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Chapter 18 The labour force. Lecture Plan. Defining unemployment Types of unemployment Cyclical and non-cyclical unemployment Measuring unemployment Direct and indirect measures Reasons and costs of unemployment International comparisons. Defining Unemployment. - PowerPoint PPT Presentation
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Copyright 2005 McGraw-Hill Australia Pty Ltd PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser 18-1
Chapter 18The labour force
Copyright 2005 McGraw-Hill Australia Pty Ltd PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser 18-2
• Defining unemployment• Types of unemployment
– Cyclical and non-cyclical unemployment• Measuring unemployment
– Direct and indirect measures• Reasons and costs of unemployment• International comparisons
Lecture Plan
Copyright 2005 McGraw-Hill Australia Pty Ltd PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser 18-3
• A situation where some people are willing and able to work, but are unable to find paid employment
• Sources of information: the Australian Bureau of Statistics (ABS) and Centrelink
• ABS regular household surveys (35 000 residences)
– ABS criteria: ‘those aged 15 and over’ who were not employed during the survey week
– Government requirements for those receiving unemployment benefits
Defining Unemployment
Copyright 2005 McGraw-Hill Australia Pty Ltd PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser 18-4
• Cyclical (demand-deficient) unemployment• Non-cyclical unemployment e.g. frictional,
structural, seasonal• Underemployment: people with part-time jobs
would prefer to work full-time/more hours• Hidden unemployment: those prevented from
seeking employment because of personal or family circumstances
• Hard-core (long-term) unemployment
Types of Unemployment
Copyright 2005 McGraw-Hill Australia Pty Ltd PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser 18-5
• Unemployment caused by the business cycle (deficient demand), that is, by a deficiency of aggregate spending
• Business activity Unemployment
• Business activity Unemployment
• Cyclical unemployment at the depth of the depression (1931–32) reached 30% of the workforce
Cyclical (Demand-deficient) Unemployment
Copyright 2005 McGraw-Hill Australia Pty Ltd PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser 18-6
• Frictional unemployment: those unemployed temporarily as individuals leave one job in search of another
• Structural unemployment: a mismatch in the demand for and supply of labour due to changing technology and the changing composition of production
– Example: demand for computer programmers, supply of car assembly workers
• Seasonal unemployment: fruit-pickers, ski instructors
Non-cyclical Unemployment
Copyright 2005 McGraw-Hill Australia Pty Ltd PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser 18-7
Measuring Unemployment
Direct measures Indirect measures• The labour force
participation rate (LFPR)
100LFUUR
tttt OIUU 1
JLFU
15CV
PLWJLPFR
Copyright 2005 McGraw-Hill Australia Pty Ltd PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser 18-8
Full Employment
• Full employment (natural rate of unemployment) =Rate of frictional unemployment + rate of structural unemployment
• Achieved when cyclical unemployment is zero• Full employment is currently estimated by some
economists at about 4–5% unemployment (used to be about 2% in the ‘golden era’ of 1950 to 1972)
Copyright 2005 McGraw-Hill Australia Pty Ltd PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser 18-9
Australia’s Employment: Full- Versus Part-time (%), Total (‘000), 1991 to 2003
0102030405060708090
Dec'91
Dec'92
Dec'93
Dec'94
Dec'95
Dec'96
Dec'97
Dec'98
Dec'99
Dec'00
Dec'01
Dec'02
Dec'03
% o
f tot
al e
mpl
oym
ent
0
2 000
4 000
6 000
8 000
10 000
12 000
Tota
l em
ploy
men
t ('0
00)
P-Time (%)F-Time (%)Total ('000)
Source: Compiled from Australia Bureau of Statistics, Labour Force Australia, cat. no. 6202.0 data.
Copyright 2005 McGraw-Hill Australia Pty Ltd PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser 18-10
Average Unemployment Rate, OECD and Australia, 1991 to 2002, % p.a.
Copyright 2005 McGraw-Hill Australia Pty Ltd PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser 18-11
Structural Unemployment Rate in Australia (%), Average 1982–1984, 1992–1994, 2002, 2003
0.0
2.0
4.0
6.0
8.0
% p.a.
% 6.1 7.2 5.8 5.6
1982/84 1992/94 2002 2003
Source: Adapted from OECD, Economic Outlook, July 2004.
Copyright 2005 McGraw-Hill Australia Pty Ltd PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser 18-12
Unemployment Rates (% p.a.) for Various Countries, 1991 to 2003
Copyright 2005 McGraw-Hill Australia Pty Ltd PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser 18-13
Causes of Unemployment
• Deficient demand for goods and services• Increased labour costs• Technological change• Increased savings (less consumption)• Lack of private investment• Anti-inflationary economic policies
– Surplus budget reducing aggregate demand– High interest rates reducing the incentive to consume and
invest
Copyright 2005 McGraw-Hill Australia Pty Ltd PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser 18-14
• GDP gap (forgone output)• Unequal burden
– December 2003: Youth unemployment rates were higher than in the late 1980s, with 24.2% of females and 17.6% of males not in education, looking for work
– Over 50s rates are extremely high• Non-economic costs
– Sociopolitical unrest– Plummeting of morale, family disintegration – Suicide
Costs of Unemployment
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