Unemployment

__**Unemployment Notes**__

Definition of unemployment -Refers to a situation where individuals want to work but are unable to find a job, and as a result labour resources in an economy are not utilised


 * Definition of the labour force:**

The labour force consists of all the employed and unemployed persons int he country at any given time. Also known as the workforce.

__The labour force consists of:__ • persons aged 15 and over who are currently employed for atleast one hour per week of paid work. It also includes those on paid leave, as well as those on leave or stood down without pay for less than four weeks, on strike, on workers' compensation, or recieving payments while undertaking full time study • Self employed persons working for at least one hour per week in their own business or a family • unemployed persons aged 15 and over, who are currently avaliable for work and are actively seeking work.

__Those not included in the workforce include:__ • children under 15 years of age • full time, non working students above 15 years of age • people who perform full time domestic duties • unemployed persons who are not willing to actively apply for jobs and attend job interviews or who are not avaliable to start work • people who have retired from the labour force

__Structural unemployment:__
 * ** Structural unemployment ** occurs because of //structural changes// within an economy – these are: changes in technology or pattern of domestic/international demand for goods and services
 * It is when the composition of the labour forces does not respond quickly or completely to changes in the demand for labour.
 * Therefore resulting in a **mismatch of labour skills** of employees and the job vacancies offered by employers.
 * Workers find that the skills previously used in declining industries do not match the job opportunities of newly emerging industries.
 * E.g. new technology that has been introduced such as automatic tellers and computer banking, has reduced the availability of jobs
 * ** Australia’s persistent, long-term unemployment problem is attributed to structural unemployment **

__Frictional Unemployment:__
 * Represents the people who are temporarily unemployed as they change jobs – they have finished one job, but have not started a new one.

__Seasonal Unemployment:__
 * Occurs at a predictable and regular times throughout the year because of the seasonal nature of some jobs (i.e Santa).


 * Formula for Unemployment Rate:**

**Unemployment rate (%) = number of persons unemployed/total labour force x 100/1**

__ NAIRU: The non-accelerating inflation of unemployment __


 * At full employment there will always be some positive level of unemployment comprised of frictional, seasonal, structural and hard-core unemployment (this is known as the __natural rate of unemployment__)
 * When unemployment is above this level an increase in economic growth will create jobs and reduce cyclical unemployment
 * Once cyclical unemployment is eliminated, additional economic growth increases wages as firms compete for existing workers instead of taking on other people (if they have inadequate training or experience)
 * As wage rises, inflationary pressures build in the economy
 * NAIRU can be reduced in the long term through policies that improve the skills of unemployed people or address hurdles to their participation in work
 * NAIRU attempts to remove cyclical influences even though the levels of unemployment and inflation are highly influenced by cyclical factors
 * When Australia has reached the NAIRU an increase domestic demand will only put upward pressure on inflation

__**Calculating the Participation Rate:**__


 * Participation rate (%) = labour force/working age pop. x 100/1**


 * Cause --> Cyclical unemployment:**


 * **Cyclical unemployment is caused by fluctuations in the business cycle.**
 * **The demand for labor is a derived demand, i.e it is derived from the level of demand in the economy.**
 * **During a downturn, or a recession there is usually a decrease in the level of aggregate demand, this leads to a decrease in overall level of consumption, which leads to a decrease in the level of demand, which then leads to an increase in cyclical unemployment due to a down turn in the business cycle.**

__Economic Costs of Unemployment__
 * **Opportunity Cost** --> Unemployment means that the economy's resources are not being used to their full capacity, the economy is thus operating below its production possibility frontier. Therefore, total output is below what it could potentially be.
 * **Lower Living Standards** --> Employed people have to shoulder greater costs when unemployed people rely on income support payments. Therefore there will be a reduction in an economy's living standards.
 * **Decline in labour market skills for the long term unemployed** --> loss of skills among workers who find themselves without work for extended periods of time.
 * **Costs to the government** --> the government will generate less tax revenue, and at the same time, the government is forced to pay out more transfer payments to the unemployed as well as funding training and labour market programs.
 * **Lower wage growth** --> there is an excess of labour supply in the economy, which leads to a fall in the equilibrium level of wages.

__**Main Groups Affected**__

The unemployment problem is far more severe for some groups in society compared to others. High youth unemployment rates come about because employers are seeking workers with greater skills and experience, which young unskilled workers lack, due to only a third of students completed secondary school.

Disadvantaged groups who face significantly higher levels of unemployment include: - Indigenous Australians: 13% - Age Related Unemployment: 15-19 years old (15.9%) Older workers also have a greater difficulty in finding a job once they have lost the previous job. - Specific Regions: capital cities: 5.7%, non-metropolitan areas: 6.4% - People born outside of Australia: those cause by the language barriers faced by people from non-English speaking backgrounds (5.4%)

__**Trends in Unemployment In Australia Over The Past Fifteen Months**__

Unemployment has peaked over the past fifteen months at 5.8 percent in July of 2009, December 2009. Following this unemployment has experienced a decline, dropping to 5.2 percent in June 2010. Unemployment has then increased to 5.4 percent in November 2010 only to decline once more and stabilize from April to July of 2011 at 4.9%. Unemployment then experienced an increase to peak at 5.3% in September of 2011.

@font-face { font-family: "Courier New"; }@font-face { font-family: "Wingdings"; }@font-face { font-family: "ＭＳ 明朝"; }@font-face { font-family: "ＭＳ 明朝"; }@font-face { font-family: "Cambria"; }p.MsoNormal, li.MsoNormal, div.MsoNormal { margin: 0cm 0cm 0.0001pt; font-size: 12pt; font-family: Cambria; }p.MsoListParagraph, li.MsoListParagraph, div.MsoListParagraph { margin: 0cm 0cm 0.0001pt 36pt; font-size: 12pt; font-family: Cambria; }p.MsoListParagraphCxSpFirst, li.MsoListParagraphCxSpFirst, div.MsoListParagraphCxSpFirst { margin: 0cm 0cm 0.0001pt 36pt; font-size: 12pt; font-family: Cambria; }p.MsoListParagraphCxSpMiddle, li.MsoListParagraphCxSpMiddle, div.MsoListParagraphCxSpMiddle { margin: 0cm 0cm 0.0001pt 36pt; font-size: 12pt; font-family: Cambria; }p.MsoListParagraphCxSpLast, li.MsoListParagraphCxSpLast, div.MsoListParagraphCxSpLast { margin: 0cm 0cm 0.0001pt 36pt; font-size: 12pt; font-family: Cambria; }.MsoChpDefault { font-family: Cambria; }div.WordSection1 { page: WordSection1; }ol { margin-bottom: 0cm; }ul { margin-bottom: 0cm; }


 * __Social Costs:__**
 * Increased Inequality
 * o Unemployment tends to occur more frequently among lower income earners in the economy, such as the young and unskilled.
 * o Lower income earners are relatively worse off compared to higher income earners, contributing to poverty and overall inequality in income distribution.
 * Other Social Costs
 * o Unemployment is associated with many of the most serious personal and social problems in Australia.
 * o Long term unemployment leads to an increase incidence of social problems including:
 * § Severe financial hardship and poverty
 * § Increased social isolation
 * § Increased levels of debt
 * § Increased levels of crime
 * § Homelessness and housing problems
 * § Erosion of confidence an self esteem
 * § Family tensions and breakdown
 * § Poor health, psychological disorders and suicide
 * § Boredom
 * § Loss of work skills.
 * o These social problems have an economic cost for the community as a whole since more resources must be redirected towards dealings with them. E.g. More public finds need to be spent on health.