A key point of this paper is to see how the association between characteristics and labour market status may have changed after a period of strong employment growth. Unlike for the binomial regression, we find that there has been a statistically significant change between 2002 and 2006; a Wald test of the significance of the full set of 2006 interactive dummies for the not-in-the-labour- force regression has a p-value of 5 per cent (while the p-value of the test for marginal attachment regression is 11 per cent). Further, for both the marginal attachment and not-in-the-labour-force regressions, the 2006 coefficient estimates for several groups of characteristics are statistically different to the 2002 estimates (see Appendix Table B2).
These results have two key implications. First, much of the increase in the rate of employment over this period was generated by higher participation, suggesting a significant role for changes in labour supply. Second, the pool of those who are unemployed does not appear to have become more concentrated in characteristics associated with low employment rates.
5.3.1 Marginal attachment and not in the labour force
The joint test of the interactive dummies indicates some change in the characteristics of the not-in-the-labour-force and marginally attached groups. More specifically, we find that for both of these groups:
the RRR decreased for older people, reflecting an increase in participation by these cohorts between 2002 and 2006;
the RRR decreased for mothers in a couple with young children;
the RRR decreased for those who had not been fully employed in the previous year (that is, less than 100 per cent of their available time working); and
the RRRs decreased for low income and poor health, as well as unskilled occupations and less-than-high-school education, consistent with an increase in
demand for, and supply of, such workers during an extended upswing in economic activity.
It is worth noting that these first two points are consistent with the documented delay in retirement and increased use of childcare (as indicated by ABS data). It is likely that policy and attitudinal changes have influenced these decisions, as a four- year period is probably too short for cohort effects to be important.
Based on HILDA data, the marginal attachment rate fell much more than the not- in-the-labour-force rate over the period 2002 to 2006. This has implications for measuring labour supply. Currently, the marginally attached are contained within the not-in-the-labour-force group in the standard LFS measure of labour force participation. However, as much of the extra employment has been due to a fall in marginal attachment, a broader (and potentially more relevant) measure of participation may include the marginally attached in the labour force. This is also consistent with the finding that the marginally attached have many characteristics in common with the unemployed in terms of their prospects of employment. Using LFS data for those aged 15–69 years, this alternative definition of the labour force would suggest a slower rate of growth in labour supply from 2002 to 2006 (from 78.3 per cent to 79.3 per cent) than the standard definition (from 72.2 per cent to 74.2 per cent).12
5.3.2 Unemployment
The relationship between personal characteristics and unemployment appears to have changed by less between 2002 and 2006 than for the other two not-employed categories; the Wald test reports that the set of interactive dummies are not jointly significantly different from 1 and very few interactive dummies are individually significant. This suggests that on average, the characteristics of the unemployed pool have not changed substantially between 2002 and 2006. As is the case for the other labour force states, the point estimates suggest that characteristics associated with the lowest employment rates in 2002 (such as being from a non-English- speaking country, having less than university-level education, being unskilled,
12 Data on the marginally attached for 2002 and 2006 are only available for the age group 15–69 years and not for the standard labour force sample that covers those aged 15 years and above. See ABS 2007.
having little recent work experience, or being in poor health) were less likely to be associated with unemployment in 2006.
5.4 Comment
Our results indicate that as employment expanded between 2002 and 2006 lower-skilled workers and groups which had lower participation rates were drawn into employment at slightly higher rates than groups with high employment rates in 2002. In general, this is consistent with Okun’s theory that during a period of expansion, workers in the labour market trade up and vacancies are filled by less- skilled workers. It is also consistent with the notion that structural changes have occurred in the labour market to support participation by groups which typically have low participation rates, such as mothers with young children and older workers.
Further, there was a notable rise in the level of experience of the not-employed pool; from 2002 and 2006, the share of people with very low previous work experience fell, while the share of people who had worked for over 75 per cent of the previous year rose (Figure 3). This reflects the fact that there is considerable churn in the labour market as individuals move between jobs and in and out of employment.13 As the employment rate rose over this period, the duration of
employment and the probability of finding employment also increased, raising the average level of recent work experience of the whole population. This suggests that at high levels of employment, the average level of experience of the population is higher, somewhat mitigating against a shortage of suitable labour.
13 Monthly LFS data from 2000–2005 indicate that around 4 per cent of employees are not employed in the next month, while just over 20 per cent of the unemployed and 10 per cent of NILF are employed in the next month. In the annual HILDA sample, around 8 per cent of the employed are not employed when interviewed the following year, while around 50 per cent of the unemployed and 20 per cent of those not in the labour force were employed when interviewed in the following year (for the period 2001/02 to 2004/05) (Carroll and Poehl 2007).
Figure 3: Share of Previous Year Spent in Work
Share of the pool outside employment
0 2 4 6 8 10 0 2 4 6 8 10 2002 % % 2006 76–100% 51–75% 26–50% 1–25%
Note: Share with 0% work experience in previous year was 75.5 per cent in 2002 and 75.2 per cent in 2006 (not shown)
Source: HILDA Survey, Release 6.0
6.
Conclusion
Data from the HILDA Survey confirm that employment tends to broaden during an expansionary phase. Using estimates of an econometric model describing the probability of being employed versus not employed, we find that from 2002 to 2006 there was some broadening of employment across individuals who were low- skilled or had other characteristics typically associated with low participation in the labour market. While this change is not statistically significant, there is clear evidence of a broadening of employment when we conduct the analysis after separating those who are not employed into three different groups, namely: those who are marginally attached, those who are not in the labour force and those who are unemployed. There is evidence of a statistically significant change in the relationships between personal characteristics and the probability of being marginally attached; the same is true for those not in the labour force. In particular, the probability of being in one of these two states (versus being employed) was significantly lower in 2006 than in 2002 for individuals having characteristics that
are typically associated with a low level of labour supply (such as being over 55 years of age or a partnered woman with young children). This result indicates an increase in the relative employment rates of these types of people over this period of strong employment growth. In contrast, a change was not noted in the characteristics of people in unemployment, which were broadly similar in both years. One implication of these results is that it is worth looking beyond the unemployment rate when considering the capacity of employment to expand during a period of strong labour demand.