Underutiilsed Labour: More than the Unemployed?

Abstract

The official unemployment rate in New Zealand has been below 5%for nearly six years and reached a 22-year low of 3.4% in late 2007. However, official unemployment statistics understate the availability of labour given they do not include an important group of people who want to work - the marginally attached. These are people who want to work, but are either not available or not actively seeking work and therefore are not classified as unemployed. But how different are those people that are marginally attached to the labour force compared to the unemployed? Since 1999, strong employment growth has coincided with a large drop in unemployment but the number of people marginally attached to the labour force has fallen only slightly. Using data from the Household Labour Force Survey, this paper tries to explain the reasons behind this by examining trends in those marginally attached to the labour force and whether this group is significantly different to the officially unemployed. While it is sometimes argued that those marginally attached to the labour force should be combined with the officially unemployed to give a measure of excess supply, this paper investigates whether this is sensible given they appear to be two distinct groups.