Labour market

Who is in the labour force?

Unemployed and employed people

Who is considered employed?

A person over the age of 15 working for more than 1 hour per week

Who is considered unemployed?

A person over the age of 15 without employment (working less than one hour per week) and actively looking for work. 

Unemployment rate formula

 Number of people unemployed                     X 100

Total number of people in the Labour Force

What is cyclical unemployment caused by?

Caused by a insufficient levels of Aggregate Demand

What is structural unemployment?

The skills of the unemployed do not match the skills required by industry.

What is seasonal unemployment?

Where a person is unemployed because their skills are only required at certain times a year

What is frictional unemployment?

Where a person is unemployed for a period of time while they are moving from one job to another.

What is hard core unemployment?

Where a person is unemployed due to mental, physical or other personal characteristics that prevent them from receiving a job offer.

What is long term unemployment?

Out of work for over 12 months

What is hidden unemployment?

People who would like to work but have become discouraged from seeking employment and are no longer actively seeking work.

What is underemployment?

Where people are employed but would like more hours. 

Underutilisation rate (The extent to which the available labour is not working at its capacity.)

Unemployment Rate + Underemployment Rate * 10

Labour force

Participation rate

Total number of people in the Labour Force             X 100

Total number of people 15 or over in the population

What is the goal for ‘full employment‘ in Australia?

4 - 4.5% (The lowest rate of unemployment that can be achieved without excessive wages and prices growth)

What are the consequences if the unemployment rate is too high?

Loss of GDP (idle labour resources don’t contribute to national income), loss of taxation revenue, greater income inequality, reduction in living standards

What are the consequences if the unemployment rate is too low?

Creates inflation that reduces purchasing power, undermines our international competitiveness and trade balance

What factors contribute to lower AD?

• A decrease in Consumer Confidence

• Decrease in the rate of economic growth in our major trading partners.

• An increase in Interest Rates

• An appreciation of the Australian Dollar

• Decrease in disposable incomes - Low wages growth

• A decrease in Business Confidence