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1 Introductory concepts 2  Market mechanism  3 Elasticities  4 Market structures 5  Market failures  6  Macro economic activity/eco growth  7 Inflation 8  Employment & unemployment  9  External Stability  10  Income distribution 11.Factors affecting economy  12  Fiscal/Budgetary policy  13  Monetary Policy   14 Aggregate Supply Policies  15 The Policy Mix

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Measurement of unemployment


How the ABS determines employment and unemployment


Those considered employed must meet the following requirements:



Those considered unemployed must meet the following requirements:



The total working age population (i.e. over 15) can then be split into the following four categories:


A. Employed persons

B. Unemployed persons

C. Persons not in the labour force but of a working age (over 15)

D. Persons not of a working age


The labour force and participation rate


The ABS defines the labour force as all those people aged 15 and over who are willing and able to work. The labour force therefore comprises both those that are employed and those that are unemployed (i.e. actively seeking work but unable to find a job).  Accordingly, (A) + (B) represent the labour force.  


The participation rate is defined as that percentage of the total 'working age' population (over 15) that are members of the labour force - that is participating in the sense of either working or willing and able to find work.  This means that the working age population is A+B+C and it really represents Australia's 'potential' labour force.  Accordingly, the rate tells us what proportion of our potential labour force is actually in the labour force.


The participation rate is therefore calculated as:


[(A) + (B)/(A) + (B) + (C)] * (100/1)


The unemployment rate


The unemployment (U/E) rate represents the proportion of the labour force that are not employed (i.e not working for more than one hour per week).  It is therefore calculated as follows:


[(B)/(A) + (B)] * (100/1)


If we assume that the economy had the following labour force statistics


A. Employed persons                                                                                     9 million

B. Unemployed persons                                                                                 1 million

C. Persons not in the labour force but of a working age (over 15)          5 million

D. Persons not of a working age  (or unable to work)                                5 million


The unemployment rate and participation rate (PR) can be calculated as follows:


U/E rate  =      (1m/10m) x 100 = 10%


PR               =     (10m/15m) x 100 = 67%


To determine the latest rates for Australia, see ABS catalogue 6202.0.

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