Chapter 6 - The goal of full employment Flashcards
What is the definition of employment?
to be classified as ‘employed’ (by the ABS), one needs to be over 15 years of age and working more than one hour per week in return for some form of measurable remuneration (wages)
What is the definition of unemployment?
one need to be over the age of 15, without work or working less than one hour per week, and actively looking for (more) work.
What is NAIRU?
Non-Accelerating Inflation Rate of Unemployment
Likely to be a sign of an efficient economy, where some levels of unemployment actually help to drive more efficient outcomes over time, particularly if they are more transitory in nature.
What is Structural Unemployment?
Where the skills of the unemployed do not match the skills required for the industry
What is seasonal unemployment?
where a person is unemployed because their skills are only demanded during certain times of the year
What is frictional unemployment?
where a person is unemployed for a period of time while they are moving from one job to another
What is hardcore unemployment?
where a person is unemployed due to mental, physical or other characteristic that prevent them from receiving a job offer.
What is cyclical unemployment?
Occurs when the economy is not operating at its full capacity due to aggregate demand deficiencies.
Such as during 2008-9, when the unemployment rate increased to a high of 5.9% as the economy was in downturn.
It is the main type of unemployment the government seeks to eliminate
What is the labour force?
All people who are over 15 years of age and are willing and able to work.
Thus, comprises of both those who are employed and those who are unemployed.
What is the Participation Rate?
The percentage of the total ‘working age’ population (over 15) who are members of the labour force.
Labour force participation rate tells us what proportion of our potential labour force is actually in the labour force.
What is the unemployment rate?
The percentage of the labour force that is unemployed
What is the relationship between participation and unemployment rates?
- An increase in the participation rate is likely to cause a short-term increase in unemployment as new hob seekers are classified as ‘unemployed’.
- Over the long term, higher participation rates exert downward pressure on wages and/or increased labour productivity thus increasing the demand for labour (as its cheaper) and lowering the unemployment rate
- A decrease in the unemployment rate is likely to induce a rise in the participation rate. This is because some job seekers become encouraged about job prospects and enter the labour force.
What is hidden unemployment?
A group of potential workers who are not classified as members of the labour force despite the fact that they would like to work and would accept a job, as they are not actively seeking work as they don’t believe they will find a job in the labour market.
What is underemployment?
Individuals that are classified as employed, but who are at least partly ‘unemployed’ in the sense that they would prefer to be working more hours.
What is the underutilisation rate?
Calculated by adding the unemployed to the underemployed and then dividing by the size of the labour force. It represents the proportion of the total labour force that is ‘underutilised’.
