Questions to ponder from the lecture material!

1. Does full employment mean zero unemployment?

2. If unemployment rises, does that mean the number of people with jobs is falling?

3. Why would increased labour market flexibility expected to reduce the unemployment rate?

4. Although unemployment is generally low in Australia, some states, such as Tasmania, have very high unemployment rates for young people. Why?

5. Give some examples of jobs that will be lost in the next 10 years, that will never disappear, and that will be created.

6. Some argue that "a tax and transfer system could be an alternative to minimum wages as an income-distribution mechanism". Do you agree?

Activity: Classroom Experiment

1 Discussion question:

Determine the impact on the size of the labour force if two hundred thousand formerly unemployed workers decide to return to school full-time and stop looking for work.

Determine the impact on the labour force participation rate if two hundred thousand formerly unemployed workers decide to return to school full-time and stop looking for work.

Determine the impact on the unemployment rate if two hundred thousand formerly unemployed workers decide to return to school full-time and stop looking for work.

Australia's labour force has 14.78 million people, of whom 14.21 million are employed. What is the unemployment rate?

2 Problem-Solving Questions

1. For each of the following, indicate if the person would be classified as employed, unemployed, or not in the labour force: i. Graeme is retired and is now working as a volunteer for 12 hours a week. ii. a university graduate who has not been able to find a position using her skills and is working as a waitperson for 30 hours a week; and iii. a manufacturing worker who is out of a job and has given up searching for a job. question.

2. Discuss the likely impact of each of the following on the unemployment rate.

i. The length of time workers are eligible to receive unemployment benefit payments is reduced.

ii. The government passes a law-making trade union illegal.

iii. The minimum wage is raised by 50%.

iv. The government funds an Internet site where companies can post job openings at no charge.

4. Explain why 'discouraged workers' are not measured as being 'unemployed' and how they impact the unemployment rate during a recession.

5. How would the unemployment rate and the labour force participation rate change if discouraged workers were counted as 'unemployed' rather than as being in the 'not-in-thelabour force' category? Show this using the formula for both measurements.

6. The Australian Bureau of Statistics counts as 'employed', those people who work part-time but would prefer to work full-time. Suppose the people who had part-time jobs but wanted full-time jobs were counted as 'unemployed'. Explain how the unemployment rate and the labour force participation rate would change.

7. What is long-term unemployment? What impact does it have on human capital, and what does that imply for government policy regarding long-term unemployment?

8. Suppose 200 000 people are employed, 25 000 people are unemployed, and 50 000 people are out of the labour force. i. Calculate the unemployment rate. ii. Calculate the labour participation rate.

9. Why are policymakers concerned about rising unemployment rates?

10. What is the difference between Cyclical, Frictional and Structural unemployment? If you were advising the government which would you consider to be of greatest concern (explain why)?