"Lies, Damn Lies and Statistics"...
Weekly Column by Dr Muriel Newman
While the Labour Government lauds the low unemployment figures published in this week's Household Labour Force Survey (HLFS), there remain serious concerns about the accuracy of these statistics. Scrutiny of the long-term unemployment figures provides justification for these concerns.
According to the HLFS, 5,400 people have been unemployed for more than two years. Yet answers to my Parliamentary Questions show there are 42,400 persons currently receiving the unemployment benefit who have been on a benefit for over two years. The HLFS has effectively undercounted 37,000 unemployed New Zealanders.
It gets even worse. While the HLFS has identified 98,000 people who are unemployed, the Minister's own answers state 122,697 people are currently receiving the unemployment benefit. Using these figures, the unemployment rate increases from the claimed 4.9 percent to an actual 6.2 percent.
The reason for the discrepancy is the methodology of the HLFS - the way the statistics are collected. The Household Labour Force Survey, adopted by the 1985 Labour Government, is run under the auspices of the Geneva-based International Labour Organisation (ILO). Some 13,000 households are surveyed over a three-month period and the results extrapolated for the country.
According to the HLFS survey, to be categorised as being officially unemployed, the respondent must fit three criteria: 1. They must have done no paid work at all in the survey week. 2. They must have actively looked for work within the previous four weeks 3. They must be ready to start work within a week Each of these criteria exclude many people who see themselves as unemployed - such as a person who has been on the Dole for years but worked for one hour in the survey week, say baby-sitting for a neighbour. As a result of working just one hour, this person will not be counted as unemployed, even though he clearly cannot support himself on one hour's pay.
Similarly, someone who has been on the unemployment benefit for five years, but lives on the East Coast and has given up looking for work will not be counted as being unemployed. Nor will someone who has no job, wants a job and has been actively looking for work, but is not available to start work within the survey week. The HLFS counts anyone who is on the Dole but has worked for as little as one hour in the week, as employed; unemployed people who are no longer seeking work or who are not available to take a job straight away are not counted as unemployed, but are instead "jobless."
The December HLFS identified 172,600 "jobless" New Zealanders. Of these, 95,275 were categorised as officially unemployed. Adding these 95,275 (unemployed) "jobless" New Zealanders to the 98,000 people the HLFS classed as unemployed increases the unemployment rate from the 4.9 percent the Government claims, to 9.7 percent. Given that there are still almost 400,000 working-aged New Zealanders on state benefits, a 9.7 percent unemployment rate is much more accurate.
The concern that the HLFS understates the true rate of unemployment - by making a Government look good but diminishing the importance of unemployment as an economic and social problem has been raised by the head of the Australian Bureau of Statistics. He suggested that ten hours of paid work a week may be a more realistic measure of employment. Replacing a one-hour-a-week paid work criteria with ten-hours-a-week would effectively double the unemployment rate.
Other countries have become disillusioned with using the misleading HLFS, and are replacing it with more accurate methods. Germany, Austria, the Netherlands, Denmark and Luxembourg all now use measures based in full or in part on their unemployment register. Those that also use an "hours worked" criteria, have set it not at one hour a week but a more realistic 10 to 15 hours a week.
It is long past time for New Zealand to follow the international lead and adopt a more accurate measure of unemployment. I have been campaigning on this issue for some years, and as a result of exposing the anomalies of the HLFS, the Government has finally been forced to admit that the measure has failings - although that clearly doesn't stop them from gloating when their figures look good.
As Deputy Chairman of the Social Services Select Committee I am pressing for the committee to carry out an inquiry into unemployment statistics in order to recommend Government uses a more honest and accurate method.
Long term dependency on welfare is a major problem for New Zealand - the fact we have gone from 28 full-time workers to every full-time beneficiary just 30 years ago to four workers to every beneficiary today demonstrates the magnitude of our welfare dependency problem. The underreporting of unemployment by the HLFS prevents a national focus on this problem and as a result does the country a disservice.