Unemployment The labour force are those 15+, who are working or actively seeking work.

. The Participation Rate is the % of working age population working or actively seeking work. Rate of unemployment is found by surveys issued by ABS to find no. and rate. Problems measuring include: Unemployed deemed fully employed. P/T work splitting total hours. No official measurement of overwork. Trends in Unemployment Aust. Since 1970s upward trend, e.g. early 1970-80s was 7-8%, in 1990s averaged under 9%, peaking during 1992-93 of 10.7% (domestic recession & global downturn). Towards late 19902 returned to approx. 6%, now at 5.7%. Now improving but still a problem in structural terms: Increased participation rate, EG up Structural change & MER, unemployment up (lack of skills) New technology, unemployment up (reduced staffing needs) Types of Unemployment Structural (structural changes, tech, demand) Cyclical (Business cycle) Seasonal Frictional Long-term (more than 12 months, lack skills) Underemployment Hidden (Do not fit ABS definition) Hardcore (personal circumstances)

The Causes of Unemployment 1. Level of EG labour is a derived demand thus influenced by aggregate demand, which may fall due to economic downturns, policies to reduce demand, or exports down due to lack of IC. 2. The Stance of Macroeconomic Policies influences short-medium term through impacting business cycle. 3. Rising Participation Rates after economic recovery, discouraged job seekers. In Aust., more women & improved conditions. 4. Structural Change involves short-term costs, unemployment due to labour reforms & privitisation. Lack of skills by workers. 5. Technological Change Sub. Capital over staff, e.g. Bank branches replaced by internet. 6. A Rapid Increase In Labour Costs due to: Wage rises leading to union demands and so nominal wages up to fast, outstripping inflation & productivity increases, causing business profits down and resort to capital. IRC award wages up. Rise in labour on costs, e.g. super, sick leave and compensation.

Impacts of Unemployment I. Economic Costs 1. Opportunity Cost resources not used to full potential, GDP output down. 2. Lower SOL production of capital & consumer goods down, SOL down, future capacity to produce g&s down and thus slower future EG rate. 3. Decline In Labour Market Skills For The Long-term Unemployed leads to loss of skills amongst existing workers and cyclical can lead to structural (hysteresis). 4. Cost To the Govt. impacts govt. revenue, thus budget has less tax revenue, transfer payments (AS) and funding for training programs. 5. Lower Wage Growth excess supply of labour leads to fall in equilibrium of prices, if wage restrictions, e.g. award wages, leads to slower wage growth instead. II. Social Costs 1. Increased Inequality - usually impacts low income earners, thus redistributes the wealth away from poor. 2. Other social costs: Severe financial hardship & poverty Homelessness & housing problems Physical & psychological disorders 3. Unemployment For Particular Groups (more severe): Youths (15-19) employees want skills & experience Indigenous Australians ( live in remote areas (some) Age-related older workers more difficulty. People born outside Aust. language barrier, discrimination, no EEO. Policies To Reduce Unemployment Can be aided by expansionary macro. Policies, though not used in recent years. Instead the govt. identifies cause & type and deal with it through MER & labour market reforms. E.g. Structural Unemployment Howard Govt. reduced funding from labour market programs (Keating Govt. 1994) as seen ineffective & expensive. Now focuses on labour market reforms to remove inflexibilities stifling employment, e.g. AWA & enterprise bargaining. Centrelink & Job Network designed to encourage private employment agencies to copete to find jobs for unemployed. Work For The Dole. Reduce Welfare Benefits. Govt. uses MER based on improving IC of economy, which boosts speed limit of growth thus need for employment.