Full employment Flashcards
Define full employment
The level of employment that exists when the government’s economic growth is achieved and where there is no cyclical unemployment.
Define non-accelerating inflation rate of unemployment
The lowest inflation rate possible before it starts to accelerate again. (natural rate of employment)
What % of the labour force is considered at which there is no cyclical unemployment?
5%
What are the types of unemployment?
Cyclical
Natural
- structural
- seasonal
- fictional
- hardcore
Define structural unemployment
Skills of employee doesn’t match the skills required by the industry.
Define seasonal unemployment
Person is unemployed because their skills are only demanded during certain times of the year. Eg ski resort workers.
Define fictional unemployment
Person is unemployed for a period of time while they are moving from one job to another.
Define hardcore unemployment
When a person is unemployed due to mental, physical or other characteristics that prevent them from receiving a job offer.
Define employed
A person who is over the age of 15 and is working at least 1 hour a week.
Define unemployed
A person over the age who doesn’t work at least one hour a week but is actively searching for work.
Define labour force
All the people over the age of 15 who are willing and able to work. Labour force = employed + unemployed
What is the formula for the unemployment rate?
number of people unemployed divided by total number of people 15 or over in the labour force X 100.
What is the formula for the participation rate?
Total number of people in the labour force divided by total number of people 15 or over in the population X 100.
What influences the participation rates in the economy?
- Incentives (mothers/childcare fees)
- Increasing retirement age (pension age no 66.5)
- Increase/decrease in immigration
Define underemployment
Where people are employed but would like more hours.
Define disguised employment
Where people have jobs but are underemployed as they are not working to capacity.
Define underutilisation
The extent to which the available labour is not working at its capacity.
What is the underutilisation rate?
unemployment rate + underemployment rate
Define hidden unemployment
People who would like to work but have become discouraged from seeking employment and are no longer actively seeking work.
What is the effect on unemployment when there is an increase in participation rates?
- Short term- increase unemployment as more people will be seeking jobs.
- Long term- adds to aggregate supply= reducing wage costs and encourages workers to be more productive to keep their jobs.
Define cyclical unemployment
Unemployment caused by a downturn in the economy.
What causes cyclical unemployment?
- Consumer confidence falls
- Exchange rates appreciate (increase) AUD
- Economic growth overseas- decreases- decreasing exports = decrease in AD = Increases unemployment
What is the impact of unemployment?
- Lowers income and creates inequalities.
- Reduces living standards (material and no-material)
What is the goal of full employment?
To have no cyclical unemployment
