Economics — Topic 4

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Labour market

where individuals supply labour to the demand of businesses

Minimum wage

Lowest wage a firm can pay a worker $24.95 per hour in Australia

Working age population

Anyone aged 15 years or over in the population

Labour force

Anyone aged 15 years or over in the population who are seeking work

Participation rate meaning

The percentage of people in the labour force, which constitutes both unemployed and employed people, relative to the working age population
Individuals counted in the participation rate must be working or actively seeking work, such as regularly checking advertisements, applying for jobs with employers, attending interviews and they may registered with any employment placement provider that is a member of Job services Australia.

Cyclical unemployment

A type of unemployment which is directly caused by fluctuations in the business cycle. During a negative output gap, businesses may experience a decrease in demand for their goods and services due to factors such as a fall in an individual’s outcome or a decrease in price of substitutes. In turn, this decreases the amount of productive resources required for these G and S, causing employers to lay off their employees.

• Primarily due to a contraction in aggregate demand

• Can be seen during a recession

• Demand driven

trade union

A group of workers usually within an occupation or industry formed to protect and improve their members’ wages and working conditions.

Main role of trade union

The main role of trade unions are to negotiate better working conditions, benefits and wage increases as they perceive this as an income. Trade unions may also represent employees in matters like training, workplace safety and company restructuring.

• Australian Education Union represents teachers and educators.

Employer association

A group formed by businesses, usually within a particular industry to represent and protect their shared interests, especially within industrial relations and government policy

Four roles of the employer association

1. Assisting members in negotiation wage agreements with employees

2. Providing advice trending and direct assistance to employers

3. Lobbying the government for changes to government policies especially relating to industrial relations and skills training

4. Representing employees interest in any hearings in industrial tribunals

Industrial relations framework

The structures, institutions, principles, and rules (SIPR) which are set by government that shape how the industry works

Awards and what MUST awards maintain

The set of minimum pay rate and conditions which provide a safety net specific to an employee’s work or industry sector

• MUST include the 10 NES

• There are 122 different awards

Derived demand

Demand for labour due to the demand for the production of G and S

Supply of labour

Employees seeking employment which are represented by households

Demand of labour and elasticity of demand of labour,

Employers offering employment, represented by firms

• Related to productivity of labour (versus cost of capital)

• Elasticity for demand for labour is related to elasticity of demand for the product

Productivity of labour meaning and EQUATION

Output per unit of labour employed over time

TOTAL OUTPUT/LABOUR INPUT

employed

Refers to the population over 15 years of age who are willing, able, and actively seeking work

unemployed

The proportion of the population over 15 working without a job. These individuals can be actively seeking work and are available to start one and may work at least 1 hour a week paid (can be unpaid in family business) or can be on paid leave.

Unemployment FORMULA

Total unemployed/labour force x 100/1

Full employment

When the economy employs all labour resources efficiently which occurs when cyclical unemployment is zero. Remaining unemployment stems from other types of employment

Roles (5) of Fair Work Australia

Functions: 

• Establish and review mod awards

• App enterprise agreements

• Adjudicate on unfair dismissal cases

• Conduct dispute resolution and mediation

structural employment

Occurs due to a mismatch between the skills demanded by employers and those possessed by unemployed people, often due to a structural change in an industry or region. It is more deep rooted and complex to fix rather than improving the economy as it deals with the capital of individuals

Policy response: government funded training programs, increase productivity of workers so that machinery/capital does not need to replace the workers

Frictional unemployment

Unemployment which occurs when people move from one job to another and when people transition into and out of the labour force.

• Reduce frictional employment by reducing the time gap between finding a new job if that is an issue

• Individuals must search for employment opportunities, attend job interviews and complete and complete any administrative details to start the next job

Seasonal unemployment

a type of employment which occurs due to the seasonal nature of some jobs leading to changes in the labour market.

• Occur regularly each year and is independent of the business cycle 

  • Fruit picker, farm workers, tourist related jobs, and jobs associated with holiday seasons

• Related to frictional

Hardcore unemployment

Employment occuring when individuals are considered unsuitable for work due to personal reasons such as mental illness, physical disabilities or drug addiction

Long term unemployment

Individuals who have been unemployed for a period of 12 months or more

• The longer a person is out of work, the harder it becomes for them to get a job

Hidden unemployment

NOT UNEMPLOYMENT

Individuals who are not officially counted as unemployed but are not fully employed or are not working to their full potential. This includes individuals who have given up looking for work, those working part-time but desire full-time work and those whose skills are not fully utilised in their current jobs.

They are not in the labour force

Full time work vs part time work (amount of hours)

Full time: 35+ hours a week

Part time: 1-34 hours a week

Dimensions of the labour market

1. Gender

2. Age

3. Occupation

4. Cultural background

Labour market policies

Any government policy which affects anything in the labour market, such as wage levels, work policies, dispute resolution methods, work practises and the quantity and quality of labour. It is a micro policy

Income policies

Strategies to influence or set the price and oncosts of labour and are macro policies where the government centrally determines labour conditions.

Enterprise Bargaining Agreements

Agreements made at an enterprise level between employers and skilled and semi skilled employees about T and C of employment. They are Tailored to meet the needs of particular enterp and may Build on or vary the minimum T and C of mod awards but must not have T and C which are worse than the standards of awards.

Single enterprise agreement

An agreement negotiated by employees with an employer in a single enterprise

Multi enterprise agreement

Agreements which are negotiated between two or more different employers and their workers

Greenfields agreement

An agreement negotiated between the unions and the employer in a new enterprise or project

centralised wage determination

When a central government sets wage levels

Decentralised wage system

Where wages and conditions are determined at a firm or industry level. Market forces, such as the supply and demand of labour, determine these wages and conditions and influence these negotiations as factors such as technology, worker skills and company profitability set boundaries

Fair work Australia

The national employment tribunal which oversees the industrial relations system. They monitor statutory employment instruments to ensure they meet the required standards of awards.

Fair work ombudsman

Independent Statutory office who functions to monitors employment contracts to ensure they meet minimum standards in compliance with commonwealth laws. They do not resolve disputes, but only enforce the act, and investigate breaches of the FWA and ensures compliance. They appoints Fair Work Inspectors who advise employees and employers of work place laws and industrial relations.

Industrial relations system

The frame work for managing the labour force which govern the interaction of employers, employees and unions in the workplace. It mainly determines minimum working conditions, wage determination and the resolution of disputes

Individual Employment Contracts (indivs)

Individual, legally enforceable agreement between an employer and employee about the employee’s T and C of employment

• Cannot have conditions and terms less than awards standards

Minimum wage panel

Determines the minimum wages for employees covered by the national system

• Reviews minimum wage annually, makes a min wage order which comes into effect in 1st July 

• Based on submissions from employee unions, employers, gov

• Based on arguments relating to productivity, inflation, cost of living

accords

Series of agreements between labour and the unions, who would moderate their wage demands in exchange for improvements in social wage

full employment

There is no cyclical unemployment

• 4-4.5%

• Business cycle is nice and stable

• People who are left unemployed are the structurally unemployed