6.1 Overview

Question 1 (3 marks)

a. Define the term, labour market. (1 mark) b. Explain why wages in the labour market sometimes rise more slowly than at other times. (2 marks)

Question 2 (4 marks)

Before answering the questions that follow, examine Table 5.11 containing data for an economy. TABLE 5.11 Data relating to a country’s labour force

Employed persons 20 million

Unemployed persons 1 million Persons aged 15 years of age and over 25 million The underemployment rate 5.0 per cent a. Showing your formula and basic working, calculate the size of the labour force. (1 mark) b. Showing your formula and basic working, calculate the unemployment rate. (1 mark) c. Showing your formula and basic working, calculate the underutilisation rate. (1 mark) d. Showing your formula and basic working, calculate the participation rate. (1 mark)

Question 3 (10 marks)

a. Contrast strong labour market conditions with weak labour market conditions. (2 marks)

Examine Table 5.12 showing data for changes in Australia’s labour market conditions:

TABLE 5.12 Australia’s labour market indicators for March 2022

Labour market indicator Feb-2022 Mar-2022 Monthly change Monthly change (%) Yearly change Yearly change (%)

Employed people 13 372 000 13 389 900 17 900 0.10% 338 300 2.60% Unemployed people 563 300 551 300 −12 100 −2.10% −236 700 −30.00% Unemployment rate 4.00% 4.00% −0.1 pts na −1.7 pts na Underemployment rate 6.60% 6.30% −0.2 pts na −1.6 pts na Participation rate 66.40% 66.40% 0.0 pts na 0.1 pts na Monthly hours worked in all jobs 1,813 million 1,803 million −10 million −0.60% −1 million −0.10%

Source: ABS, Labour force Australia, see https://www.abs.gov.au/statistics/labour/employment-and-unemployment/ labour-force-australia/latest-release. b. Referring to the data in Table 5.12, describe the general change in labour market conditions over the period shown. c. Identify and outline two important factors that could explain the change in Australia’s unemployment rate over the period covered in the table. (2 marks) d. If the unemployment rate was to fall to 3 per cent, identify and explain one important problem that may arise. (2 marks) UNCORRECTED PAGE PROOFS e. If Australia’s unemployment rate fell to 3 per cent and the underemployment rate also fell to 3 per cent, explain what policy actions would be required to prevent a deterioration in domestic economic conditions. (4 marks)

Question 4 (7 marks)

a. Define the term, unemployment.

(1 mark)

b. Distinguish between cyclical unemployment and structural unemployment. (2 marks) c. Explain how the widespread application of new technology in an economy can result in both costs and benefits for members of the labour force. (4 marks)

Question 5 (6 marks)

Before answering the questions that follow, examine Fiigure 5.21 showing changes in Australia’s level of consumer or household confidence.

FIGURE 5.21 Changes in Australia’s index measuring consumer confidence 115 113.1 110 107.2 105 100 95 Jul 2021 Oct 2021 Jan 2022 Apr 2022

108.8 104.0927

106.225 104.6419 105.2999 104.2771 102.2016 100.8239 96.6217 95.7 Source: Trading Economics, see https://tradingeconomics.com/australia/consumer-confidence. a. Referring to the graph, describe the change in consumer confidence over the period shown. (1 mark) b. Assuming all other factors remained constant, explain how this recent overall change in consumer confidence would be likely to affect each of the following: • The unemployment rate • Average hours worked and job vacancies • The underemployment rate. (3 marks) c. Given the change in consumer confidence over the period shown, explain the actions that the RBA might take to improve labour market conditions. (2 marks) Question 6 (11 marks) a. From time to time, Australia has experienced labour shortages. Explain what is meant by labour shortages, outlining one important cause of these. (2 marks) b. Outline the actions that the Australian government might take to help alleviate a skills shortage. (2 marks) c. Define the term, labour productivity. (1 mark) d. Giving reasons, explain how you would expect the general decline in Australia’s labour productivity to affect each of the following: • The unemployment rate • The level of wages. (4 marks) e. Explain why it is important to encourage a further increase in Australia’s female participation rate in the labour UNCORRECTED PAGE PROOFS force. (2 marks)