unemployment Flashcards
unemployment rate
the unemployment rate is the number of people unemployed expressed as a percentage of the total labour force
number of unemployed
———————————– x 100
total labour force
unemployment definition
according to the ILO (international labour organisation), unemployment is defined as “people of working age, who are without work, available for work and actively seeking employment
complications when measuring unemployment: underestimation
underestimation in the unemployment is defined as hidden unemployment it divides in 3 categories
- “discouraged” workers that lost hope searching for a job are no longer considered in the labour force, but are still unemployed
- part-time workers who want a full-time job but have to stray in the current one while searching
- over-qualified workers that want to quit but have to stay in the current job while searching
complications when measuring unemployment: overestimation and inequalities
overestimations : illegal activities
inequalities:
- geographical disparities (more employment inner cities than rural zones)
- age disparities (sometimes youth unemployment rate is higher than the national rate –> lack of skills)
- gender disparities: more unemployed women
costs of unemployment (3)
- to the unemployed themself (less income, lower standards of living, stress, anxiety, depression, relationship breaking and suicide)
- to society (higher poverty, increase in homelessness, crime and vandalism)
- to the economy (higher couvrement spending and lower tax-income and less potential output)
causes of unemployment
- cyclical unemployment
- structural unemployment
- frictional unemployment
- seasonal unemployment
cyclical unemployment
- also known as demand-deficient or Keynesian
- associated with the cyclical downturns of the economy (recessions, crisis)
- as an economy moves to slower growth, aggregate demand will fall as consumers spend less money on goods and services
- the fall in consumers spending is very likely to lead to a fall in demand for labour
GRAPH
how do we cure cyclical unemployment ?
- government should intervene to bring about an increase in AD trough the use of fiscal or monetary policies
- more government spending will result in higher AD, example: lower taxes, decreasing interests rates or increase money supply
frictional unemployment
- short term unemployment that occurs when people are in between jobs, or are waiting to get their very first job (ex student)
- not perceived as negative, as the goal is to be more productive
- even though government wishes to have 0 unemployment, the existence of frictional unemployment makes it impossible
how do we cure frictional unemployment ?
can be reduced by improving the flow of information from potential employers to people looking for a job (internet, newspaper, job centres)
seasonal unemployment
- unemployment that occurs because the need for workers in specifics jobs fall in certain times of the year
- ex: more employment in nov/dec
structural unemployment
structural unemployment occurs when there is a change in the structure of the economy
it is natural in an economy that new jobs are created while other disappearn (exemple: software engineers and coal miners)
harmful because it is long term unemployment as workers lack skills to take the new jobs
caused by globalisation, technological changes and changes in consumers taste
GRAPH
natural rate of unemployment
the natural rate of unemployment is the minimum rate that the economy will see when at full potential. It is caused by frictional and structural unemployment
why do rates differ between countries ?
rates differ for various reasons
- different economic structure
- labour market policies
- education and skills
- social safety
- technological changes
- policies
unemployment rates italy and Germany
italy 7.8% dec 2023
germany 5.9% 2023
