Did you know there are millions of Australians without work who aren't counted in the unemployment rate?

There's a reason for it.

I'll show you who they are and how many want to be working.

I'll also show how many could start work immediately if they had better support, such as suitable child care.

The unemployment rate doesn't tell you what you think it does

Just quickly, this is the third part of a series I've been doing on the unemployment rate.

In Part 1, I explained why the official definition of "unemployment" leaves millions of people out of the unemployment data.

Part 2 showed why the unemployment statistics are actually designed for employers, not job seekers.

To illustrate what I mean on that second point, have a look at the graph below.

What do you think the unemployment rate is telling you? 

Here's what it isn't telling you.

The unemployment rate is not telling you what percentage of Australians were without work each month over the last 20 years.

Far from it.

It's telling employers and economists what percentage of people in the "labour force" were immediately available to fill a vacancy in any month.

See those points I've highlighted where the unemployment rate is 5.5 per cent but the "participation rate" is different each time?

That's telling you something important.

It's letting you know that, even though the unemployment rate is the same number in 2004, 2009, 2017 and 2021, none of those numbers are actually comparable.

Not if you think they're telling you about the strength of the economy.

Has a politician ever explained that to you?

Anyway, let's get into the next bit — which is why we're here.

The millions of Australians left out of the unemployment rate

See the image below. 

It's a simplified model of the labour force framework.

I want to talk about all of the people who are consigned to that big yellow box called "Not in the Labour Force."

That's where millions of Australians are sitting who aren't employed, yet they aren't included in the official unemployment rate.

You can be in that group for lots of reasons. Traditionally, you might be:

• Retired
• Full-time parent
• Full-time carer
• Student
• Permanently disabled
• Travelling
• Discouraged job seeker
• In prison or another institution

The Bureau of Statistics has released some really interesting information on this group.

It took a snapshot of the population in February when the economy was recovering strongly after last year's lockdowns (before the Delta outbreak in New South Wales in June), and here's what it found.

They're not employed, but they're not considered unemployed

In February, there were 20.7 million usually resident people in the working-age population who were 15 years or over, of whom:

• 13 million were employed 
• 2.2 million were not employed and wanted to work, of whom 808,000 were classified as unemployed
• 5.5 million were not employed and did not want to work, or were permanently unable to work

Notice that second point? 

There were 2.2 million people who weren't employed and wanted to work, but just 808,000 of them were considered officially unemployed.

That means there were 1.4 million people who weren't working and wanted to work.

But they were shunted off into the "Not in the Labour Force" group, where they didn't affect the unemployment rate.

How could that be?

It's because the definition of "unemployed" is deliberately restrictive.

To be considered officially unemployed you have to be actively looking for work and available to start immediately.

If you're available to start work in four weeks, but not immediately, you're not considered unemployed.

Why? Because, as I explained in Part 1, the labour force framework is designed for employers and economists.

It's focused on solving immediate problems for employers.

For example, imagine it's February and you're an employer who needs to fill some job vacancies this week.

Do you know how many unemployed people there are who are immediately available to start work?

You do.

According to the ABS, there were an estimated 808,000 people who didn't have a job in February but who were actively looking and were ready to start immediately.

That was the pool of officially unemployed people from which you could have hired extra workers to fill an immediate vacancy.

Anyway, let's see who those other 1.4 million people were who also wanted work.

How the ABS breaks it down

The ABS starts with this simple graphical representation.

Then, it presents that information in a slightly more detailed way.

It says of the 2.2 million who wanted to work (which includes the officially unemployed):

• 882,000 looked for work
• 220,000 had a job to go to, or return to
• 1,081,000 did not look for work

And here's how the ABS categorises them.

Now, an immediate question that might spring to mind is: if there were over 1 million people wanted to work but didn't look for work, why didn't they look for work?

Well, as the ABS explains, life is complicated.

It says people who aren't going to be available for work in the short to medium-term may not begin looking for work until closer to when they'll be able to work. 

In fact, of the 1,081,000 people who did not look for work, over three-quarters of them (862,200 people) wanted to work and were available to start immediately or within 4 weeks.

Here are the main reasons why they didn't actively look for work in February:

Notice how nearly 140,000 people wanted paid employment but didn't look for it because they couldn't find suitable child care?

Over 90 per cent of them were women.

If there was suitable child care available they'd be able to start work immediately.

Another 64,700 people wanted to work, but didn't look for it, because of family considerations or caring responsibilities.

Nearly 75 per cent of them were women.

There were 113,000 people who wanted to work but had become so discouraged by their inability to find work that they'd stopped looking.

Another 110,000 people wanted to work but ill-health, injury, or disability meant they couldn't look for it.

Many officially 'unemployed' people also face barriers to work

Anyway, I'll leave it there.

Hopefully, it shows you how there are hundreds of thousands of people who aren't employed and are immediately available to start work, yet they're not counted as officially "unemployed."

They don't affect the unemployment rate. 

But as ABS reminds us, it's not as though life is easy for the 808,000 officially unemployed people either.

In February, despite the strength of the economic recovery at that time, nearly 90 per cent of people who were considered officially unemployed (and therefore did affect the unemployment rate) still had difficulties finding work.

Those difficulties included: age discrimination, lack of nearby public transport, lack of suitable skills, and too much competition from other job seekers.

And to put things in perspective.

In the February quarter, there were just 289,000 job vacancies.

But 2.2 million people wanted a job.