eco - unemployment (part of labour markets (topic 4))

unemployment

situation where individuals want to work but are unable to find a job, and as a result labour resources in an economy are not utilised

labour force

all employed and unemployed persons in the country at any given time

participation rate

percentage of the population, aged 15 and over, in the labour force, that is either employed or unemployed

cash rate

the interest rate paid on overnight loans in the short-term money market.

structural unemployment (what is it and why does it happen?)

• occurs because of structural changes within the economy caused by changes in technology or the pattern of demand for goods and services

• skills previously useful in declining industries may not match job opportunities in newly emerging industries

• most long-term unemployment is due to structural unemployment

cyclical unemployment

• caused by a downturn in the business cycle

• main contributor to rise in unemployment in 2020

hidden unemployment

• people who can be considered unemployed but do not fit the ABS definition of unemployment and are not reflected in unemployment statistics

• includes people discouraged from seeking employment

• shows in stats as a decline in participation rate

underemployment

individuals who have part-time or casual jobs but would like to work more hours per week

how does level of economic growth affect unemployment?

labour is a ____ demand… (explain)

when is unemployment likely to start rising (due to eco. growth)?

when is unemployment like to start falling (due to eco. growth)?

• affects cyclical unemployment

• labour is a derived demand

  • i.e decrease in AD in the economy may result in decrease for demand for labour and increase in unemployment

• unemployment starts rising when growth falls below 2%

• unemployment is likely to fall when growth is above 3%

how do macroeconomic policies affect unemployment?

• influence cyclical unemployment in short-medium term

• FP and MP influence AD

what does an expansionary policy stance aim to do?

increase economic growth and job creation

what does an contractionary policy stance aim to do?

aims to reduce inflation - might be at the cost of higher unemployment + lower growth

how does structural change affect unemployment? (short term and long term)

• short term: loss of jobs in sectors undergoing structural change (e.g manufacturing)

• long term: redirects labour to more productive sectors in the economy

  • e.g fossil fuels → renewables

how does technological change affect unemployment?

what type of unemployment does it affect?

(including AI)

• affects structural unemployment

• AI - doesn’t require new capital, fits into existing workflow

• report by Social Policy Group (2024) estimated between 22-33% of workforce could experience temporary unemployment by 2030 due to tech. change

how does high productivity affect unemployment? (short term and long term)

• short term: tends to increase unemployment (fewer employees needed per unit of output)

• long term: higher eco growth, lower unemployment rates

how has skill shortages affected unemployment?

what has been the issue with skill shortages over the past 2 decades?

• over past 2 decades, there has been significant skill shortages for skilled jobs

  • (e.g construction workers, health professionals)

• Jobs & Skills Australia - found 33% occupations experiencing skill shortages (2024)

• skills shortages make australia more reliant on migration

how do increased labour costs affect unemployment?

• causes businesses to substitute capital for labour to improve profits (less jobs, more unemployment)

• if FWC increases award wages substantially, businesses may not be able to afford to pay all their workers → unemployment

what is the opportunity cost of unemployment? (impacts)

• opportunity cost - value of all g.a.s that could have been produced given the whole labour force be utilised

• workforce is not being used to full capacity

  • i.e economy operating below PPF

how does unemployment impact living standards?

• unemployed people → lower income → lower living standards

• employed people have to pay higher taxes to cover cost of welfare payments to unemployed - less income

how does unemployment impact the government?

high unemployment

- reduces household income

- reduces government revenue from tax

how does unemployment create inequality?

• increased inequality

• unemployment leads to poverty (less income) and subsequently less equitable income distribution

• June ‘24 - in 1.4 million families no one aged over 15 had a job

more negative social impacts of unemployment

• increased debt levels

• homelessness

• loss of work skills

• erosion of confidence

• poor health

why are younger people (15-24) more likely to experience higher rates of unemployment?

• tend to work in industries with high amount of casual/part-time positions

  • e.g hospitality, accommodation

• employers often look for workers with training and experience

during COVID, people aged 15-24 accounted for —- of the workforce but experienced —- of job losses

14%, 55%

why are Indigenous Australians more likely to experience higher rates of unemployment?

• 44% live in regional or remote areas - reduces job opportunities

• racism + discrimination

• unemployment among ATSI aged 25-64 fell from 15% to 10% from 2016-2021

why are older australians more likely to experience unemployment?

• structural - they don’t possess the skills needed for current jobs

• attitudes - employers view them as less trainable than younger workers

Australian — Commission found in —-, — of organisations were open to hiring people aged 50-64

Human Rights, 2023, 50%

why do migrants experience higher rates of unemployment?

