Topic 4

What are labour market outcomes?

the wages and working conditions different people recieve when participating in the labour market

What is dynamic efficiency?

Dynamic efficiency refers to a firm's ability to adapt to changes in consumer preferences and technological developments over time.

What is technical efficiency?

Technical efficiency occurs when a firm maximises output while minimising the inputs used to produce that output.

What is allocative efficiency?

Allocative efficiency occurs when resources are allocated to their most effective use, where they generate the greatest benefit to society.

What is comparative advantage?

Comparative advantage occurs when a country can produce a good or service at a lower opportunity cost than another country.

What is aggregate demand (AD)?

Aggregate demand is the total demand for goods and services in an economy at a given price level. It is primarily used to analyse short-run economic activity.

How is aggregate demand linked to the business cycle?

Changes in aggregate demand can cause fluctuations in economic activity, contributing to the different phases of the business cycle in the short run.

What is aggregate supply (AS)?

Aggregate supply is the total quantity of goods and services that firms in an economy are willing and able to produce at different price levels.

What is the long-run aggregate supply curve?

Long-run aggregate supply represents the economy's productive capacity and is influenced by factors such as technology, labour, capital and productivity.

What is cost-push inflation?

Cost-push inflation occurs when rising costs of production cause firms to increase prices, resulting in inflation.

What are examples of causes of cost-push inflation?

Higher wages, energy prices, raw material costs, taxes or other production costs can cause cost-push inflation.

What is the Gini coefficient?

The Gini coefficient is a measure of income or wealth inequality within a population.

What does a Gini coefficient of 0 mean?

Perfect equality, everyone has the same income or wealth.

What does a Gini coefficient of 1 mean?

Perfect inequality, one person receives all the income or wealth and everyone else receives none.

What Gini coefficient is commonly considered a warning level for high inequality?

round 0.4 is commonly used as a warning threshold for high inequality.

What are Australia's National Employment Standards (NES)?

The NES are the minimum employment entitlements that apply to most employees in Australia.

What are the 11 National Employment Standards?

Maximum weekly hours, Requests for flexible working arrangements,Casual employment and conversion, parental leave and related entitlements, Annual leave, Sick and carer's leave and compassionate leave, Community service leave, Long service leave, Public holidays, Notice of termination and redundancy pay, Fair Work Information Statement

What are the maximum weekly hours under the NES?

Full-time employees generally work a maximum of 38 hours per week, plus any reasonable additional hours.

What is casual conversion?

Casual employees may have pathways to become permanent employees, subject to the relevant rules and eligibility requirements.

What is the Fair Work Information Statement?

A document that employers must provide to new employees containing important information about their employment rights and conditions.

What is Australia's National Minimum Wage from 1 July 2026?

$26.44 per hour or $1,004.90 per week for a full-time employee working 38 hours per week.

Who sets Australia's National Minimum Wage?

The Fair Work Commission sets the National Minimum Wage through its annual wage review.

What is the Better Off Overall Test (BOOT)?

The BOOT is an assessment used by the Fair Work Commission to determine whether employees covered by a proposed enterprise agreement are better off overall than they would be under the relevant modern award.

Why is the BOOT important?

It helps ensure that employees do not receive worse overall pay and conditions under an enterprise agreement than under their relevant modern award.

What is nominal wage?

pay received by employees in dollar terms for their contribution to the production process, not adjusted for inflations

What is real wage?

measure of the actual purchasing power of money wages

What is enterprise bargaiging?

refers to negotiations between employees about pay and work conditions at the level of the individual firms

What is income distribution?

refers to the way in which an economy’s income is spread among the members of different social and socio-economic groups

How does skill level influence difference in wage between different occupations?

higher skilled occupation command higher wages. Workers in jobs requiring greater education, longer training periods, and specialised knowledge earn significantly more

How do working conditions influence difference in wage between different occupations?

jobs that are dangerous, dirty, or involve irregular hours attract a compensating wage differential

How does occupational mobility influence difference in wage between different occupations?

when occupational mobility is high, the workers can move easily between occupations, the supply of labour is always likely high. However when it is low, the wage rate tends to be higher

How does bargaining power influence difference in wage between different occupations?

when wages grow faster than productivity, real labour costs rise and cut into profits, promoting employees to replace workers with technology, causing underlying tension with bargaining power

How does experience and qualifications influence difference in wage between the same occupations?

more experienced workers are generally considered more valuable and are paid more. Workers with higher qualifications command higher wages

How does geographic mobility influence difference in wage between the same occupations?

the ease with which labour can move from one area to another. isolated locations have higher wage rates

How does labour productivity influence difference in wage between the same occupations?

more productive workers earn higher wages, and employees can negotiate higher wages in exchange for productivity improvements

How does capacity of the firm to pay influence difference in wage between the same occupations?

the more profitable a firm is the greater capacity they have to pay higher wage

How does age influence difference in wage between the same occupations?

income generally peaks between the ages of 35-44, lowest for 15-19

How does gender influence difference in wage between the same occupations?

