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Flashcards in Chapter Six Deck (17):
1

What is the labour force survey

Every month a team of field interviewers employed by the abs contact 27,000 households and ask a series of questions about the age and labour market activities of their member.

2

What is the working age population

The total number of civilians aged 15 and over. It is broken into those in the labour force and not in the labour force. The labour force is the number of people employed plus the number unemployed.

3

What is the unemployment rate

The unemployment rate is the percentage of people in the labour force who are unemployed.

Formula
Unemployment rate = number of people unemployed divided by the labour force X 100.

4

What is the labour force participation rate

Is the percentage of the working age population who are members of the labour force.

Labour force participation rate: labour force divided working age population X 100.

5

What is marginal attachment

A person who has marginal attachment to the labour force is a person who does not have a job and either had looked for one but is not immediately available for work or is available for work but has stopped looking for a job because of repeated failure to find one. A person who is available for work but had stopped looking for a job because of repeated failure to find one is a discourage job seeker.

6

Explain underemployment

Underemployment workers are people with part time jobs who are unable to find full time work because of unfavourable business conditions or seasonal decreases in the availability of full time work or are unable to work longer hours.

The underemployment rate usually exceeds the unemployment rate so the labour force underutilisation rate is more than double the unemployment rate.

7

What are the alternative measures of underemployment

The official measure of unemployment does not include the underemployment and those with marginal attachment to the labour force. The ABS provides some broader measures of labour force under-utilisation. The broader the measure, the higher is the average.

8

Explain part time jobs and their appeal

A part time job is attractive to workers because they can balance family with work. Part time jobs are attractive to employers because benefits are not paid to part time workers and less government regulation of part time workers. The labour force under-utilisation rate includes people who work part time but want to work longer hours. The abs counts the total of people with part time jobs. If we subtract the number underemployed from this total we get the number of people who want part time jobs eg voluntary part time workers.

9

Explain the three types of unemployment

The key reason why there is always some unemployment is because the labour market is constantly churning. New jobs are created and old jobs die; and some people move into the labour force and some move out of it. This churning creates unemployment.

We distinguish among three types of unemployment.

Frictional unemployment
Structural unemployment
Cyclical unemployment

10

Explain frictional unemployment

Frictional unemployment is the unemployment that arises from normal labour turnover- from people entering and leaving the labour force and from the ongoing creation and destruction of jobs. For example a grad interviewing for his first job.

11

Explain structural unemployment

Structural unemployment is the unemployment that arises when changes in technology or international competition change the skills needed to perform jobs or change the locations of jobs.

12

Explain cyclical unemployment

Cyclical unemployment is the fluctuating unemployment over the business cycle that increases during a recession and decreases during an expansion.

13

What is natural unemployment

Natural unemployment is the unemployment that arises from frictions and structural changes when there is no cyclical unemployment - when all the unemployment is frictional and structural. The natural unemployment rate is the natural unemployment as a percentage of the labour force.

14

Explain full employment

Full employment occurs when the unemployment rate equals the natural unemployment rate. At full employment all the unemployment is frictional or structural - and not cyclical unemployment. The major influences on natural unemployment are: age distribution of the population, the pace of structural change, the real wage rate and unemployment benefits

15

Explain unemployment and real GDP

Cyclical unemployment is the fluctuating unemployment over the business cycle - unemployment increases during recessions and decreases during expansions. At full employment, there is no cyclical unemployment. At the business cycle trough, cyclical unemployment is positive. At the business cycle peak, cyclical unemployment is negative.

16

How does unemployment affect potential GDP

Potential GDP is the value of real GDP when the economy is at full employment. Because the unemployment rate fluctuates around the natural unemployment rate, real GDP fluctuates around potential GDP: when the unemployment rate is above the natural rate, real GDP is below potential GDP and when the unemployment rate is below the natural unemployment rate, real GDP is above potential GDP.

When the economy is at full employment, real GDP equals potential GDP and there is no output GDP.

17

What is output GDP

Output gap equals real GDP minus potential GDP, expressed as a percentage of potential GDP. When the unemployment rate is above the natural rate, real GDP is below potential GDP and the output gap is negative. When the unemployment rate is below the natural unemployment rate, real GDP is above potential GDP and the output gap is positive.