unemployment

• What does the term 'labour market' refer to?

  The supply of labour from households and demand for labour by businesses
• What is the definition of unemployment?

  Unemployment occurs when someone is willing and able to work but does not have a paid job
• Which organization is responsible for collecting labour market data in Australia?

  The Australian Bureau of Statistics (ABS)
• What are the three broad categories the ABS groups people aged 15 years and over into?

  • Employed: People in a paid job for one hour or more in a week
  • Unemployed: People not in a paid job but actively looking for work
  • Not in the labour force: People not in a paid job and not looking for work
• What is the formula for calculating the labour force?

  Labour force = Employed + Unemployed
• How is the unemployment rate calculated?

  Unemployment rate = (Number of unemployed / Labour force) × 100
• How does labour force participation typically move with the business cycle?

  It increases when businesses are hiring and decreases when they are not
• What are the three main types of unemployment?

  1. Cyclical unemployment
  2. Structural unemployment
  3. Frictional unemployment
• What is cyclical unemployment?

  Unemployment that occurs with changes in economic activity over the business cycle
• What is structural unemployment?

  Unemployment that occurs due to a gap between available jobs and the skills of jobseekers
• Why might workers experience structural unemployment?

  Because they lack the skills required for available jobs or jobs are far from them
• What is frictional unemployment?

  Unemployment that occurs when people move between jobs or transition into and out of the labour force
• What are some other types of unemployment to consider?

  • Underemployment: People employed but wanting more hours
  • Hidden unemployment: People not counted as unemployed but wanting to work
  • Seasonal unemployment: Unemployment due to seasonal job patterns
• What is hidden unemployment?

  When people are not counted as unemployed but would probably work if given the chance
• What is seasonal unemployment?

  Unemployment that occurs at specific points over the year due to seasonal job patterns
• What is the state of the pool of unemployed people at any given point?

  It is in a constant state of flux.
• How do movements in and out of the pool of unemployment affect the economy?

  They affect the supply of labour in an economy.
• What is the Natural Rate of Unemployment (NRU)?

  It is the level of unemployment that exists even when the economy is at full employment.
• What happens when the demand for labour equals the supply of labour?

  Labour markets clear, but there will still be natural unemployment.
• What is disequilibrium unemployment?

  • Occurs when conditions prevent the labour market from clearing
  • Two types:

  1. Real wage unemployment (classical unemployment)
  2. Demand deficient unemployment (cyclical unemployment)
• What causes real wage unemployment?

  It occurs when minimum wages interfere with the labour market.
• What happens if the minimum wage is set too high?

  The aggregate supply of labour will be greater than the aggregate demand for labour.
• What happens to wages during a cyclical downturn?

  Wages are 'sticky' and do not decline easily.
• What is Keynesian unemployment?

  It refers to an economy operating below full employment due to cyclical downturns.
• The labour market in equilibrium

  *the demand for labour equals the supply of labour at the equilibrium wage. 

   

  
• The labour market in disequilibrium

  *yellow curve shows the total labour force

  *red curve shows # of ppl willing and able to work

  *point a-b is unemployment

  
• real wage unemployment (classical unemployment)

  *when wages interfere with labour market

  *point a-b depicting unemployment

  
• Demand deficient unemployment (cyclical unemployment)

  *LRAS curve

  *AD decreasing ... supply decreases too

  
• Demand deficient unemployment (cyclical unemployment)

  *AS curve

  *equilibrium wage will be We at Qe number of workers

  *points a-b are unemployment