Question

Why is the underutilisation rate higher than the underemployment rate?​

b) The current unemployment rate is 5.2% and the number of people in the labour force is 212,000. Use this information to find the following.

(i) How many people are unemployed?​​​​​

(ii) If the working age population is 320,000 what is the labour force participation rate?​​​​​​​​​

(iii) Tara, who lives in Sydney is not a particularly productive worker and she is often unemployed as she gets sacked from her various jobs as she fails to meet her employer’s expectations. Yet for the past 8 months, Tara has not only managed to obtain a job on a part-time basis, but recently was upgraded to a full-time worker despite still being a less than efficient employee. What does Tara’s situation tell you about Australia’s output gap at present, and what does this indicate with respect to the relationship between the actual unemployment rate and the full-employment rate?​​​

Answer 1

a. The underutilisation rate is a sum of employed plus unemployed people. In this case, even discouraged workers are also considered. Underemployed are those people who are working in jobs less than they are trained at. A student with commerce post graduation degree working as driver is underemployment.

As even discouraged workers are also considered, underutilisation rate higher than the underemployment rate.

b. i. 5.2% of 212,000 are unemployment, it means that 5.2/100*212,000 =11024  are unemployed.

ii.Labor force participation rate = (labor force/ working age population)*100 = 66.25%

iii.It is clear that Australian economy is having inflationary gap and actual rate of unemployment is low than natural rate of unemployment.