• overseas qualifications are not recognised

• language barriers

• limited networking

unemployment rate for migrants from english-speaking countries

5.9% (2025)

unemployment rate for migrants from non-english-speaking countries

6.4% (2025)

what did the Treasury estimate unemployment would have peaked at during COVID recession if not for economic support program?

12% (July 2020), rather than 7.5%

what was jobkeeper?

• expansionary fiscal policy

• wage subsidy program, aimed at preventing employers laying off staff

• support for businesses, child care subsidies, unemployment benefits

• $90 bil. program

• $1500/fornight

how many people were on jobkeeper?

~3.5 million workers, ~27% of labour force

when was early release of superannuation during COVID?

20 April 2020-31 Dec 2020

what was the cash rate in 2021?

expansionary MP, 0.1%

how did this expansionary MP minimise unemployment?

• lowers borrowing costs for businesses

  • so they had more money to pay their workers and avoid laying off staff

• stimulates AD + consumer spending - encourages firms to hire more workers to meet increased demand for g.a.s

  • also lowers cyclical unemployment

when was the Real Jobs, Real Wages pilot and what was it?

• introduced in 2024-25 budget

• program providing tapered wage reimbursements to employers who hire jobseekers at risk of long term unemployment

since —- albanese govt. has invested over $—- for ——— fee-free TAFE places and apprenticeships, including incentives for apprenticeships in —-

2022, $1.5 billion, 500, 000, housing construction

what has these apprenticeships in housing construction helped reduce?

post-pandemic labour shortages, shortage of skilled workers in construction, contributing to housing undersupply

what did the Secure Jobs, Better Pay act 2022 do?

what is it an amendment to?

• fair work amendment

• banned secrecy clauses

  • improves transparency

  • reduce risk of gender pay discrimination

• aimed to reduce employment barriers related to gender

what did the Closing Loopholes act 2023-24 do?

• increase job security for gig workers by reclassifying employee-like workers

• set enforceable minimum standards for gig workers - including rates of pay

• made it a requirement for gig workers to be given a fair process before contracts are terminated

when was the NSW Govt. Fee Free VET program and what did it do?

• 2019-2020

• aimed to upskill workforce in high demand sectors - care, tech, construction

when did the federal government include $722 million in apprenticeships in priority trades (plumbing, carpentry) and why?

• 2025-26 Budget (fiscal policy)

• to reduce obstacles for individuals to acquire new and in demand skills

when did the federal government introduce the Skills in Demand visa?

2024

why was the skills in demand visa introduced (give example)?

what did the skills in demand visa do?

how many visas were awarded to skilled workers to do what?

• to address critical skill shortages in high demand field - e.g healthcare

• increased visa efficiency, better worker protection for migrants, faster path to permanent residency

• helped combat skills shortages - 70% of visas awarded to skilled workers to help fill skill shortages

what was net overseas migration estimated in 2025-26 budget?

~260, 000

what was the main reason women aged 25-39 didn’t want a job? (factors affecting participation rate)

‘caring for children’ was the main reason for not wanting a job (44%) (ABS) (Dec ‘25)

what was the main reason men who wanted a job were not available within 4 weeks? (factors affecting participation rate)

‘studying / returning to studies’ (48%) (Dec ‘25)

why would an aging population influence the participation rate?

older individuals are transitioning into retirement

how does greater gender equality affect the participation rate?

what was the participation rate for women now and in 1978?

• shifts toward greater gender equality + flexible working arrangements

  • allows more women to balance career + caregiving

• participation rate for women April 2026 - 62.8%

  • participation rate for women 1978 - ~36%

how do higher school retention rates influence the participation rate?

• if more people pursue tertiary education, they tend to join the workforce later in life'

• according to OECD

  • 48% of men and 65% of women aged 25-34 had a tertiary qualification in 2024

how does the state of the economy influence participation rates?

what happens to the participation rates in times of strong economic growth?
provide an example?

• in times of strong eco growth, people will be more inclined to actively seek work

  • e.g rebound in 2023 after COVID - Nov ‘23 - 67%

how does the state of the economy influence participation rates?

what happens to the participation rates in times of recession?

provide an example?

• people are less optimistic about job prospects + less inclined to seek work

  • e.g COVID recession resulted in many people giving up looking for work - May 2020 - 62.2%

when did the car manufacturing industry decline in australia?

which major companies ceased production?

what did this do to unemployment?

• 2013-2017

• ford, holden, toyota

• caused those working in the car manufacturing industry to become structurally unemployed

why was there less demand for labour during 2020?

• COVID restrictions → lockdown restrictions meant people could not go out and spend money → decrease in consumption

• labour is a derived demand → if there is less demand for g.a.s, then there will be less demand for the labour to product g.a.s

manufacturing: % of GDP in 2024 vs in 1970s

2024: ~5%

1970s: ~25%