August 2011, Canberra: ABSCat. no. 6310.0.

Australian Bureau of Statistics (ABS) (2013a) Employee Earnings and Hours, Australia, May 2012, Canberra: ABSData cubes, Table 1, ‘All Employees, Average weekly total cash earnings’. Cat. no. 6306.0.

Australian Bureau of Statistics (ABS) (2013b) Employee Earnings and Hours, Australia, May 2012, Canberra: ABSData cubes, Table 3, ‘Non-managerial Employees, Averages and Distributions, Cash earnings and hours paid for’. Cat. no. 6306.0.

Australian Bureau of Statistics (ABS) (2013c) Employee Earnings, Benefits and Trade Union Membership, Australia, August 2012, Canberra: ABSCat. no. 6310.0.

Australian Bureau of Statistics (ABS) (2013d) Australian Labour Market Statistics, July 2013, Canberra: ABSData cubes, Table 2. ‘Volume measures of labour underutilisation’. Cat. no. 6105.0.

Australian Bureau of Statistics (ABS) (2013e) Average Weekly Earnings, Australia, May 2013, Canberra: ABSData cubes, Table 15. ‘Average Weekly Cash Earnings, Australia by Sector (Dollars) – Original’. Cat. no. 6302.0.

Australian Bureau of Statistics (ABS) (2013f) Labour Force, Australia, Detailed, Quarterly, August 2013, Canberra: ABSData cubes, E04. ‘Employed persons by Sex, Status in employment, Actual hours worked’. Cat. no. 6291.0.55.003.

10.

Australian Bureau of Statistics (ABS) (2013g) Labour Force, Australia, Detailed, Quarterly, August 2013, Canberra: ABSData cubes, E05_Aug94. ‘Employed Persons by Sex, Industry, Age, Status in Employment, August 1994 onwards’. Cat. no. 6291.0.55.003.

11.

Australian Bureau of Statistics (ABS) (2013h) Job Vacancies, Australia, August 2013, Canberra: ABSTime series spreadsheets, Table 1. ‘Job Vacancies, States and Territories ('000)’. Cat. no. 6354.0.

12.

Australian Bureau of Statistics (ABS) (2013i) Job Vacancies, Australia, August 2013, Canberra: ABSTime series spreadsheets, Table 2. ‘Job Vacancies, Private Sector, States and Territories (’000)’. Cat. no. 6354.0.

13.

Australian Bureau of Statistics (ABS) (2013j) Labour Force, Australia, Detailed – Electronic Delivery, September 2013, Canberra: ABSData cubes, LM2. ‘Labour Force Status by Sex, Age, Capital City/Balance of State’. Cat. no. 6291.0.55.001.

14.

Australian Bureau of Statistics (ABS) (2013k) Labour Force, Australia, Detailed – Electronic Delivery, September 2013, Canberra: ABSData cubes, UM3_Apr01. ‘Unemployed Persons by Sex, State, Age, Duration of Unemployment Categories, April 2001 onwards’. Cat. no. 6291.0.55.001.

15.

Australian Bureau of Statistics (ABS) (2013l) Consumer Price Index, Australia, September 2013, Canberra: ABSTime series spreadsheets, Tables 1 and 2. ‘CPI: All Groups, Index Numbers and Percentage Changes’. Cat. no. 6401.0.

16.

Australian Bureau of Statistics (ABS) (2013m) Australian System of National Accounts, 2012–13, Canberra: ABSCat. no. 5204.0.

17.

Australian Bureau of Statistics (ABS) (2013n) Labour Force, Australia, October 2013, Canberra: ABSTime series spreadsheets, Table 18. ‘Labour force status by Sex – Persons aged 15 to 64 years – Trend, Seasonally adjusted and Original’. Cat. no. 6202.0.

18.

Australian Bureau of Statistics (ABS) (2013o) Labour Force, Australia, October 2013, Canberra: ABSTime series spreadsheets, Table 22. ‘Labour underutilisation by Age and Sex – Trend, Seasonally adjusted and Original’. Cat. no. 6202.0.

19.

Australian Bureau of Statistics (ABS) (2013p) Wage Price Index, Australia, September 2013, Canberra: ABSTime series spreadsheets, Table 9b. ‘Ordinary Hourly Rates of Pay Excluding Bonuses: Sector by Industry, Original (Quarterly Index Numbers)’. Cat. no. 6345.0.

20.

Australian Council of Trade Unions (ACTU) (2013) ACTU Jobs Report, February 2013, Melbourne: ACTU.

