Unemployment: Basics Flashcards
What is the definition of being unemployed?
Not working but actively seeking work
What is the working age population?
The population aged 15 and above
What is the labour force?
The population who are willing and able to work - including both those who have a job and those who don’t
Labour force =
Unemployed + employed
Labour force participation rate =
(Labour force ÷ Working age population) x 100
Unemployment rate =
(Unemployed ÷ Labour force) x 100
List six types of unemployment
1) Cyclical
2) Structural
3) Frictional
4) Seasonal
5) Hidden
6) Long-term
What is cyclical unemployment?
People without a job due to low aggregate demand and derived demand for labour (a downturn in the business cycle)
What is structural unemployment?
People without a job due to a mismatch between their skills and the skills needed for the jobs that are available
What is frictional unemployment?
People without a job because they are transitioning between one job and another
What is seasonal unemployment?
People without a job due to some jobs only being available at particular times of the year
What is hidden unemployment?
People who are not actively seeking work, but would take a job if it was offered to them
What is long-term unemployment?
People without a job for more than 12 months
What is underemployment?
People who are working but would like to work more hours
List 4 groups that are more likely to experience unemployment.
1) Young adults
2) Indigenous Australians
3) People in occupations affected by structural change
4) Migrants
What is full employment?
The level of unemployment where there is no cyclical unemployment
The Australian Treasury estimates that full employment in Australia is ..%
4.5%
How has unemployment in Australia changed in recent years?
It was above full employment throughout the 2010s, spiked during the pandemic, and has now fallen dramatically to below full employment
Why did unemployment rise during the pandemic?
Low derived demand for labour due to:
- Lockdowns and low consumption
- Low business investment
- Low service exports
Why didn’t unemployment rise further during the pandemic?
1) Expansionary fiscal and monetary policy supported AD
2) Those on JobKeeper were considered employed
3) Hidden unemployment rose
Why has unemployment fallen in 2022?
1) Strong economic growth due to fiscal and monetary policy and high consumption after the end of lockdowns
2) Fewer backpackers and international students competing for retail and farming work
3) High absenteeism due to covid, meaning firms need to hire more staff
Why is very low unemployment considered a risk to the economy?
Low unemployment means workers can negotiate higher wages, which can drive up cost inflation
What is the NAIRU?
The non-accelerating inflation rate of unemployment
It is the rate of unemployment below which inflation will rapidly rise
What should the government do if unemployment is above the NAIRU?
Use expansionary macroeconomic (fiscal and monetary) policy to reduce cyclical unemployment
