The Federal Government is pushing for a rethink of the definition of full employment beyond statistical modelling, saying existing models have severe limitations and do not fully reflect the modern labour market.
It instead wants full employment to consider factors like underemployment — a measure of people who have jobs but want to work more hours — and the full potential of the workforce to increase the level of maximum employment.
The Government’s employment white paper released on Monday urges a shift away from only considering the dominant economic measure — the NAIRU, or non-accelerating inflation rate of unemployment, devised in the 1970s — a key tool used by the Reserve Bank of Australia and the Treasury.
“(It) is a really important, necessary, but essentially narrow and technical definition of full employment,” Treasurer Jim Chalmers said.
“But distinct from that and complementary to that, is the Government’s objective, which is a good, secure, fairly paid job for everyone who wants one, without having to look for too long. That’s our goal and that’s our objective.”
The Treasurer said while the rate of the NAIRU should be driven down over time, the assumptions around full employment should as well.
New Reserve Bank governor Michele Bullock earlier this year suggested the unemployment rate would have to rise to about 4.5 per cent by the end of next year to help tackle the high inflation rate, a point that some commentators have suggested puts her at odds with the Government’s aims.
The unemployment rate is still at near 50-year lows of 3.7 per cent, and the Government’s own forecasts suggest it will reach 4.25 per cent next year.
Westpac senior economist Justin Smirk said though the Government’s new targets of full employment were not numerically definitive, they were complementary with the RBA, agreeing there was no conflict.
The white paper also highlights discrepancies in unemployment rates among sectors of the community — for gay, lesbian and bisexuals in 2020, it was 12 per cent compared to 6.1 per cent for heterosexuals in the same period, while single mothers in Australia have some of the lowest employment rates in the OECD.
Elsewhere, it points out employment rates are as low as 43 per cent for migrants from southern and eastern Europe, while just 59 per cent of women born overseas are employed, compared to 70 per cent of men born outside Australia.