Defining Full Employment in the Modern Labour Market

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Economy News

Full Employment,Labour Market,Unemployment Rate

The article discusses the different definitions of full employment and the need for a broader suite of measures to gauge labour's under-utilisation in the economy. It also explores the perspectives of the treasurer and the Reserve Bank of Australia on full employment.

He said when an economy's operating at full employment, workers should be getting the hours they want, with fair pay. Long-term unemployment should be minimal, and barriers to youth employment should be few. In short, he said we had to look at a broader suite of measures to gauge the true extent of labour's under-utilisation in the economy. Here are some interactive templates of key labour market data that we'll be including in our stories on the unemployment rate every month.

They'll help us to track the Albanese government's full employment ambitions, and to make better sense of any surprise movements in single numbers each month. The treasurer's definition of full employment is different from the Reserve Bank's. The RBA uses a technical and more narrow definition: it says full employment is the level of unemployment that's consistent with stable wage or price inflation. The federal government releases new a definition of "full employment" to reflect the modern labour market, saying it needs to be conscious of underemployment. From the RBA's perspective, we have over-full employment at the moment, which means it thinks the level of unemployment is so low it's contributing to wage and price inflation. The RBA thinks we'll probably enjoy a sustainable level of "full employment" when the unemployment rate increases to be sitting somewhere around 4.25 to 4.5 per cent. The template below shows us what other employment indicators look like when the unemployment rate moves around

 

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