BUSS1040 Lecture Notes - Lecture 12: Business Cycle, Potential Output, Structural Change
28 May 2018
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WEEK 12: UNEMPLOYMENT AND INFLATION
INTRODUCTION TO UNEMPLOYMENT
• Unemployment: refers to a situation where individuals want to work but are unable to find a job, and as a result
labour resources in an economy are NOT utilised
o Important measure of an economy’s performance
o Measure of utilisation of an economy’s labour force
o Indicator of whether the economy is expanding fast enough to create jobs for those willing to work
• UE creates hardship à rising UE weakens confidence and spending
• UE lose skills and employability = risk of long term UE
• Tax burden: lower income tax payments and higher welfare payments
• High UE suggests that economic policies need to be adjusted
LABOUR MARKET MEASUREMENT
• The population is divided into 2 groups:
1. Working age population (15+)
2. People too young to work (under 15)
• The working age population is divided into
1. People in the labour force (working or seeking work)
2. People not in the labour force
• Labour Force: the sum of employed and unemployed workers
• Employed: to be counted as employed, a person must:
o Work for more than one hour as a paid employee or in a family business or farm
o Had a job or business from which they were temporarily absent
• Underemployment: the underemployment rate is the proportion of the labour force that has a job but would like to
work more hours per week
• Unemployment: to be counted as UE, a person must:
o Actively look for full-time or part-time work and be available immediately
o Be waiting to start a new job and could have started if the job was available
THE AUSTRALIAN LABOUR MARKET
• August 2017:
o Population: 24.8 million
o Working age pop: 19.9 million
o Labour force: 13 million
o Employed: 12.3 million
o Unemployed: 0.7 million
EMPLOYMENT AND UNEMPLOYMENT
• Four labour market indicators:
o The unemployment rate
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§ Currently 5.6%
§ UE rate increases in a recession, and peaks after recession ends
o The labour force participation rate
§
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§ Currently 65%
§ Female labour force participation has trended higher over time, whilst has declined for males
o The employment-to-population ratio
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§ Currently 62%
o The underemployment rate
• A strong labour market is usually characterised by low UE and a high labour force participation rate (giving a high
employment to population ratio)
o Strong labour markets offer more full-time jobs and have a low underemployment rate
Document Summary
Introduction to unemployment: unemployment: refers to a situation where individuals want to work but are unable to find a job, and as a result labour resources in an economy are not utilised. Important measure of an economy"s performance: measure of utilisation of an economy"s labour force. Indicator of whether the economy is expanding fast enough to create jobs for those willing to work: ue creates hardship rising ue weakens confidence and spending, ue lose skills and employability = risk of long term ue. Tax burden: lower income tax payments and higher welfare payments: high ue suggests that economic policies need to be adjusted. The population is divided into 2 groups: working age population (15+, people too young to work (under 15) The working age population is divided into: people in the labour force (working or seeking work, people not in the labour force. Labour force: the sum of employed and unemployed workers.
