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Unemployment 101: Itís time to get REAL

By Jonathan J. Ariel - posted Wednesday, 22 February 2012


Western leaders misleading their citizens. Feeding the people gruel and calling it tiramisu. Chuckling heartily within the confines of parliament, at the expense of an ignorant public. Where is Wikileaks when we need it?

Last Thursday when Australia’s jobless figures were published nationwide inboth the Fairfax and News Ltd press. They weren’t. Media outlets fell over themselves crowing that the jobless rate fell to 5.1 per cent in January, from 5.2 per cent in the previous month.  

In unison they cooed, that in January the number of employed rose by 46,300, with full time employment increasing by 12,300 and part time workers climbing by 34,000.

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The media downplayed or ignored that in the last year, employment has grown by a tiny 0.3 per cent. That is, it barely moved.

Many commentators expected the jobless rate to rise marginally to 5.3 per cent and were gobsmacked with the news of a fall in jobless numbers. After all, companies up and down the eastern seaboard are shedding labour: Alcoa, Kell & Rigby, Pacific Brands, Qantas, ANZ, Heinz, Ingham, Holden and Toyota. With others like Caltex and Air Australia possibly next to cull their staff numbers.

Officially, at 5.1 per cent, January's unemployment rate fell to the lowest level since July 2011.

But unofficially - and we’ll define that in a minute - the number of truly jobless Australians grew to 10.3% or 2.21 million. This is 0.7per cent higher than for December’s unofficial rate. So why the discrepancy between official and unofficial figures?

For starters, politicians are allergic to bad news and do their utmost to immunise the public from the brunt of it. Lest the public vent its rage at the ballot box.

Former Labor Prime Minister Paul Keating was a master of this deception. Towards the end of his term he grew more and more unhappy with the march northward of the consumer price index (CPI). The CPI after all is a measure of the change in prices paid by households for goods and services for consumption purposes. In general the greater its strut northward the lower the living standard enjoyedby the punters.

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Keating removed (the volatile and mostly climbing) house prices as a variable in determining the CPI and replaced it with (far steadier) “imputed rent on owner occupier homes”. This way, he misrepresented living standards and cunningly misstated that people were better off than they really were. The charade continues to this day.

But such wicked behaviour is not solely the domain of the Labor Party. Back in the winter of 2003, the highly regarded pollster Gary C. Morgan of Roy Morgan Research attempted to shame the then Howard government for telling porky pies about the number of unemployed Australians with their snouts in the welfare trough. The claim was that the Howard government was intentionally understating these numbers.

Morgan put forward his argument to the Australian Financial Review on 22 August, 2003, claiming that by reclassifying some unemployed people as permanently disabled or by conjuring up a potion called “Youth Allowance” (which is little more than a mask for the jobless), the official statistics hid a huge number of people who would actually like to be working.

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About the Author

Jonathan J. Ariel is an economist and financial analyst. He holds a MBA from the Australian Graduate School of Management. He can be contacted at jonathan@chinamail.com.

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