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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 Define the term unemployment. Explain how the unemployment rate is calculated. Explain the difficulties in measuring unemployment, including 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? 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: 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. Loss of skills 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 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? Maximum GDP growth Higher standard of living, Less social unrest Improved government budget