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The real jobless rate: The 7 million Aussies not looking for work

Jobs: People walk on a city street in Australia wearing masks and a map of Australia.
Australia's unemployment rate is falling but the number of Aussies not looking for a job has gone up. (Source: Getty)

There are around 7 million Australians of working age that don't have a job, and are not looking to enter the workforce.

Yet, our unemployment rate is down to 4 per cent and experts predict this will keep falling.

How does this make sense?

Here’s a breakdown.

Unemployment rate

The unemployment rate is calculated by counting those who are actively looking for work but have been unable to find a job.

It doesn’t include people who are not seeking a job.

So, people lucky enough to have enough money to not have to work or stay-at-home parents are not included in the numbers.

At present, there are almost 21 million people that make up the working-age population - 13.4 million Aussies have jobs, just over 580,000 are unemployed and 7 million people are simply not in the workforce, according to CommSec.

Of the 7 million people not in the workforce, almost half (3.4 million) permanently don’t intend to work or are unable to work.

A further 3 million people aren’t looking for work. And only around 170,000 people could fill job vacancies, but indicate they are just not in a position to do so in the next month.

Worker shortage

There are a record number of jobs available in Australia at the moment, with job ads up 50 per cent compared to pre-pandemic times.

Yet, there is a growing number of Australian workers choosing not to enter the workforce.

“One issue that deserves the attention of our federal political leaders is our ever-tightening job market,” CommSec chief economist Craig James said in a research note.

“In simple terms, who will fill all the jobs that are currently available as well as the jobs that will be created over coming years?”

James said the bottom line was that the pool of potential workers was continuing to shrink.

“This is a problem, in an overall sense, for businesses to fill positions,” he said.

“And, given the smaller number of candidates, the further complication is lining up potential job seekers with the skills required to fill the position.”

What can we do to fix the problem?

James said part of the solution would be to bring in more workers from overseas, as Australia regularly did before the pandemic.

“But not all countries have relaxed border laws,” he said.

“And then there is the question of the motivation of potential migrants – how keen are they to travel overseas for work?”

After falling by 89,900 in 2020/21, net overseas migration is tipped to lift by 41,000 in 2021/22, then lift by 180,000 in 2022/23 and a further 213,000 in 2023/24.

“From 2012 to 2019, annual net migration averaged 224,000. So migration may fall short in filling the job-market void,” James said.

“Simply, it’s a matter of supply and demand. If there are fewer people available to fill positions, then businesses will either have to offer higher wages to attract candidates, not fill the positions at all or get existing staff to do the necessary work by lifting working hours and pay.”

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