Key Definitions:

Labour Force (working population): the total number of people, over the age of 15 currently employed and or unemployed but actively engaged in seeking a job

Labour Productivity: a focus on the relationship between the labour resources used in a production process and the output achieved (output/labour hour)

Workforce: people who are employed and working for a particular industry, firm, or an organisation

What are the factors affecting the size of the labour force?

• 1. The size of the population
• 2. The working age population
• 3. The labour force participation rate
• 4. Average time spent in school for studies

What are the parts of the population not included in the labour force?

• 1. Fulltime students and homeworkers
• 2. Retirees
• 3. Sporting groups
• 4. People with special needs (disabled)

Labour force: the total number of people, over the age of 15 currently employed and or unemployed but actively engaged in seeking a job

Workforce: people who are willing and able to work and are employed/working for an industry, firm, or an organisation

Employment: situation when a person is engaged in a regular paid job

Papua New Guinea has two sectors in the economy:

• o The formal sector: comprises of businesses and the government where people are engaged in formal employment and earning regular income
• o The informal sector: comprises self-employed people on irregular incomes and employment
• o The formal sector: comprises of businesses and the government where people are engaged in formal employment and earning regular income
• o The informal sector: comprises self-employed people on irregular incomes and employment
• Unemployment: situation where people are able and willing to work but cannot find gainful employment or a paid job
• Underemployment: being in either a full-time or part-time job but on reduced work hours due to economic reasons; or being employed in a job that is inadequate with respect to the individual’s current qualification, skills, and/or training.
• Types of unemployment include frictional, cyclical, structural, seasonal, and hare-core
• Effects of unemployment: lost output & income, reduced taxation, human resource depreciation, growing poverty & inequality, and increase social problems

Ways in which the government can lower unemployment:

• o Increase government spending (welfare)
• o Accept higher inflation rate
• o Credit schemes at lower interest rates
• o Support small farming and business through financial assistance

Economic system: the organisational and institutional pattern through which choices are made about which wants to satisfy, and how to allocate resources to do this

An economic system must coordinate individual’s wants/needs. It must allocate resources efficiently to solve the problems of:

• What do we produce? Identifying which combination of goods should be produced at which points of the PPC.
• How much do we produce? Identifying the level of output
• How do we produce it? Identifying which resources (factors of production) should be used to produce goods/services
• Who do we produce it for? Identifying who should benefit from the goods/services produced