ECON10003 Lecture Notes - Lecture 5: Job Services Australia, Unemployment, Nominal Rigidity
19 Jun 2018
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WEEK 4 MACROECONOMICS- LABOUR MARKET PART II
Sample surveys give indicators and measures of performance and behaviour in labour markets. Periodically verified
and calibrated against population census results. ABS does monthly Labour Force Surveys. 52,200 people aged 15
years and over. 0.32% of population. Survey week is the week starting Monday between 6th-12th of the month,
questions will be asked following week. Key Labour market indicators include:
-The working age population: measure of total civilians ages 15 years and over. Not including members of
defence force and diplomatic staff of foreign countries residing in Aus.
-The Labour Force: sum of employed and unemployed persons.
-The Labour Force Participation Rate: % of working age population that is economically active.
Employed person: over 15 years, worked for one hour or more for payment in kind, or in family business or farm.
Including those employed but were not at work e.g. on leave or strike. Full-time works more than 35 hours. Part-time
works for less than 35 hours.
Unemployed person: actively seeking full or part-time work during the 4 weeks up to the end of survey. Was
available to start work in the week of the survey or was waiting to be called back after have been temporarily stood
down.
Actively seeking work includes having submitted applications or replied to advertisements, checked or registered with
Job Services Australia, taken steps to starting a business and contacted people in order to obtain work.
Unemployment rate- number of unemployed persons expressed as a percentage of the labour force.
Discouraged worker hypothesis- a negative relationship b/w measured unemployment rate and the labour force
participation rate, true unemployment rate is underestimated. Significant excess supply in macroeconomic labour
market as reflected in high level of unemployment that persons are discouraged for seeking work because it is too
difficult. These people are excluded from classification as unemployed, they are willing to work if the prospects of
finding it were improved. As these people are not included in unemployment recognised by the ABS the true rate of
unemployment in Aus. is underestimated.
Duration of unemployment: If time is short, may not merit policy intervention not associated with financial and
social hardship. Long-term (52 weeks or more) unemployment may require particular policy intervention to alleviate it
and is associated with financial hardship and emergence of social problems including crime, drugs and family
breakdown.
Underutilisation of Labour: Not giving hours to those who want hours.
Long-Term contracts: Agree to a labour output at a specific wage.
Efficiency Wages: Real wage will remain above the classical market clearing level. Higher paid workers are more
productive. “Shirking model” suggests if employers were to pay the market clearing level an employee will not work
well. Employers thus won’t hire at lower wages.
Types of unemployment: Classification based on the cause of unemployment and diff. policy solutions which may be
appropriate.
Sticky Wages and Cyclical unemployment
Money wage flexibility provides for full employment in that all of those able and willing to work at that
equilibrium real wage will be employed. In times of unemployment the money wage is not bid down by unemployed
workers and that a wage “stickiness” exists. Unemployed workers resisting any decrease in their money wage as they
would interpret this as a reduction in their wage, relative to that of other workers.
Cyclical unemployment is a factor of overall unemployment that relates to the cyclical trends in growth and
production that occur within the business cycle. When business cycles are at their peak, cyclical unemployment will
be low because total economic output is being maximized.
Frictional: Those who voluntarily leave a job to look for another, and experience a period of unemployment while
doing so. Assume all workers and jobs are the same.
Structural: Those who are unemployed due to a mis-matching between available workers and their characteristics and
job vacancies and their requirements.
Statistical Discrimination: Occurs when firms recruit/select employees according to group characteristics rather than
individual characteristics or individual suitability for the job.
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Document Summary
Sample surveys give indicators and measures of performance and behaviour in labour markets. Periodically verified and calibrated against population census results. Survey week is the week starting monday between 6th-12th of the month, questions will be asked following week. The working age population: measure of total civilians ages 15 years and over. Not including members of defence force and diplomatic staff of foreign countries residing in aus. The labour force: sum of employed and unemployed persons. The labour force participation rate: % of working age population that is economically active. Employed person: over 15 years, worked for one hour or more for payment in kind, or in family business or farm. Including those employed but were not at work e. g. on leave or strike. Unemployed person: actively seeking full or part-time work during the 4 weeks up to the end of survey.
