There are two key measurements of the labour market, and you should become familiar with both of them. The unemployment rate is a measure of the percentage of people in the labour market who are unable to find employment. The key term, missed by many people, is that to be classified as unemployed you must be part of the labour market. This means that you must either have a job, or be actively seeking one. The following diagram will help to make this clear.

On the right hand side of this diagram you can see a group identified as the non-labour force. This group includes any person who is over the age of fifteen, but for some reason has stopped seeking employment. For example, full time students, retired people and homemakers are all part of the non-labour force.

The unemployment rate is calculated as follows:

There are a number of limitations to this measure. Two that you should be aware of are:

Hidden Unemployment: We have said that there is a group known as the non-labour force. These people include a group known as the hidden unemployed. To be classified as one of the hidden unemployed, a person is considered a discouraged job seeker. That is, they would like a job, but economic circumstances make them believe that if they look they won’t find one. As a result they don’t meet the Australian Bureau of Statistics definition of unemployed, and they will not be revealed by the official statistic.

Disguised Unemployment: There are many people in Australia who have a job, but would like to work for more hours each week. Others are working in a field that does not fully utilise their skills. These people are the disguised unemployed; they are doing everything that an unemployed person is doing (in looking for a new job), but they can’t be classified as unemployed because they have a position. This often happens to students when they graduate – in the short term they will take any position, but over time they will seek a more meaningful one.

As suggested earlier, there is a second measure of the Australian labour market that you should be able to calculate. In addition to ensuring that the unemployment rate is low, the Australian government would also like to achieve a high rate of participation. The participation rate is defined as the percentage of people aged over 15 who are involved in the labour market. It is calculated as follows:

In general this figure is quite steady, although some gains have been made in recent years. The participation rate in Australia is generally recorded at around 65%.