Key Concepts in the Labour Market

Labour market

The market where workers sell their labour and employers buy labour; determines the price (wage) and quantity of labour

Derived demand

Demand for labour is derived from the demand for goods and services produced by labour

Labour force

All people aged 15 and over who are employed or actively seeking work

Participation rate

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

Working-age population

All individuals aged 15 years and over

Unemployment rate

The percentage of the labour force that is unemployed and actively seeking work

Underemployment

When individuals are working fewer hours than they would like or are employed in jobs that don't fully use their skills

Hidden unemployment

People who are not actively seeking work and are therefore not counted in the official unemployment statistics

Casualisation of the workforce

An increase in the proportion of workers employed on casual, part-time or non-permanent contracts

Wage

The monetary return paid to labour for their contribution to the production process

Nominal wage

The wage received in current dollars, unadjusted for inflation

Real wage

Wage adjusted for inflation; shows actual purchasing power

Occupational mobility

The ability of labour to move between different occupations

Geographical mobility

The ability of labour to move between different geographic regions for work

Enterprise bargaining

The process of negotiating wages and working conditions between employers and employees at the enterprise level

Award

Legally binding document setting out minimum wages and conditions for specific industries or occupations

Minimum wage

The lowest legal wage that can be paid to workers, as determined by the Fair Work Commission

Fair Work Commission

The national workplace relations tribunal that sets minimum wages and resolves industrial disputes

Wage differentials

Differences in wages across occupations, industries, or individuals due to skill levels, demand, location, etc.

Education and training

Factors that influence the productivity, employability, and wage levels of workers

Labour productivity

The output produced per unit of labour input; a key factor in wage growth and employment

Workplace health and safety

Regulations and practices to ensure a safe working environment

Discrimination in the labour market

When individuals are treated unfairly in hiring, pay or promotion due to gender, race, age, etc.

Structural change

Changes in the composition of industries and occupations in the economy, often due to technology or globalisation

Technological change

Advances that can increase productivity but also reduce demand for certain types of labour

Labour market institutions

Organisations that influence the functioning of the labour market, such as unions, employer associations and government bodies

Trade union

An organisation that represents workers in a particular industry to protect their interests and negotiate wages and conditions

Employer association

An organisation representing the interests of employers in negotiations and policy discussions

Labour market flexibility

The ability of the labour market to adapt to changes, including through casualisation, part-time work and contracting

Human capital

The skills, knowledge, and experience possessed by an individual or population, seen as an asset

Demand for labour

The number of workers firms are willing and able to hire at different wage levels

Supply of labour

The number of workers willing and able to work at different wage levels

Labour market equilibrium

The point where the quantity of labour demanded equals the quantity supplied at a given wage

Shortage of labour

When demand for labour exceeds supply at the current wage rate

Surplus of labour

When supply of labour exceeds demand at the current wage rate; contributes to unemployment

Government intervention in the labour market

Includes setting minimum wages, employment laws, taxation policies, and labour market programs

Industrial relations

The system of laws, institutions, and processes that govern employment relationships

Labour market programs

Government initiatives to increase employment and improve workforce skills (e.g. apprenticeships, JobTrainer)

Income inequality

The unequal distribution of income across individuals or households in an economy

Gender pay gap

The difference between the average earnings of men and women in the labour market

Productivity and wages

The relationship that suggests higher labour productivity leads to higher real wages

Cyclical unemployment

Unemployment caused by a downturn in the business cycle

Structural unemployment

Unemployment caused by changes in the structure of the economy (e.g. automation or decline of industries)

Frictional unemployment

Short-term unemployment as individuals move between jobs

Seasonal unemployment

Unemployment due to seasonal variations in demand (e.g. fruit picking, tourism)