Unemployment: Concepts

Question 1

What would happen to the participation rate if the school leaving age was raised?

Answer 1

It would fall: fewer people are looking for work

Question 2

What would happen to the participation rate if the school leaving age was lowered?

Answer 2

It would rise: more people are looking for work

Question 3

What would happen to the participation rate if the retirement age was raised?

Answer 3

It would rise: more people are looking for work

Question 4

What would happen to the participation rate if the retirement age was lowered?

Answer 4

It would fall: fewer people are looking for work

Question 5

What would happen to the labour force participation rate and unemployment rate if the minimum wage was raised?

Answer 5

LFPR would rise due to more people wanting to work

UR would rise because firms would be less willing to hire people

Question 6

How could the unemployment rate be low but hidden unemployment be high?

Answer 6

Hidden people are not counted in the unemployment rate, so high hidden unemployment would not increase the unemployment rate

Question 7

How could the unemployment rate fall but the underemployment rate rise?

Answer 7

Underemployed people are considered ‘employed’, so are not counted in the unemployment rate.

This means that if more people got jobs but did not get many hours of work, unemployment would fall but underemployment would rise

Question 8

Why are young people more likely to be unemployed?

Answer 8

Lack of experience and skills

Question 9

State a statistic illustrating the extent to which young people are more likely to be unemployed.

Answer 9

Three times more likely to be unemployed than the general population

Question 10

Why are Indigenous Australians more likely to be unemployed?

Answer 10

Education gap and poverty trap for many indigenous Australians

Question 11

State a statistic illustrating the extent to which indigenous Australians are more likely to be unemployed.

Answer 11

50% more likely to be unemployed than the general population

Question 12

Why are people in industries affected by structural change more likely to be unemployed?

Answer 12

Mismatch between their skills and job vacancies

Question 13

State a statistic illustrating the extent to which people in industries affected by structural change are more likely to be unemployed.

Answer 13

Fewer than half of those retrenched following the closure of the car industry found full-time, permanent work within 5 years

Question 14

Why are migrants more likely to be unemployed?

Answer 14

Language barriers and lack of a social network (hearing about jobs through friends)

Question 15

State a statistic illustrating the extent to which migrants are more likely to be unemployed.

Answer 15

More likely than the general population to be unemployed in the initial years after their arrival

Question 16

In 2020, the unemployment rate rose/fell to ..%

Answer 16

7.4%

Question 17

In 2022, the unemployment rate rose/fell to ..%

And in 2024, unemployment was… %

Answer 17

2022: 3.4%

2024: 4.1%

Question 18

How successful has the Australian Government been at managing unemployment?

Answer 18

With mixed levels of success:

Even though unemployment has been above full employment for over a decade, in the pandemic the Government prevented unemployment rising as high as had been forecast by the RBA (over 10%) and kept it lower than most other OECD countries.

However, it then did contribute to unemployment falling below the NAIRU in 2022-23, contributing to a spike in inflation

Question 19

How responsible is the Australian Government for the fall in unemployment after the pandemic?

Answer 19

Expansionary macro policy contributed to falling unemployment, but was helped by the strong recovery in consumption and the labour shortages due to the pandemic and fewer international students

Question 20

What is the Phillips Curve?

Answer 20

A graph showing the relationship between inflation and unemployment

Question 21

What is the difference between the short-run and long-run Phillips Curve?

Answer 21

In the short-run, as unemployment falls inflation rises (due to higher bargaining power for workers)

But in the long-run, unemployment will not stay below the NAIRU and inflation will be determined by people’s inflationary expectations

Question 22

What is labour market decentralisation, and when did the Australian Government do it?

Answer 22

Decentralisation is when the government reduces its control over how wages are determined in the economy

In the 1990s, the government allowed enterprise agreements (a group of employees to negotiate their wage with the business) and then individual contracts (where employees can negotiate one-on-one with the business)

Question 23

List two examples of Australian Government employment programs.

Answer 23

1) $4b on JobMaker - subsidies to hire new employees under the age of 35 (though only 4,000 jobs were created)

2) $100b on JobKeeper - in 2020, paid the wages of employees in businesses that were significantly affected by the pandemic

Question 24

What type of unemployment does job matching services help to reduce?

Answer 24

Frictional

Question 25

What is the name of the Australian Government’s main job matching service?

Answer 25

Workforce Australia

Question 26

List two examples of how the Australian Government has changed its education and training policies in recent years.

Answer 26

1) The 2022 National Skills Agreement included $1 billion funding for 300,000 extra fee-free TAFE courses

2) Based on the new Universities Accord, the Government will introduce a Commonwealth Prac Payment (e.g. for teachers, nurses), set a goal of 80% of the labour force having tertiary qualifications by 2050, and undo the Job Ready Graduates Program (that linked uni fees to skills shortages)

Question 27

What type of unemployment do education and training programs help to reduce?

Answer 27

Structural

Question 28

How has Australia’s labour force participation rate changed in recent years?

Answer 28

It has grown to a record high level due to increased participation of women in the workforce

But it temporarily fell during lockdowns when people who lost their job did not believe they would be able to find another one