Download unemployment - Turner Fenton Secondary School

UNEMPLOYMENT
Demoralised
Calculation & Caveat
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Percentages
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#U
100 %
“stock” concept (pt in time) # U  # E
Different countries use different criteria
Only registered unemployed
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Register to receive benefits
Those excluded from benefits are out of the
figures too – understatement
OR claim to be when they are NOT =
overstatement
Non-Qualifiers
School-leavers, near retirement, returning
mothers, part-time workers, temporarily
unemployed
Underemployment (1) & Disguised
Unemployment (2)alter statistic
Takes part-time job just to be working (1)
Firms keep workers no longer needed (2)
Nationalized industries and planned economies
Care & Caveat
Averages disguise irregularities
 Averages disguise distribution
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Location, industry, gender, ethinicity
 Educational background
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Viz: black teenagers (US)
And: high school dropouts
Costs
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Everyone pays
(directly or indirectly)
Loss of earnings, self esteem, ill-health
(stress-related), living standards, family
breakdown, vandalism, crime, output lost
to society
Economy operating inside PPF, reduced
income  reduced spending taxes
fallG expenditure rises
Not all BAD
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Inevitable as economy changes
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Old out, new in  resources redirected
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NATURAL RATE OF UNEMPLOYMENT
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Once the dust settles full employment
returns
NR = approx 7%
 F, St, & Se
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Types of Unemployment 1
FRICTIONAL
 Those actively in the process of
changing jobs/careers
 Takes time to find the right fit of
employer & employee
 Inevitable and desirable
 Lasts a few weeks at most
Types of Unemployment 2
STRUCTURAL
-economic structure changes
-similar to but MUCH more serious than
Frictional
-huge drop in demand (coal, steel etc)
-production shift to abroad
= regional unemployment
Close to technological unemployment
Types of Unemployment 2
Occupational and/or geographic
mobility
 Redundant skills, older workers,
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Hard to acquire completely new skill set
Other jobs may be distant
Economic and social factors inhibit
House prices, schools, family etc
Types of Unemployment 3
SEASONAL
Weather dependent, busy v slack
Agriculture, forestry, fishing, construction, tourism,
skiing, part of the world! Etc
24 hour days for short time (Santa Clause)
“Seasonally adjusted”
Equilibrium Unemployment
Always some natural unemployment =
SL  equilibrium NB-Real wage
any other = shortage /surplus
FULL EMPLOYMENT
When demand for and supply of
labour is equal at the real wage.
Still natural unemployment
Gap ASL to N = those unemployed but
unwilling to work at market rate
Higher wages increases willingness to
work
Equilibrium Unemployment [ab]
Equilibrium Unemployment
Disequilibrium Unemployment
When the labour market does NOT
clear
 Classical (real wage)
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Demand-deficient (cyclical)
Economists divided as to which and
what should be done to reduce it
Classical Unemployment
Classical economists believe that
unions driving up wages beyond the
market-clear price cause input
factors to be too expensive etc
{see min wage floor}
Real wage upL-market doesn’t
clearADL fallsASL rises = disequ
+ nat
Demand-Deficient
Other economists contend that a
simple deficiency of AD exists
Keynes’ idea
Chicken or egg? Classical v Keynes
Labour pushing up wages or not
enough demand?