3. Unemployment Flashcards
Unemployment
Unemployment is a situation where people who are willing and able to work are unable to find employment
Why do people work?
To make money - they need the money they make for food, rent/mortgage, and to have fun with family and friends
To learn new skills
To make friends
To contribute to society
Measuring Unemployment
The unemployment rate is measured by the Australian Bureau of Statistics (ABS) using Labour Force Surveys.
Employed
a person is classified as employed if they work more than one hour per week; and receive an income or profit
Unemployed
a person who does not have a paid job who is actively looking for work (completing job applications, registered with Centrelink) in the week prior to the survey.
Non-Labour force
The Non-Labour force is made up of all those people who are over the age of 15, who are not working or not seeking work.
Calculating the unemployment rate
The unemployment rate is the percentage of people who are in the labour force and actively seeking work, but do not have a job.
Limitations of the unemployment rate
Unemployment rate ignores hidden unemployment
Unemployment rate ignores underemployment
Misleading survey answers
Causes of Unemployment
Cyclical Unemployment
Structural Unemployment
Seasonal Unemployment
Frictional Unemployment
Cyclical Unemployment
Cyclical unemployment occurs when the level of spending in the economy falls. This leads to reduced spending, reduced production and hence a reduced need for labor.
Structural Unemployment
Structural unemployment occurs as a result of changes in the way goods and services are produced. Generally, this takes place when production methods change in order to increase productivity, leading to a mismatch of skills and jobs available.
Seasonal Unemployment
Seasonal unemployment results from the termination of jobs at the same time each year due to the regular change in seasons.
Frictional Unemployment
Frictional unemployment occurs when people are unemployed between finishing one job and starting another.
Long Term Unemployment
Long term unemployment refers to those people who have been unemployed for 52 consecutive weeks or longer
Youth Unemployment
Around the world, young people (between 15 and 24 years of age) are more likely to be unemployed compared to the rest of the labour force. In Australia they are 2-2.5 times more likely to be unemployed compared with adults.
Material Well Being
Material well being refers to the enjoyment received from access to goods and services. As output is increased, there are more goods and services available and therefore material living standards increase.
Non-Material Well being
Non material well being refer to the quality of life which is not related to the size of income or the quantity of goods and services consumed. The quality of human relationships, the state of the natural environment, crime rates, amount of leisure time, education levels and health are all important aspects of the quality of life.
Effects of unemployment on individuals:
Reduced income
Family unhappiness
Lower self-image
Less healthy
Reduced income
unemployment benefits are generally lower than income and sometimes lifestyle changes need to occur because of this. Material living standards fall.
Family unhappiness
family tension, stress and
violence can be increased when someone in the home
is unemployed. Non-material living standards fall.
Lower self image
feelings of personal failure because
of loss of status and sometimes friends. Non-material living standards fall.
Less healthy
sometimes there can be higher incidence of health problems (nervous disorders, heart disease). Non-material living standards fall.
Effects of unemployment on society
Increase in crime and vandalism - increased social unrest. Non-material living standards fall.
When unemployment of the nation increases fewer goods and services are being produced and national output (GDP) is lower. Lower material living standards.
Increase in incidences of family breakdown. Non-material living standards fall.
Effects of unemployment on government:
Less revenue is collected from income tax as there are fewer income earners.
Increased unemployment benefits lead to increased government funding for health, law and order, labor market training, and job creation schemes.
Government budgets often fall into deficit due to reduced revenue and higher payments, requiring increased taxes and reduced education expenditures, potentially leading to increased national debt.
