chapter 9 - unemployment

Question 1

unemployment rate

Answer 1

UN rate = UN (no.)/labour force x 100%
outside labour force - under 15 years,& economically inactive population (can work but not looking for work)
labour force - employed & unemployed

Question 2

Labour force participation rate

Answer 2

LFPR = labour force (no.)/population aged 15 years and above x 100%

Question 3

types of unemployment

Answer 3

frictional
structural
cyclical
seasonal

Question 4

frictional unemployment

Answer 4

1. temporary
2. voluntary
3. enough jobs in the market but time is needed to find the right job & employee
4. results in better match of worker and job
   caused by normal search time req by workers, changing jobs initially entering the workforce or re-entering the workforce

solution: recall the cause of frictional UN: imperfect info on job market, improve methods of dist job info (job listings on internet)

Question 5

Structural UN

Answer 5

long term UN
- caused by mismatch of the skills of workers out of work & skills req for exisiting job ops
- bc of technological changes which results in new skills being req to handle new tech
- changes in demand –> new skills being needed as new industries will arise & old ones disappear

solution:
- retraining & re-education
- relocation to where skill is needed

Question 6

Cyclical UN

Answer 6

• arises bc of lack of jobs caused by downturn in business cycle
• recessions, when spending falls, less goods & services will be produced, workers retrenched
• unpredictable & involuntary
• not enough jobs bc output is low

solution
- govt involvement is necessary to bring economy out of recession

Question 7

Seasonal UN

Answer 7

• due to seasonal changes in employment
• inevitable in some industries (eg growing of crops, skiing)

Question 8

limitations of UN rate

Answer 8

underemployment
discouraged worker

Question 9

underemployment

Answer 9

condition whereby factors of production are operating below capacity or potential
- when a person has to accept a job that is way below what they trained for
- when a person wants to work full time but is forced to work a shorter work week

Question 10

discouraged worker

Answer 10

someone initially UN but has given up looking for work bc of repeated failure in getting a job
drops out of the ranks of the UN and labour force
–> official UN rate will understate the real prob of unemployment if thre are underemployed workers & discouraged workers

Question 11

full employment

Answer 11

• when whoever wants to work the full time work week will be able to find work
• unemployment not zero, but positive (natural rate of UN)
• frictional & structural UN can exist, but cyclical UN must be 0