Definition of Goal: The goal of Full Employment: that there should be no cyclical unemployment caused by weak demand or recession. TARGET – To achieve

Economic Goal : FULL EMPLOYMENT

Definition of Goal: The goal of Full Employment: that there should be no cyclical unemployment caused by weak demand or recession.

TARGET – To achieve the lowest rate of unemployment that will not cause inflation to accelerate. (NAIRU)

Economic Goal Full Employment

The full employment zone is a range of unemployment rates that are judged to be an acceptable minimum.

Some times referred to as the natural rate of unemployment or Non-Accelerating Inflation Rate of Unemployment (NAIRU)

Currently, the Australian Government sets a target rate of unemployment of 4 – 5%

Full Employment Zone

Unemployment: a situation in which some who are actively seeking work and are willing to work are unable to find gainful employment.

Key Definitions

Cyclical unemployment: unemployment caused by an insufficient aggregate demand as occurs during or following slowdowns or recessions.

Natural unemployment:At any given time there will exist a small group of people who are willing to work and are actively seeking work but are unemployed.

Key Definitions

Structural unemployment: due to changes in the production process some skills are no longer required making some workers redundant. This may be due to new technology, business relocation, cost cutting measures and some microeconomic reform policies.

Frictional unemployment: exists when people are unemployed between finishing one job and starting another job.

Types of Natural Unemployment

Seasonal unemployment: results from the termination of jobs at the same time each year due to the regular change in the season.

Hard core unemployment: is often the result of personal attitudes or physical or mental issues that may prevent people being employed.

Types of Natural Unemployment

ABS conducts a monthly labour force survey with a sample survey of 0.7% of households. The definitions the ABS uses to classify people in the labour market are.

Definition of Labour Force Status

Labour force comprises of the civilian population aged 15 years and over who are able and willing to work. It includes those who are classified as:◦Employed (full-time or part-time), and◦Unemployed


Employed are defined as people aged 15 and over who, during the reference week:◦worked for one hour or more for pay, profit, commission or

payment in kind, in a job or business or on a farm; or◦worked for one hour or more without pay in a family business

or on a farm; or◦were employees who had a job but were not at work and were:

away from work on holidays away from work as a standard work or shift arrangement; or on strike or locked out; or on workers' compensation and expected to be returning to their job; or

◦were employers who had a job, business or farm, but were not at work.


Unemployed are defined as people aged 15 and over who were not employed during the reference week, and:◦ had actively looked for full-time or part-time work at any time

in the four weeks up to the end of the reference week and were available for work in the reference week; or

◦were waiting to start a new job within four weeks from the end of the reference week and could have started in the reference week if the job had been available then.


Persons not in the labour force are defined as: people aged 15 and over who were neither employed

nor unemployed. They include: ◦ people who were keeping house (unpaid); ◦ people who were retired, ◦ voluntarily inactive, ◦ permanently unable to work; ◦ people in institutions (hospitals, jails etc.);



The unemployment rate expresses the number of unemployed people as a percentage of the labour force.

Calculating Labour Market Indicators

Participation Rate: is the percentage of the population 15 years and over who are either actively employed as part of the labour force or are actively seeking employment.

The participation rate expresses the number of people in the labour force as a percentage of the population aged 15 years and over.

Calculating Labour Market Indicators

Definitions are arbitrary: the definitions used to classify a person as employed or unemployed are rather arbitrary. Should the cut-off for employed be 1 hour or 4 hours a week?

Limitations of Unemployment rate as a measure of full employment

Survey error: only a small sample of the population is surveyed so there is a likelihood of possible error in the statistics. Budget cuts by governments also affect the number of people surveyed leading to issues of credibility of the sampling.


False information: Some people completing the survey may give false information because they fear losing unemployment benefits if it was found they actually have a job.


Misleading data and hidden unemployed: the unemployment rate fails to take into account labour that is underutilized or the hidden unemployed. That is why a suite of statistics should be used to analyse whether the objective of full employment is being achieved.


Underemployment: is the situation of those of the labour force employed part-time who would prefer to work more. The underemployment rate is the number of people underemployed expressed as a percentage of the labour force.

Other Labour Market Indicators

Labour underutilization: the degree to which labour resources are not used to their full potential Labour underutilization rate is the unemployed plus the underemployed as a percentage of the labour force.


Hidden Unemployment: Those people who are not in the labour force but they could be in the near future. They include two main groups of people who are considered marginally attached to the labour force:◦Those not employed who are actively seeking work

but are not available to start now.◦Discouraged job seekers – those wanting to work

and available to start but not actively seeking employment.


Australia’s Unemployment Rate

Documents

Definition of Goal: The goal of Full Employment: that there should be no cyclical unemployment caused by weak demand or recession. TARGET – To achieve