3. Unemployment

Question 1

Unemployment

Answer 1

Unemployment is a situation where people who are willing and able to work are unable to find employment

Question 2

Why do people work?

Answer 2

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

Question 3

Measuring Unemployment

Answer 3

The unemployment rate is measured by the Australian Bureau of Statistics (ABS) using Labour Force Surveys.

Question 4

Employed

Answer 4

a person is classified as employed if they work more than one hour per week; and receive an income or profit

Question 5

Unemployed

Answer 5

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.

Question 6

Non-Labour force

Answer 6

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.

Question 7

Calculating the unemployment rate

Answer 7

The unemployment rate is the percentage of people who are in the labour force and actively seeking work, but do not have a job.

Question 8

Limitations of the unemployment rate

Answer 8

Unemployment rate ignores hidden unemployment
Unemployment rate ignores underemployment
Misleading survey answers

Question 9

Causes of Unemployment

Answer 9

Cyclical Unemployment
Structural Unemployment
Seasonal Unemployment
Frictional Unemployment

Question 10

Cyclical Unemployment

Answer 10

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.

Question 11

Structural Unemployment

Answer 11

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.

Question 12

Seasonal Unemployment

Answer 12

Seasonal unemployment results from the termination of jobs at the same time each year due to the regular change in seasons.

Question 13

Frictional Unemployment

Answer 13

Frictional unemployment occurs when people are unemployed between finishing one job and starting another.

Question 14

Long Term Unemployment

Answer 14

Long term unemployment refers to those people who have been unemployed for 52 consecutive weeks or longer

Question 15

Youth Unemployment

Answer 15

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.

Question 16

Material Well Being

Answer 16

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.

Question 17

Non-Material Well being

Answer 17

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.

Question 18

Effects of unemployment on individuals:

Answer 18

Reduced income
Family unhappiness
Lower self-image
Less healthy

Question 19

Reduced income

Answer 19

unemployment benefits are generally lower than income and sometimes lifestyle changes need to occur because of this. Material living standards fall.

Question 20

Family unhappiness

Answer 20

family tension, stress and
violence can be increased when someone in the home
is unemployed. Non-material living standards fall.

Question 21

Lower self image

Answer 21

feelings of personal failure because
of loss of status and sometimes friends. Non-material living standards fall.

Question 22

Less healthy

Answer 22

sometimes there can be higher incidence of health problems (nervous disorders, heart disease). Non-material living standards fall.

Question 23

Effects of unemployment on society

Answer 23

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.

Question 24

Effects of unemployment on government:

Answer 24

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.