Topic : 9 Unemployment Flashcards
Labor force
People who are either working or seeking work
Participation rate and state changes
Participation rate - Proportion of working-age population that is in the labor force ( trended upwards over time)
- Female participation rates have increased due to
changing social attitudes
- Male participation rates have fallen due to higher
education retention rates and changing social
attitudes
Unemployment
Unemployment occurs when people who are willing and able to work or can’t find a job
Unemployment rates
The proportion of the labor force who are willing and able to work but have not been employed in paid work for at least one hour in the survey week
Full employment
People who want a job can find one without having to search for too long
NAIRU
The NAIRU is the lowest unemployment rate that can be sustained without causing wage growth and inflation to rise
Underemployment
Underemployment are part-time workers who indicate they prefer to work more hours
Participation rate calculations
(labor force / working age population) x 100
Underemployment rate calculations
(number of part – time workers seeking more work / labour force) x100
Unemployment rate calculation
(number of people who are unemployed / labor force) x 100
Underutilisation rate calculation
unemployment rate + underemployment rate
Voluntary unemployment
When a worker decides to leave a job to search for another position
Involuntary unemployment
When a worker is laid off from their place of work (when there is not enough demand for their services or other reasons such as business restructuring)
Frictional unemployment
Occurs when workers are transitioning between jobs and have a temporary period of unemployment.voluntary
Short duration - a short-term form of joblessness when a worker is between jobs
Cyclical unemployment
Occurs in periods of recession and trough, when there is a slowdown of economic activity. Demand-deficient unemployment, rises, when there is insufficient demand to employ the country’s resources fully and falls in periods of economic expansion.
Structural Unemployment
Occurs when there is a mismatch of available and required skills in a sector of the economy eg. assembly line workers
Temporary - This can be long, especially for older workers or those with less education, overtime the demand generation effects of new tech tend to outweigh the displacement effects
The natural rate of unemployment
The minimum level of unemployment that can be achieved given the current characteristics of the labour market
- varies over time- recently 4%
- People constantly moving and changing jobs
- Necessary component of a healthy economy
Why can we never have 0% unemployment
0 unemployment means that every single person who wants to work has a job which is not possible in a dynamic economy. It is not possible as it means there is no room for workers to move to better jobs and no incentive for employers to improve their job offerings
GDP Gap
GDP gap indicates that unemployment imposes a direct cost on the economy
Effect of unemployment 1: Direct cost
Loss of income for the unemployed individuals, loss of tax revenue for the government, and the cost of providing unemployment benefits
Effect of unemployment 2: Welfare payment
Welfare payments come from the taxpayer’s pocket - welfare payments associated with unemployment including unemployment benefits, food samples, job-seeker
Effect of unemployment 3: Opportunity cost
The opportunity cost of unemployment and the loss of economic output as the skills and labour of the unemployed individual are not being utilized to produce goods and services
Countercyclical
It moves counter to the business cycle as economic growth increases, cyclical unemployment falls
Pro-cyclical (Inflation)
It moves with the business cycle and increases as economic activity rises
Trends
Covid
Russia/ Ukraine war
