Unemployment What is unemployment? What are the types of unemployment? What are the trends in unemployment? What are the costs of unemployment? © Karen Devine 2008

What is unemployment? Where those who are willing and able to work are unable to find it due to structural, cyclical or other factors within the economy.

What are the types of unemployment? Structural Cyclical Frictional Seasonal Hidden Hard Core

Structural unemployment As the economy experiences structural change, the workforce may not possess the skills required for the positions available.

Cyclical unemployment Due to economic downturns, there are fewer positions available than are wanted by labour units.

Seasonal unemployment Seasonal unemployment usually results from changes in climate or occurs at specific times of the year. Eg: The ski instructor will generally find themselves unemployed during summer, or Santa will be unemployed on December 26th.

Frictional unemployment Frictional unemployment exists in the time taken between being employed in two jobs. It is of a temporary nature. Eg: If a person is retrenched from one job, they are frictionally unemployed until they find another one.

Hidden unemployment The hidden unemployed are those who are no longer actively seeking work and are therefore not counted in the official statistics. Married unemployed women may be the biggest category here.

Hard core unemployment The hard core unemployed are those who are very difficult to place within the workforce. This category may include alcoholics, drug users, former prisoners or extremely disabled people.

Trends in unemployment The average unemployment rate hit 10.7% in 1992-1993 following the 1990 recession. This is the highest rate since the Great Depression. Since 1996, the unemployment rate has been steadily declining.

Trends in unemployment Due to strong economic growth since 1996 the level of cyclical unemployment has fallen. There have been increasing participation rates and many hidden unemployed returning to look for work. The Australian workforce has become more feminised with women’s participation levels increasing in recent years.

Trends in unemployment There is a pool of structurally unemployed workers who have lost their jobs due to: Microeconomic reform in industry. Structural change policies at a microeconomic and macroeconomic level. Decreased protection in many Australian industries. Changes to technology within industry. Increased productivity of labour.

Costs of unemployment There are two main costs of unemployment: Economic costs Social Costs

Economic costs of unemployment Potential goods and services are lost. Unemployment is most prevalent among disadvantaged and minority groups and their disadvantage worsens. Income equality is worsened by unemployment.

Economic costs of unemployment Budget deficits are worsened. This may have spill over effects onto the foreign debt. The government receives less tax revenue with high unemployment; this leads to major revenue shortfalls.

Social costs of unemployment There may be psychological effects on the individual such as depression. Individuals suffer financial losses. The unemployed have lower real incomes, which affects their standard of living.

Social costs of unemployment The gap between the rich and poor widens causing social problems. The benefits spent on the unemployed could have been allocated to other projects. The government must reallocate its funds towards job training schemes, retraining programs, job placement and other community employment projects.

Question Time? Monitor Australia’s unemployment rates over the last 20 years. Do they show any trends?