Download 2.3II A Defining, Measuring and Effects of Unemployment N

2.3 A Unemployment:
Ai Definitions and Measurements
Aii Calculating Unemployment (HL only)
Aiii Effects of Unemployment
B & D pages 203-207
Ai Learning Objectives

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
Define the term unemployment.
Explain how the unemployment rate is calculated.
Explain the difficulties in measuring unemployment,
including

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the existence of hidden unemployment,
the existence of underemployment,
and the fact that it is an average and therefore ignores regional,
ethnic, age and gender disparities.
Legal, Paid Work is Employment
Work, in an economic sense, is any activity that is
engaged in the production of goods or services.
Employment, however, is when someone works for a
wage or salary: it must be legal, paid activity.
Who might work but not be employed? (three examples)
How is Unemployment Defined?
Certainly those who are actively seeking and
currently available for work – yet are without
a job – are unemployed.
Together, the unemployed and employed are in the
labour force: either working or available for
work.
The unemployment rate is the number of
those not employed for every 100 of the
labour force.
What are the difficulties in measuring
unemployment?
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
Hidden unemployment: Those who are “discouraged”
i.e. no longer available or seeking – are not
unemployed but they are jobless.
Underemployed:
Those “overqualified” for their jobs – are actually not
appropriately employed (and thus are underpaid)
 Those working only part time are actually employed, but
some would rather work more hours (and thus are
underpaid).
Ways of getting the data:
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Quarterly surveys – only a sample surveyed (official measure)
Registered Unemployed (to gain government welfare benefits)
Census – everybody surveyed but only every 5 years
Distribution of Unemployment
This topic is about the issue of fairness to social groups
within a country. If some groups have higher rates of
unemployment, this may be “hidden” and thus ignored by
government or society. Thus it’s an issue of fairness. Take a
brief note from the text, page 206 (bottom) on likely social
groups according to:
 Geography
 Age
 Enthicity
 Gender
The unemployment rate is calculated
as the percentage of the labour force
that is unemployed.
The labour force participation rate is the
percentage of the working age population
that is in the labor force.
Why is this measure significant?
Write in the relevant numbers and check
the calculations of the u/e rate and LFP rate
December 2012
quarter
(
Unemployed
Employed
)
163 000
Employed
2,194 000
Not in the labour force
1,149 000
Working-age population
3,506 000
(Percent)
Unemployment rate
6.9
Employment rate
62.6
Labour force participation
rate
67.2
Unemployed (
)
Not in labor force
(
)
Unemployment rate, 1986–2005
Source: Statistics New Zealand, Household Labour Force Survey
2.3 Aii
Calculating Unemployment
HL only: learning outcomes
 Calculate the unemployment rate from a set of data.
2.3 Aiii Effects of U/E
Learning Objectives
 Discuss possible economic consequences of
unemployment
 Discuss possible personal and social
consequences of unemployment
Economic Effects of
unemployment
a loss of GDP, decreased growth rate
 loss of tax revenue (income and GST),
 increased cost of unemployment benefits,
 loss of income for individuals
 and greater disparities in the distribution of income.
Task: Write one statement to explain each of the abovenoted effects.

Long Term economic effects
High unemployment tends to lead to an
increase of self-employment.
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
Loss of skills

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Some skills can be lost over time.
Consideration must be given to retraining.
Regional stagnation

The closure of one business in a small town can cripple its
economy.
Task: Write one statement to explain each of the abovenoted effects.
Social Effects
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Increased emotional stress levels due to a loss of selfrespect (physical health can deteriorate)
Increased indebtedness and less quality of life
This may lead to marriage and family breakdown or
homelessness.
The stress of being unemployed can increase the likelihood
of crime.
Therefore a foremost Government Objective
is FULL EMPLOYMENT!
Why?
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Maximum GDP growth
Higher standard of living,
Less social unrest
Improved government budget