Download Ch. 13: Unemployment Ppt

CIE3M1-01
M. Nicholson
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One of the biggest problems facing Canada
and any country is the waste of its human
resources.
Canadians aged 15 and over who are without
work and are actively seeking employment
are classified as unemployed
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Unemployment rate – is % of members of the
labour force who are unemployed
discouraged workers are not officially
unemployed because they give up looking for
work even though they still want to work
Full employment Canada is not 0% because
people always looking for a better job or
temporarily out of work
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Regional rates – traditionally unemployment
rates have been highest in Atlantic Canada &
Quebec and lowest in Ontario and Alberta
Unemployed Young adults – ages 15-24 >
ages 25
Unemployed Women > Unemployed Men
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Seasonal – loss of jobs due to changes in the
climate and other seasonal conditions (e.g.
construction, farming, fishing)
Frictional – temporarily unemployed due to
the time required to change jobs (e.g.
students leaving school)
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Structural – is the loss of jobs due to:
1. long-term
changes in consumer demand (e.g.
horses to cars)
2. the decline in natural resources (e.g. cod on
Atlantic coast)
3. the development of new technologies (e.g.
farm machinery)
4. shifts in trade between nations (e.g. NAFTA)
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Retraining and education is the key solution
Cyclical / Inadequate-Demand
1. trough
– low point of business cycle with high
unemployment
2. recovery – improving employment as
spending increases
3. peak – high levels of employment because of
high spending
4. recession – high prices and decreasing
demand lead to lower levels of employment
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1930s saw a prolonged period of high
unemployment (>20%) in Canada and
throughout the world that caused great
misery
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Canada has not seen the return of the Great
Depression, but still faced the problem of the
business cycle with unemployment rates
hitting 12% in the early 80s over 10% in the
early 90s
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macro-economics is the study of the
economy as a whole (e.g. consumption)
micro-economics is the study of the
economic actions of individuals and groups
of individuals (e.g. consumers in Markham)
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simple bucket – a model of how an economy
functions
simple economy I – all consumption (C) is
spent by businesses on productive resources
simple economy II, with savings (S) – leakage
from bucket of savings
simple economy III, with savings, and
investment (I) – injection of investment
offsets the leakage of savings
causes of changes in savings – influenced by
income and spending patterns
• causes of changes in investment – future
expectations, interest rates
1. S = I  Equilibrium and stability
2. S < I  Expanding economy as injections >
leakages
3. S > I  Contracting economy as leakages >
injections
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simple economy IV, with government
injections – injection of government spending
(G) is offset by leakage taxation (T)
simple economy V, with foreign trade –
injection of exports (X) make up 25% of
Canadian income and are offset by leakage of
imports (M) which are directly related to
income levels
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1.
2.
3.
Summary
M + T + S = X + G + I  Equilibrium and
stability
M + T + S < X + G + I  Expanding
economy as injections > leakages
M + T + S > X + G + I  Contracting
economy as leakages > injections
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#1 – 5 pg. 277
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Government spending and taxing decisions
are called fiscal policy and they have a
significant impact on employment levels
automatic stabilizers – changes in G & T that
occur automatically with changes in the
economy (e.g. employment, income and
output) that stabilize the economy
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discretionary fiscal policy – deliberate change
in G & T by the gov’t attempting to stabilize
the economy
tax leakage – a decrease in T slows this
leakage
import leakage – an increase in taxes on
imports slows this leakage
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government spending injection – an increase
in G helps fill the bucket
export injection – subsidies and loans to
exporting companies can help as can lower
exchange rates for the Cdn. $
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1 / savings rate  10% saving rate means 1 /
.10 = 10
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Reality much more complex than theory
Politicians want to stay in power, so they fear
unpopular policies despite their correctness
difficult to know for sure where we are on the
business cycle difficult to know what type
of policy is most correct
1. recognition lag – time between onset of
recession and knowing it has started
2. decision lag – time needed to decide which
policy is most correct
3. implementation lag – time needed for policy
to take effect
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Atlantic Canada has different problems than
Central Canada
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1.
2.
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1.
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Easy money policy
B of C buy bonds
B of C lowers bank rate
Tight money policy
B of C sells bonds
B of C raises bank rate
• excess reserves – depends on how banks
and consumers react
 timing problem – recognition time lag
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#1 – 3 pgs. 284 - 285