The nature of employment , unemployment and work

Why do people work?

Paid work: involves the labour market The labour market is an institution where buyers

(govt, businesses and firms) and sellers of labour (workers) negotiate wages and working conditions.

Why do some occupations receive higher wages?

Unpaid work: involves a volunteer providing help in the form of time, skills or service for no wage or renumeration

Types of work

ABS conducts a monthly labour force survey with a sample survey of less than 0.45% of the population of Australia.

Using responses from this survey the ABS classify people into various categories of the labour market.

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

Labour Market Classifications

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;

Labour Market Classifications

Employed are defined as people aged 15 and over who, during the reference week - Continued

◦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.

Labour Market Classifications

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.

Labour Market Classifications

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.);

Labour Market Classifications

Definition of Labour Force Status

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

Unemployment rate = (Unemployed/ Labour force) X 100

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 =

Participation rate = (employed + unemployed)/ Pop 15+) x 100

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

Year Employed Unemployed Population 15+

Labour force

Unemployment Rate

Participation rate

1 10000 600 16500 10600

2 10150 580 16650 10730

3 10400 570 16800 10970

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

Key Definition - Unemployment

There are two main categories of Unemployment

Cyclical unemployment

Natural unemployment:

Types of Unemployment

Cyclical unemployment: unemployment caused by insufficient aggregate demand in the Economy during slowdowns or recessions in the economy as shown by the business cycle.

Types of Unemployment

Increasing Unemployment

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

Natural unemployment is the lowest level of unemployment that we can achieve without experiencing inflation.

Approximately 4% of unemployment is natural

Types of Unemployment

There are 4 types of Natural Unemployment

Structural Unemployment: a rise in unemployment caused by changes in the structure of production. Because different skills are required, some workers become redundant

Cause of Structural Unemployment:◦Business Relocation◦The effect of globalisation and tariff cuts◦Government microeconomic policies◦ Industries requiring a low cost base to survive in a high cost

country

Types of Natural Unemployment

Australian products no longer produced

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

Eg. An electrician has a contract to put light fittings in a new building. Once that contract is finished he is unemployed until he finds another contract with work.

Types of Natural Unemployment

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

E.g. Ski teachers in winter in Thredbo, surf schools in summer at Torquay

Types of Natural Unemployment

Hard core unemployment- is often the result of personal attitudes, limited skill level, illness or other problems that may be make it difficult for the person be employed.

Long term unemployed more than 1 year = 162,000 (20.1% of unemployed)

Types of Natural Unemployment