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Underemployment costing $24bn a year

Lachlan Maddock
— 1 minute read

Australia is heading for an underemployment crisis, with one researcher saying we can’t afford to “snap back” to an economy where people can’t find enough work.

According to a research paper from Per Capita, underemployment is costing the Australian economy as much as $24 billion due to lost wages, which would create $4.3 billion in income tax receipts.

“Underemployment has become one of the greatest drags on our economy, stifling wages and consumption, fuelling the productivity crisis, and ruining careers”,” said Matthew Lloyd-Cape, the paper’s author. “We simply cannot afford to snap back to an economy where over a million workers cannot find enough hours.

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“Tackling underemployment must be placed front and centre of the post-COVID economic reconstruction”. 

The ABS’ April statistics showed an increase of 50 per cent in underemployment, meaning 15 per cent of the Australian workforce is now underemployed. Australia now has a labour force underutilisation rate of 19.9 per cent – but over the last five years, Australia’s underemployment rate has been among the highest in the OECD. And that’s causing significant damage to the livelihood and long-term economic outcomes of Australia’s workers. 

“For individual workers, eliminating underemployment would see a significant increase in their standard of living,” said Mr Lloyd-Cape. “For example, for already underpaid workers in the healthcare sector, wages forgone due to underemployment could be as much as $25,503 per year”.

The upcoming COVID-19 recession also has the potential to cause “economic scarring”. 

“Recessions typically cause deep scarring: for example, the incomes of low-income earners in the USA fell by 20 per can during the 1980-82 recession and did not return to their pre-recession level until the late 1990s,” the report reads. Economic scarring not only affects employment status, incomes, and economic security, it has significant implications for health and wellbeing.

“Levels of mental ill health increase during recessions, and mental health problems persist for workers who emerge from a recession with long-term reduced hours and income.”

 

Underemployment costing $24bn a year
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