Full Employment
Definition: Full employment means a
situation in which all of the people who
are willing and able to work are able to
find employment.
Measurement and Goal:
• The data is collected every month. The
ABS collects the information by performing
a random survey of 0.7% of all Australian
households.
• The data that they show is the percentage
of people who are in the labour force and
unable to find employment.
Performance
Despite our improvement, Australia has a
higher unemployment rate than most of
our South East Asian neighbours. Most
OECD countries, as shown in
‘International Comparison’ have higher
unemployment rates than Australia.
Recent Performance
Australia’s unemployment rate fell steadily
between mid 2001 and the end of 2005.
Strong domestic economic growth, low
interest rates and high levels of
government expenditure have been the
main reasons for the decline.
International Comparison
Singapore – 3.4%
South Korea – 3.7%
New Zealand – 3.7%
Taiwan – 4.1%
Japan – 4.2%
United Kingdom – 4.6%
United States – 5.0%
Australia – 5.1%
Hong Kong – 5.7%
Canada – 6.6%
EU Average – 7.7%
International Comparison cntd.
International comparisons still show
Australia’s unemployment conditions as
“middle of the road”. The debate in 2006 is
on how the recent declines in our
unemployment levels can be sustained
and further reduced to levels below 5%.
Recent major industrial relations reforms
have been suggested by some
commentators as being likely to assist in
this process.
Limitations of Official Statistics
1. Many unemployment benefit recipients
have been shifted into disability pensions
or the “youth allowance”. This removes
people from the official unemployment
statistics.
2. Some People simply lie deliberately
mislead the survey takers
Further Measurement limitations
• Others are employed but seek extra work.
These people are known as the disguised
unemployed.
• There are those that come under the
heading of the hidden unemployed. These
people do not have a job, but they have
given up actively seeking employment.
They have lost confidence in themselves.
Underemployed
A tighter work test and a weakened means
test for unemployment benefit recipients
has encouraged people to seek a few
hours work here and there while staying
on benefits. Because the ABS does not
count as unemployed people doing one
hour paid work per week or more, these
people are not aprt of official
unemployment statistics. However they
are clearly unemployed.
Real Unemployment Rate
It has been estimated that if these
figured are included, the “real”
unemployment rate would be around
10%, compared to the current rate of
5.1%
Another Limitation
2. Discouraged workers who withdraw from
the job market are not registering as
unemployed workers.
Maintaining Low Unemployment
• Governments need to meet those
Economic Objectives
Low Inflation
1. Maintenance of a low inflation
enviroment which will generate
“sustainable economic growth” is an
important ingredient in limiting growth in
unemployment levels.
Low Inflation – Federal Govt.
The Federal government also aims to
prevent major economic imbalances, such
as rising inflation.
• In early 2005 this potential imbalance led
to a tightening of monetary policy,
truncating excessive economics growth
and limiting the process of furthur
reduction in unemployment.
• In early 2006 accelerating inflation due to
rising oil prices, strong wage demands and
a waning of the positive effects on inflation
from our recent $A appreciation may
require further RBA intervention to prevent
the imbalances of an inflation outbreak
reemerging.
Labour Market Reform
Labour market reform involves individual
contracts and enterprise bargaining, lower
entry level training and wages, reduced
trade union influence and targeted training
which promotes a better synergy between
labour market supply and demand.
Excessive Wage Growth
Excessive wage increases and structural
impediments in the labour market will lead
to higher unemployment. Labour market
deregulation can promote greater
competition and flexibility and prevent the
excessive wage growth.
Improved Productivity
Reduction in the real unit cost of labour
will also provide an incentive for increased
employment of a well-trained labour force.
The likelihood of excessive wages growth
is reduced.
Improve Training
Improved training and on the job skills for
the long-term unemployed, “work-for-thedole” scheme, are designed to increase
job skills for the long-term unemployed
and allow them to respond to higher labour
demand.
Job Networks
• Job Network has introduced 300
community and private sector employment
placement agencies into competition to
find suitable work for the unemployed.
Tax and Welfare Reform
The taxation package introduced in July
2000 aimed in part to reduce business
costs by the scrapping of the wholesale
sales tax. Removal of distortions in the
taxation system will lead to more efficient
resource allocation and an improvin
business climate, and job creation.
Welfare Reform
The combination of a loss of welfare
benefits and marginal income tax rates on
income earned acts as a disincentive to
unemployed persons wishing to re-enter
the labour force.
2003/2004 Budget
In the 2003/04 budget, increasied family
tax benefits and higher income tax
thresholds were announced. In the
2004/05 and 2005/06 budgets, a further
round of measures to reduced welfare
traps and improve incentives to work were
introduced.
Welfare to Work
The “Welfare to Work” reforms include
lower marginal tax rates for low income
earners, requiring recipients of the
parenting Payment to seek work when
children reach a certain age, and provision
of assistance to employers wishing to
engage long-term unemployed.