11ECON Chapter 10 - Unemployment

Labour market

. Refers to the supply and demand for labour/employment:

•        Supply: willingness of people to be hired for their labour by firms

•        Demand: willingness of employers to hire labour

. Regarding the state of jobs, it is dependent on the total number of jobs available, and on the number of people competing for them

Labour force

. The combination of people that are employed and unemployed (employed + unemployed)

—> including the people who are unemployed, employed part time and employed full time

—> includes people who are either working or seeking work

. At July 2025, Australia’s labour force is 15 308 900 people

. Not all people work for various reasons

—> EG:

•        Below the minimum age of employment

•        Retirees

•        Just choosing not to seek paid employment

—> THEREFORE

. The labour force (or work force) is the term for people who are either working or seeking work

. This means that those that are not seeking employment, for whatever reason, are not in the labour force

Participation rate

. the proportion of the working age population that is in the labour force (currently employed or currently seeking employment)

. Participation rate = (Labour force/working-age population) x 100

Current data:

. In Sept 2025, participation rate was 67%, having increased from 66.9% in August 2025 à cost of living rises have forced people to find work

Recent Significant data:

. was 65.5% in March 2020, then fell to 62.2% in May 2020, then rose to 65.9% in June 2021, then fell to 64.4% in September 2021 to rise to 66.2% in April 2022, then continuing the pre-covid trend of a steady increase

Male Participation rate

•        Fallen from 76% in 1990 to 71% in 2023

—> why:

•        Higher education retention rates

•        Changing social attitudes

. Males are retiring earlier

Female participation rate

•        Risen from 53% in 1990 to 63% in 2023

—> why:

•        Higher levels of education

•        Changing attitudes towards gender roles

•        Falling fertility rates

•        Improved access to childcare

•        Flexible working arrangements

Target for participation rate

. as high as possible

Business cycle and participation rate fluctuations

. Some fluctuations in the participation rate are to be expected over the course of the business cycle, because the apparent number of job opportunities influences people’s decisions to seek work

•        Contraction:

. Job seekers may become discouraged if they feel they have limited prospects of attaining employment

•        Expansion:

. Encourage people to enter the job market due to better prospects of being able to obtain employment

. The rate might rise or fall about 1-1.5% over the course of the cycle

How can changes in labour force participation affect monthly employment data

EG: an increase in economic activity after a period of slow growth might not translate into shorter waits for employment.

—> This is because the more people that seek employment, the larger the participation rate and, subsequently, an increase in unemployment if new participating people do not have a job

Unemployment rate

. Proportion of the labour force who are willing and able to work, but are not in paid work for at least 1 hour a week

. Target = full employment (~4% where everyone who wants a job can find one)

Unemployment rate data

Unemployment

•        Occurs when people who are willing and able to work (in the labour force) cannot find paid work for at least one hour per week à this is the unemployment rate

Conditions to be unemployed: an individual is

1.      Part of the working age population (15-65) and NOT a full-time student

2.      Not working 1+ hour paid work per week (or 5+ hours per week in family business)

3.      Actively seeking work (been actively seeking work in the month prior to survey + carried out specific tasks to suggest they were actively seeking work like contacting employment services, responding to job advertisements and sending their resume to employers)