 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)
 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 NonAccelerating Inflation Rate of
Unemployment (NAIRU)
 Currently, the Australian Government sets
a target rate of unemployment of 4 – 5%
 Unemployment:
a situation in which some
who are actively seeking work and are
willing to work are unable to find gainful
employment.
 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.
 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.
 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.
 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.
 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:
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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:
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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.

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.

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?

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.

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.