Chapter 9 - Employment and unemployment

Question 1

Classification of “employed”

Answer 1

A person is only classified as employed if they are exchanging their labour for income, that is, they are being paid. (15 years or older)

Question 2

Classification of “unemployed”

Answer 2

A person is only counted as unemployed if they have not worked for income for that week and have actively sought work and were available to start work. (15 years and older)

Question 3

Unpaid work

Answer 3

• Work that is completed at home (cooking, cleaning etc…). If work is completed by the homeowner, then it is not counted in our GDP figures.
• Volunteers (not-for-profit unpaid work)

Question 4

Derived Demand

Answer 4

Demand for labour is determined by the demand for goods and services.

Question 5

Labour Demand Graph

Answer 5

Shifts to the right is when labour is in demand. (going rate)

Shifts to the left are when labour is in excess (GFC, outsourcing, cheap capital)

Question 6

Labour Supply Graph

Answer 6

Skill levels and occupational requirements change labour supply.

Size and willingness to work of the working age population

Question 7

Relative Wages

Answer 7

Compares to professions and there relative wages.

e.g. If teachers and accountants were paid $50,000, but then both got a pay rise. Teachers to $80,000 and accountants to $120,000. The relative price of labour is 2:3, thus even though teachers pay increased, there labour supply graph would shift to the left.

Question 8

Unemployment Rate

Answer 8

Total number unemployed/Labour force x 100

Question 9

Labour Force

Answer 9

Labour Force = Unemployed + employed

Question 10

Participation Rate

Answer 10

Labour Force/Total population over 15 x 100

Question 11

Underemployed

Answer 11

People who work but would like to work more.

Referred to as disguised unemployed or underemployed

Question 12

Underutilisation Rate

Answer 12

Unemployed + Underemployed / Labour Force x 100

Question 13

Employment Trends

Answer 13

• Increased participation rate for females
• Wage disparities
• Casualisation of the workforce

Question 14

Two causes of unemployment

Answer 14

1. Lack of aggerate demand (cyclical unemployment)

2. structural, seasonal, frictional (natural unemployment)

Question 15

Aggerate Demand

Answer 15

AD = C + I + G + X - M

C = Private consumption expenditure
I = Private Investment expenditure
G = Government expenditure (spendings and investment)
X - M = Net Exports (Exports - Imports)

Question 16

Cyclical Unemployment

Answer 16

Lack of aggerate demand, generally associated with economic downturns which are part of the business cycle

Question 17

AD factors

Answer 17

1. Consumer Confidence
2. Economic growth in trading partners
3. Interest Rates
4. Exchange Rate

Question 18

Natural Unemployment

Answer 18

Structual - change in business operations, economic trends, labour demands etc…

Frictional - caused when a person has left or finished a job and is looking for a new one

Seasonal - workers whose skills are not in demand at certain times of the year.