• The demand for employees is often determine by the demand for goods and services. As the economic cycles through phases of growth and decline, so will the demand for a business’ goods and services, which impacts on the demand for labour

During boom

During recession

·         Low unemployment

·         Rising inflation

·         Skill Shortage

·         Higher Wages

·         Increased Hiring

·         Business expansion

·         Downsizing

·         Lower Wages

·         Higher Unemployment

·         Shift away from labour to capital


  • The level of economic activity in an economy is primarily determined by the level of consumer and business spending within a given period of time, and can fluctuate through the economic business cycle.

  • If employees are confident about their level of job security, they show an increased willingness to spend more of their income on consumer goods, encouraging more demand for labour.

  • The economic growth can lead to inflation, which is when demand for goods increase, and businesses react by increasing their prices because there isn’t as much supply as before. As prices increase, so does the cost of living, and employees will seek higher wages from their employer to compensate for the increase. This could result in a business reducing the size of its workforce.

Globalisation refers to the integration of the world’s economies into a single market where goods and services can be traded with ease. This means that Australian businesses face increased competition, as they are unable to compete with lower prices, ceasing operations and therefore jobs.

Extract from Business Studies Stage 6 Syllabus. © 2010 Board of Studies NSW.