Flashcards in Lecture Five Assessable Notes Deck (17):
What is the working age population?
All those who are fit and eligible to work within a population. People aged over 15.
What is the working age population divided into?
Divided into those in and out of the labour force (LF) . The LF is made up of those who are either employed or unemployed. If you are unemployed but looking for work you're part of the LF but if you're unemployed and not looking for work eg full time student you are not in the LF
What are the two main labour market indicators?
Unemployment rate and LF participation rate.
Unemployment: an indicator of the extent to which people who want jobs can't find them. It tells us the amount of slack in the labour market. The unemployment rate is the percentage of the people in the labour force who are unemployed.
Formula: (number of unemployed people divided by the LF number X 100
Labour force participation: the number of people in the labour force is an inductor of the willingness of people of working age to take jobs. The LF participation rate is the percentage of working age population who are members of the labour force.
Formula: (LF rate divided by working age population X 100)
What is marginal attachment?
A person who has marginal attachment to the LF does not have a job and either (a) has looked for one but is not immediately available for work or (b) is available for work but has stopped looking for work due to repeated failure to find work. A person who is available for work but has stopped looking due to failure is know as a discouraged job seeker.
How do discouraged job seekers differ from others with marginal attachment as their unemployment reason
Only differ due to their reason for being counted as unemployed. Argued presence of discouraged seekers sometimes make employment figures look better than they are because you are bit officially unemployed as you are a job seeker
What is an underemployed person?
An underemployed individual is someone will part time work but is looking for longer or full time hours. Unable to find full time work because of unfavourable business conditions and seasonal decreases in the availability of hours. Not all part time works are underemployed
What are the three measurements ABS reports on unemployment
Formula: (number underemployed divided by LF rate X 100)
LF underutilisation rate
Formula: (number unemployed + number underemployed divided by LF X 100)
Underemployment rate exceeds unemployment rate usually this LF underutilisation rate generally double unemployment rate which adds marginal attachment. This addition is small and increases it generally by only a a bit more than one percentage point
What is frictional unemployment
Unemployment that arises from people entering and leaving the labour force from quitting jobs to find better ones and from the ongoing creation and description of jobs from normal labour turnover. Is permanent and healthy phenomenon in a dynamic growing economy. There is an unending flow of people in and out of LF as people move through stages of their lives. Unending processes of job creation and destruction.
What is structural unemployment?
Unemployment that arises when changes in technology or international competition change to skills needed to perform jobs or change the locations of jobs. Usually lasts longer than frictional unemployment because works must retrain and possibly relocate to find a job. Painful for older workers for whom the best available option might be to retired w lower income.
What is cyclical unemployment?
The fluctuating unemployment over the business cycle - higher than normal unemployment at a business cycle trough and the lower the normal unemployment at a business cycle peak. A work who is laid off because the economy is in a recession and who gets rehired some months later when the expansion begins has experienced cyclical unemployment.
What is the natural rate of unemployment?
Really just frictional + structural unemployment. The unemployment that arises from normal labour turnover and structural change when there is no cyclical unemployment - when all unemployment is frictional and structural. Natural unemployment as a percentage of the labour force is called the natural employment rate.
What is full employment?
A situation in which the unemployment rate equals the natural unemployment rate
What determines the natural employment rate
Influenced by main factors but most important are:
The age distribution of population
The pace of structural change
The real wage rate
What is the age distribution of the population?
An economy e a young population has lots of new job seekers every year and has a high level of frictional unemployment. An economy with an ageing population has fewer new job seekers and a low level of frictional unemployment
What is the pace of structural change
The pace of structural change is sometimes low. The same jobs using the same machines remain the place or many years. But sometimes a technologically upheaval seeps aside the old ways, wipes out millions of jobs and make the skills once used to perform these jobs obsolete. The amount of structural unemployment fluctuates with the pace of technological change. The change is driven by fierce international competition especially from fast changing Asian economies. A high level of structural unemployment is present in Aus today.
What is the real wage rate
The natural unemployment rate is influenced by the level of the real wage rate. Anything that raises the real wage rate above re market equilibrium level creates a surplus of labour and increases the natural unemployment rate. The real wage rate might exceed the market equilibrium level for two reasons: a minimum wage and an efficiency wage. If fair work Australia sets the minimum wage above the equilibrium wage, some people will be unable to find work. An efficiency wage is a wage set above the going market wage to enable firms to attract the most productive workers, get them to work hard and discourage them from quitting. When firms set their wage above the going market equilibrium wage, some workers would like to work for these firms but can't get jobsZ