Underemployment on the rise in Australia: How HR can help

Underemployment in Australia has been a growing concern, with recent data indicating a rise in 2024. The underemployment rate, which measures the percentage of workers who want and are available to work more hours than they currently do, has increased due to various structural and cyclical factors. In April 2024, the seasonally adjusted underemployment rate rose to 6.6%, up from 6.5% in March, reflecting a rise in part-time employment that offset the fall in full-time jobs.

An underemployed person is currently employed but desires and is available to work additional hours. This shortfall between the preferred number of hours and the actual hours worked creates a significant issue in the labor market. Underemployment differs from unemployment in that, even when an underemployed person is working zero hours temporarily, they are still classified as employed due to their existing connection to at least one employer. However, like unemployment, underemployment represents additional hours of labor supply available from the current workforce.

The Australian Bureau of Statistics (ABS) measures underemployment in two main groups: part-time workers who usually work less than 35 hours a week and want more hours, and full-time workers who worked less than 35 hours during the reference week due to insufficient work or being stood down. This highlights the importance of considering underemployment alongside unemployment to fully assess labor market spare capacity and its potential to increase production.

While Australia’s unemployment rate fell slightly to 3.6% in September 2024, the labor market still faces significant challenges. The growth in employment was less than expected, and although the participation rate dropped slightly, indicating a positive result in terms of jobless rate decline, the trend shows a gradually relaxing labor market. Since April 2024, the monthly growth in employment has been 0.3%, above the 20-year pre-pandemic average of 0.2%. In general, the employment growth has kept up with the fast growth in population. The employment-to-population ratio remained at 64.1%, close to historically high levels seen throughout 2023, and 2.0 percentage points higher than March 2020. The participation rate remained at 66.8%, much higher than 65.6% in March 2020. In trend terms, all indicators still point to a tight labor market, although it is less tight than in early 2023.

This situation underscores the need for proactive measures to address underemployment, ensuring that workers can achieve their desired working hours and contribute more effectively to the economy. Nevertheless, Australia’s labor market remains one of the healthiest and most attractive to workers both at home and abroad. The robust economic environment, coupled with high standards of living and a strong social safety net, continues to draw talent from around the world. Australia boasts a strong and resilient economy, characterized by consistent growth and stability. The country has experienced extended periods of economic expansion, even during global financial crises, thanks to its diversified economic base.

How HR Can Help Address Underemployment

HR departments can play a crucial role in mitigating underemployment and improving the overall well-being of their workforce. The work of HR professionals is key to helping workers and businesses navigate complex contexts, such as those presented by underemployment figures in Australia, and elsewhere in the world. The role of HR departments is no longer merely administrative but involves strategic design of policies and measures to harness the full potential of teams and support disadvantaged workers. In this specific case, how to help those who are working fewer hours than they can or aspire to?

Here are some strategies HR can implement:

• Flexible Work Arrangements: Implementing flexible work schedules allows employees to take on additional hours or shifts as needed, helping underemployed workers achieve their desired working hours.

• Training and Development: Offering training programs helps employees acquire new skills, making them eligible for more hours or different roles within the company, thus improving job satisfaction and productivity.

• Career Pathways: Creating clear career progression pathways motivates employees to take on more responsibilities and hours. Developing internal promotion policies that recognize and reward employees’ efforts is crucial.

• Employee Engagement: Regularly engaging with employees to understand their needs and preferences helps HR tailor solutions that address underemployment. Surveys and feedback mechanisms are useful tools in this regard.

• Job Sharing and Part-Time Opportunities: Encouraging job sharing and creating more part-time roles provide opportunities for underemployed workers to increase their hours.

• Supportive Policies: Implementing policies that support work-life balance, such as childcare support or mental health resources, helps employees manage additional hours more effectively.