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The RBA just explained why part-time employment has risen so quickly in Australia

Photo: Spencer Platt/ Getty Images.

Part-time employment is on the rise around the world, and Australia is no exception.

As shown in the chart below from the Reserve Bank of Australia (RBA), Australia ranks only behind Switzerland and the Netherlands as having the highest proportion of workers employed part-time.

Source: RBA

And, if using the ABS’ terminology of less then 35 hours per week, those workers classified as part-time, contract or casual swell to over 30% of the entire employed workforce, well above the 10% levels seen in the early 1970s.

This chart, also from the RBA, tells the story of the past four decades.

Source: RBA

And regardless of industry, part-time employment has increased noticeably over the past decade, especially in sectors that tend to be lower paying than others.

Source: RBA

The same can be said for workers by age bracket or gender with part-time employment increasing in all groups since 1980.

Source: RBA

So part-time employment in Australia is elevated compared to international standards, has increased across all industries, age groups and genders, and has risen rapidly over the past few decades.

But why?

According to the RBA, it’s not one factor but many.

In some instances it’s because employers are only looking for part-time employees, but, for many workers, it comes down to personal preference.

Nothing demonstrates that last point better than this excellent chart, showing the reason why employees work part-time based off the most recent HILDA study.

Source: RBA

Of those who participated in the study, two-thirds of employees said they choose to work part-time due to study commitments, personal preference or to raise a child.

“These three reasons for working part time are consistent with the share of part-time employment being highest for two groups: those aged under 25 years and females,” said the RBA.

For younger workers, the part-time share has increased from 15% of employment in 1980 to over 50%, with these workers tending to cite study as their main reason for working part time. Just over half of 15–24 year olds are now enrolled in full-time education, which is an increase from 30% in the mid 1980s.

The RBA also notes that the participation rate of females in the labour force has increased from 40% to 60% over the past five decades with half of those workers currently employed in a part-time job.

And of those employed part-time, most nominated childcare as the reason behind their decision.

“Prime-aged (those aged 25–44 year olds) females indicate caring for children as the dominant reason for working part time,” the RBA said.

So many of those currently working part-time have chosen to do so, demonstrating an increased amount of flexibility that exists within Australia’s labour market compared to previous years.

Indeed, according to the HILDA survey, only around a quarter of part-time employees said they would prefer to work full-time.

Outside of personal preference, the RBA noted that structural changes within the Australian economy, including the increased dominance of the nation’s services sector, was also factor behind the increased prevalence of part-time workers.

“This has resulted in a large increase in employment in service areas of the economy, such as health, education, tourism and hospitality,” it says.

“The nature of these jobs can involve irregular hours and this has meant that part-time and casual work are more common in these industries.”

As Australia’s services sector has grown, so too has the share of employment in these industries, further fueling the lift in part-time, casual or contract workers.

“As these industries have become more important in the economy, this has contributed to the overall rising share of part-time work,” the RBA said.

It also noted that the increase in part-time workers may stem from firms looking to improve the flexibility of their business models, adding workers when demand strengthens and trimming staff when it weakens.

Pretty self explanatory, and again representative of the increased flexibility that exists across the Australian workforce.

However, while working part-time benefits many of those who chose to do so, it does have implications to the broader labour market, particularly when it come to wage pressures.

Yes, it’s allowed more people to either work or look for work, but it has also meant that there are also more people who would like to work more hours, helping to keep underemployment levels elevated.

Essentially, when combined with unemployed persons, there’s still an abundance of workers who are underutilised right now.

That, as the RBA explains, may help to explain why wage growth has been so disappointing over recent years.

“The presence of underemployed workers could dampen wage growth given they offer additional labour supply to the pool of unemployed workers,” it says.

“From a modelling perspective, the addition of a measure of part-time underutilisation has some explanatory power in a wages Phillips curve, and, at the margin, may have contributed to the decline in wage growth in recent years.”

So while increased flexibility in the labour market has allowed many Australians to find work, which is undoubtedly a good thing, it’s also helped to increase the supply of labour, keeping wage pressures in check despite recent strength in labour market conditions.

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