Unemployment - the headline figures can disguise the truth

In Australia the rate of unemployment has generally been falling. This is usually good news, but there are other subtle points to consider, such as the situation in Queensland where the fall in unemployment might be hiding a more serious problem.

The unemployment rate is measured from a base figure of those people of working age who are looking for work or in work. This group are participating in the labour market, those who choose not to or cannot work are disregarded. The proportion of working age people active in the labour market is therefore called the participation rate.

The fact some people decide not to look for work can affect the unemployment figures and the article below gives an example of this. Unemployment in Queensland is falling, but some claim that this is because some people are so fed up with not finding a job they are simply giving up. If you are not seeking work you are no longer counted as unemployed and the unemployment rate appears to fall.

The discouraged workers as they are known are still without work. The participation rate has fallen and, in the case of Queensland, the number employed falls, but the unemployment rate also falls.

This could indicate a very serious problem with a number of people simply becoming detached from the labourforce, suffering all the personal costs of unemployment, but receiving none of the help the unemployed should receive. In addition the economy is loosing out on all the output those people could produce if they were in work.

Australia's participation rate, since 2011 there has been a downward trend

The ABC cover the story here

This story applies equally to IB and VCE students. The problems of unemployment and the difficulty measuring it is a core concept. There are also links to economic growth and supply-side economics as those not working represent a loss of output and those not seeking to work a serious restraint on aggregate supply.