Unemployment: Bad news NZ, it's much worse than you think

The official unemployment rate in New Zealand has hit an eight-year low of 4.8 percent.

Sounds impressive, right? Sounds like the kind of employment environment where the worker rules - where there is little competition for jobs, and bosses are so desperate for workers they are offering great salaries and benefits.

But the 4.8 percent unemployment statistic is not telling the full story.

There are 1 million New Zealanders not in jobs and not counted in either the unemployment or employment rate. Many of the 1 million people 'not in the labour force' are doing things like studying or caring for a family member.

Unemployment: Bad news NZ, it's much worse than you think
Photo credit: Newshub.

But included in this shadowy bulk are jobless people you'd think would be included in unemployment statistics. People who have given up looking for work or are so disheartened they haven't applied for anything within the past month are not included in the unemployment rate. They compete for work with the unemployed, suppressing the wage market.

In June 2017, there were 80,100 of these 'available potential jobseekers'. The Statistics NZ definition for them is 'people not actively seeking work but who would like a paid job and were available in the reference week'. In other words, these are the disheartened - people who want work but, for whatever reason, aren't applying for jobs.

The number of people who are jobless and 'disheartened' rivals the official number of unemployed - which was 128,000 in July.

To count as unemployed, people must have actively sought work within the past month and be available for work within the next four weeks. 'Actively sought' means they contacted an employer, placed an ad to find a job or took steps to set up a business.

You might be trawling Seek for a forestry job in Kaikohe, but if you don't apply for anything in the month before the employment survey takes place, you count as 'outside the workforce'.

Yes, you're unemployed and you want a job but no, you are not counted in the Government's unemployment statistics.

Unemployment: Bad news NZ, it's much worse than you think
Photo credit: Newshub.

So, are we being misled by statistics boasting low unemployment rates?

Bill Rosenberg, economist at the Council of Trade Unions, says when people read headlines saying New Zealand has a 4.8 percent unemployment rate, they are not getting the full picture.

"When [people] look at that figure, they get a false sense of wellbeing. Actually, there's a lot more people out there who are still wanting work."

He said he's never been particularly happy with the exclusion of people who have stopped looking for work.

"It's a fairly brutal definition, really. It's what's used internationally, but it really doesn't take into account the nature of the jobs that are out there and the difficulties people can have in finding those jobs."

"There are a lot of people who are not getting what they need from employment," he said, be it enough hours or enough pay.

The same measure of unemployment is used in the United Kingdom, where the statistic was labelled a 'lie' by the editor of Business Insider Jim Edwards last week.

"The statistical definition of 'unemployment' relies on a fiction that economists tell themselves about the nature of work," he wrote.

He argues people voted for Jeremy Corbyn's Labour Party and Brexit because despite what seems like a record low unemployment rate, "people still feel poor, their wages are not rising, and one in seven workers is out of work".

Statistics NZ documents explicitly state the unemployment rate should not be considered a sole measure of the state of the labour market. They are using a standard unemployment measure that allows the rate to be compared across time and across the world.

As ANZ economist Nick Tuffey explains, the unemployment rate measures "people who are making a defined amount of effort to [look for work] so they have to have done more than just read a job ad".

"The emphasis is on actively seeking work, rather than a more passive approach," he says.

Statistics NZ acknowledges criticism of the unemployment rate measurement, including its failure to "fit with common perceptions of 'lack of work'" and for that reason, releases a somewhat clinically-named measure called 'underutilisation rates'. This is the number of people who are working less than 30 hours a week but want more work, combined with the number of people who are unemployed - including the disheartened - those who are not working and haven't applied for anything in the past month.

At 11.8 percent, New Zealand's underutilisation rate is more than double the unemployment rate. And it's much worse for women, who are 'underutilised' - underemployed or jobless - at a rate of 14.5 percent, compared to 9.4 percent for men.

When contacted for comment, Minister of Tertiary Education, Skills and Employment Paul Goldsmith said "the Government has confidence that the Household Labour Force Survey provides a comprehensive picture of the labour market."