Despite equal pay for equal work, men earn on average more than women

How does migrant status and cultural background influence difference in wage between the same occupations?

median income of workers with a migrant background make less than the national average. Recent migrants tend to earn less than longer settled migrants

How does being Indigenous Australians influence difference in wage between the same occupations?

they face a significant wage disadvantage

What is enterprise bargaining?

refers to negotiations between employers and employees about pay and work conditions at the level of the individual firm

What is income distributions?

refers to the way in which an economy’s income is spread among the members of different social and socio-economic groups

What are non-wage outcomes?

the benefits that many employees receive in addition to their ordinary pay over time

What are some examples of non-wage outcomes?

salary packaging, bonus cash payments, flexibility in work patterns

What is salary packaging?

a means to supplement wages

What is a bonus cash payments?

added to an employee’s normal wage

What are the economic costs of inequality?

reduces overall utility and economic growth, creates poverty and social problems, increases cost of welfare support

What are the economic benefits of inequality?

encourages the labour for to increase education and skill level and to accept risks more readily and to work harder and longer. It also makes the labour force more mobile and creates the potential for higher savings and capital formation

What are the social costs of inequality?

wellbeing, social class divisions, poverty

What is cyclical unemployment?

caused by a downturn in the business cycle. Falling demand for goods and services results in firms reducing production, which decreases demand for labour. 

What is structural unemployment?

Occurs because of structural changes in the economy caused by technological changes or changes in the pattern of demand for goods and services.

What is long-term unemployment?

unemployed for a period of 12 months or more. Which can be very difficult to reduce as they become less desired by employers, who often prefer skills that are more up to date.

What is seasonal unemployment?

occurs due to the seasonal nature of some jobs

What is frictional unemployment?

occurs as people change jobs moving from one to another

What is hard core unemployment?

Individuals who are considered unemployable as they have been out of work for so long because of a personal characteristic

What is hidden unemployment?

those who are discouraged and have given up looking for work and or have gone back to school

What is underemployment?

those who have part-time jobs or casual hours jobs but would like to work more hours

How does skill level impact wage outcomes?

higher-skilled occupations command higher wages

What is the reason for the trend of wages in relation to age?

as young workers have less experience, while (60+) workers begin to rely on retirement income and move into lower paying roles

What are three contributing reasons for unequal pay between genders?

gender discrimination, years not working, occupation based segregation

How much more do men earn on avg?

11.5% more than women

What is the glass ceiling?

an informal barrier limiting access to top-paying positions

What is the stat for median income for migrants?

13% below market wage

What is occupational downgrade?

working in jobs below their qualification level due to language barriers and non-recongnition of overseas qualifications

What is the stat for median income for Indigenous Australians?

median household income for those aged 15+ was 33% lower than non-Indigenous Australians

What is the stat for weekly earnings for Indigenous Australians?

Only 10% earnt over $1000/week in 2021 vs 45% of the general population

What is aggregate demand?

Total demand for goods and services in an economy

What is the equation for aggregate demand?

C+I+G+X-M

What is human capital?

total sum of knowledge, skills, training and experience of workers that contribute to the production process, which reflects quality of labour

What is a labour market?

A market where individuals seeking employment interact with employers who want to obtain the most appropiate labour skills for their production process

What happens as wages fall and what does this for the demand wages curve?

as wages fall, firms will demand more labour and the curve is downward sloping

What is the demand for labour?

It is a derived demand, the most significant influence on a firm’s demand will be output factors

The demand for labour is derives from?

changes in aggregate demand

How do changes in the total level of economic activity influence demand for labour?

If economic activity is declining, there will be a fall in spending, leading to a fall in production, then a reduced demand for labour.

How do conditions in the firms industry and demand for products influence demand for labour?

Any changes in the pattern of consumer demand will affect the pattern of demand for labour, therefore a change in consumer taste and preferences for goods and services will see a change in the allocation of labour between different industries

What does the productivity of labour help firm's choose?

the choice between labour or capital in their production process

Labour productivity depends on?

the quality of the workforce

What impact does labour productivity have on the demand for labour in the short term?

if aggregate demand is rising faster than the increase in productivity, there will be more demand for labour.

What impact does labour productivity have on the demand for labour in the long term?

Higher productivity means labour is more attractive

What is the cost of capital represented by?

interest rates and special tax allowances

Who supplies labour?

individuals supply labour when they are able and willing to work

The supply curve is?

upward sloping

How do pay levels influence the supply of labour?

The higher the wage, the more willing people are to sacrifice leisure to supply their labour

How do working conditions influence the supply of labour?

Attractive working conditions encourage a higher supply of labour

How does education, skills and experience requirements influence the supply of labour?

the level of skill required for a job can limit the supply of labour

How does occupational mobility influence the supply of labour?

the ability of labour to move between different occupations, mainly depends on the level of education and skill required

How does geographical mobility influence the supply of labour?

the ability to move between different locations. Factors that limit geographical mobility are costs and personal upheaval, remote locations have limited geographical mobility

Labour force participation rate can be determined by?

the percentage of the population aged 15 years old and over, who are in the workforce. Labour force/ population over 15 × 100

What influences the participation rate?

state of the economy, social attitudes, ageing population, school retention rates

When does the labour participation rate increase?

it increases during booms

What are two groups that impact the participation rate?

young people looking for their first job, and women with young children returning to the workforce

How do government policy decisions influence the supply of labour?

qualification requirements and license restrictions

How do professional associations influence the supply of labour?

impose standards of educations, which then restricts the supply of labour

What is unemployment?

When a person in the labour force is actively seeking work but is unable to find employment. People who have given up on looking for work are not counted as unemployed, they fall out of the labour force entirely

What is the working age population?

the total member of people in australia aged 15 and over who are civilians and not institutionalised. This is the pool from which the labour force is drawn

What is the labour force?

unemployed and employed, excluding those who are not looking for work

What is participation rates?

the percentage of the working age population that is in the labour force

How to calculate the labour force?

employed + unemployed = labour force

How to calculate the unemployment rate?

number employed/ labour force x 100

The quality of the labour force refers to?

the general health, motivation, skill, experience, and levels of education and training possessed by people in the labour force. This is also referred to as human capital