21.

Australian Government (2013a) Skill Shortages, Australia, 2012–13, Canberra: Department of Education, Employment and Workplace Relations.

22.

Australian Government (2013b) Vacancy Report, November 2013, Canberra: Department of Employment.

23.

Autor

Wasserman

(2013) Wayward Sons: The Emerging Gender Gap in Labor Markets and Education. Third Way, Washington, DC. Available at: economics.mit.edu/files/8754 (accessed 17 December 2013).

24.

Corden

(2012) The Dutch disease in Australia: Policy options for a three-speed economy. Australian Economic Review 45: 290–304.

25.

Fair Work Australia (FWA) (2010) Decision: Annual Wage Review 2009–10 ([2010] FWAFB 4000), Melbourne: FWA.

26.

Fair Work Australia (FWA) (2011) Decision: Annual Wage Review 2010–11 ([2011] FWAFB 3400), Melbourne: FWA.

27.

Fair Work Australia (FWA) (2012) Decision: Annual Wage Review 2011–12 ([2012] FWAFB 5000), Melbourne: FWA.

28.

Fair Work Commission (FWC) (2013) Decision: Annual Wage Review 2012–13 ([2013] FWCFB 4000), Melbourne: FWC.

29.

Gong

(2011) The added worker effect for married women in Australia. Economic Record 87: 414–426.

30.

Independent Inquiry into Insecure Work in Australia (Howe Inquiry) (2012) Lives on Hold: Unlocking the Potential of Australia's Workforce. Report commissioned by the Australian Council of Trade Unions, Melbourne. Available at: securejobs.org.au/Home/Howe-Inquiry.aspx (accessed 18 December 2013).

31.

Jefferson

Preston

(2013) Labour markets and wages in Australia in 2012. Journal of Industrial Relations 55: 338–355.

32.

Organisation for Economic Co-operation and Development (OECD) (2013a) OECD. StatExtracts, ‘Decile ratios of gross earnings’. Available at: stats.oecd.org/Index.aspx?DataSetCode=DEC_I (accessed 17 December 2013).

33.

Organisation for Economic Co-operation and Development (OECD) (2013b) OECD. StatExtracts, ‘FTPT employment based on a common definition’. Available at: stats.oecd.org/Index.aspx?DataSetCode=FTPTC_D (accessed 9 November 2013).

34.

Organisation for Economic Co-operation and Development (OECD) (2013c) OECD. StatExtracts, ‘Incidence of involuntary part time workers’. Available at: stats.oecd.org/Index.aspx?DataSetCode=INVPT_I (accessed 19 November 2013).

35.

Organisation for Economic Co-operation and Development (OECD) (2013d) OECD. StatExtracts, ‘Incidence of unemployment by duration’. Available at: stats.oecd.org/Index.aspx?DataSetCode=DUR_D (accessed 9 November 2013).

36.

Organisation for Economic Co-operation and Development (OECD) (2013e) OECD. StatExtracts, ‘Labour force statistics by sex and age’. Available at: stats.oecd.org/Index.aspx?DataSetCode=LFS_D (accessed 9 November 2013).

37.

Organisation for Economic Co-operation and Development (OECD) (2013f) OECD. StatExtracts, ‘Labour productivity growth in the total economy’. Available at: stats.oecd.org/Index.aspx?DataSetCode=PDYGTH (accessed 9 November 2013).

38.

Organisation for Economic Co-operation and Development (OECD) (2013g) OECD. StatExtracts, ‘Minimum relative to average wages of full-time workers’. Available at: stats.oecd.org/Index.aspx?DataSetCode=MIN2AVE (accessed 19 November 2013).

39.

Richardson

(2013) Overworked and underpaid? The new realities of the labour market . The Foenander Lecture 2013. University of Melbourne. Available at: fbe.unimelb.edu.au/alumni/events/alumni/recent_events/2013/foenander_lecture_2013 (accessed 18 December 2013).

40.

Shields

(2005) Setting the double standard: Chief executive pay the BCA way. Journal of Australian Political Economy 56: 299–324.

41.

The Conversation (2013) Holden to cease making cars in Australia by 2017: Experts react . Available at: theconversation.com/holden-to-cease-making-cars-in-australia-by-2017-experts-react-21369 (accessed 17 December 2013).

42.

Wilkins

(2007) The consequences of underemployment for the underemployed. Journal of Industrial Relations 49: 247–275.