Labour Productivity

Labour Productivity Total input

Total output=

Labour Productivity Working age

population

GDP=

or in practical terms

Unemployment Rate

Unemployment rate (%) Total labour force

# of persons unemployed= 100x

Types f Unemployment

• Cyclical• Structural• Long-term• Seasonal• Frictional• Hard-core• Hidden• Underemployment

Cyclical unemployment

• A result of economic downturn• Occurs due to a fall in demand for goods and

service, which flows on to demand for labour• Will be reduced by economic upturn• A concern for governments

Structural Unemployment

• A result of a mismatch between skills of the unemployed and jobs available

• Occurs when new industries emerge and employee’s skills are no longer valued

• Individuals need to acquire new skills to become employable again

Long-term Unemployed

• Unemployed for 12 months or more• Of concern as the longer the period of

unemployment, the reduced chance of the person finding suitable employment

• May begin as cyclical unemployment and become long term unemployed

Seasonal Unemployment

• Occurs as a result of changing patterns of consumer demand relating to at different times of the year (eg Christmas, tax time)

• Unemployment will rise at Christmas as school leavers enter the market

Frictional Unemployment

• Occurs when people change jobs• The period between finishing one job and

starting the next

Hard-core Unemployment

• May be considered unemployable due to personal characteristics such as disabilities, addictions, anti-social behaviours

Hidden Unemployed

• People who have ceased looking for work as their expectancy for finding a job is low

• As they are not willing and able to supply their labour, they are not considered to be unemployed

• A rise in hidden unemployment will result in a fall in the lfpr(%) rather than an increase in unemployment

Underemployment

• Workers who are employed for more than one hour per week and are willing and able to work more hours each week but are unable to find suitable work for those additional hours

• These people do not count as unemployed in the statistics but do reduce the production possibility

Labour Force Participation Rate (LFPR)

LFPR (%)Working age population

Labour force= 100x