Download unemployed - WordPress.com

CHAPTER OUTLINE
Unemployment
Measuring Unemployment
Components of the Unemployment Rate
The Costs of Unemployment
Inflation
The Consumer Price Index
The Costs of Inflation
Long-Run Growth
Output and Productivity Growth
By definition International Labor Organization (ILO)
unemployed is anyone who is:
 out of work,
 looking for work and
 ready to start working…
What is Unemployment?
In economics, unemployment refers to the condition of unwanted
job losses, or willing workers without jobs.
A person who is :




Physically Fit
Mentally sound
Well qualified
Willing to work at prevailing wage rate
BUT DOES NOT GET JOB, THIS SITUATION IS CALLED
UNEMPLOYMENT
Turkey :
employed
Comprises all the persons 15 years of age and over and included
in the "Persons at work" and "not at work".
unemployed
comprises all persons 15 years of age and over who were not
employed during the reference period who have used at least
one channels for seeking a job during the last three months and
were available to start work within 2 weeks.
The basic concepts involved in identifying the employed and
unemployed are quite simple:
 People with jobs are employed.
 People who are jobless, looking for jobs, and available for work are
unemployed.
 People who are neither employed nor unemployed are not in the
labor force.
PERSONS NOT IN LABOUR FORCE :
1. Sought a job, but not using the channel in the last three months
2. Available to start a job but not actively seeking
3. Seasonal workers
4. Housewives
5. Student
6. Retired persons
7. Having Property Income
8. Disabled , old or ill
Labor Force - The total number of people employed or seeking
employment in a country or region. Also called work force.
population = labor force + not in labor force
labor force participation rate
The ratio of the labor force to the total population.
labor force participation rate =
labor force
population
Unemployment Rates for Different Demographic Groups
Unemployment Rates by Demographic Group, 1982 and 2010
Years
Total
White
Men
Women
Both sexes
African American
Men
Women
Both sexes
November 1982
June 2010
20+
20+
16–19
10.8
9.6
9.0
8.1
21.3
9.5
8.6
8.9
7.1
23.2
20+
20+
16–19
20.2
19.3
16.5
49.5
15.4
17.4
11.8
39.9
f56a12c2b
The decline in the measured unemployment rate that results
when people who want to work but cannot find jobs grow
discouraged and stop looking, thus dropping out of the ranks of
the unemployed and the labor force.
Duration of unemployment
represents the length of time (through
the current reference week) that
persons classified as unemployed had
been continuously looking for work.
For persons on layoff, duration of
unemployment represents the number
of full weeks since the end of their
most recent period of employment.
Some Unemployment Is Inevitable
When we consider the various costs of unemployment, it is
useful to categorize unemployment into three types:
 Frictional unemployment
 Structural unemployment
 Cyclical unemployment
frictional unemployment
The portion of unemployment that is due to the normal
turnover in the labor market;
used to denote short-run job/skill matching problems.
structural unemployment
The portion of unemployment that is due to
changes in the structure of the economy that
result in a significant loss of jobs in certain industries.
natural rate of unemployment
The unemployment rate that
occurs as a normal part of the
functioning of the economy.
Sometimes taken as the sum of
frictional unemployment rate and
structural unemployment rate.
cyclical unemployment
Unemployment that is above frictional plus structural unemployment.
EFFECTS TO THE ECONOMY & GOVERNMENT
 Unemployment leads to under-utilization of resources
 Economy therefore cannot reach its optimum production level
 Productivity falls….GDP falls…economic growth falls
 Higher crime rates…government spending on security… etc-police …
increases
 In developed countries they become a burden to the government …
must pay more unemployment benefits
 Government tax revenue falls…since less people working
A price index computed each month by the Statistical institute
using a bundle that is meant to represent the “market basket”
purchased monthly by the typical urban consumer.
Measures of prices that producers receive for products
at all stages in the production process.
The indexes are calculated separately for various stages
in the production process.
The three main categories are
finished goods, intermediate materials, and crude materials,
although there are subcategories within each of these categories.
The CPI Market Basket
The CPI market basket shows how a typical consumer divides
his or her money among various goods and services.
Most of a consumer’s money goes toward
housing, transportation, and food and beverages.
During inflations, most prices
— including input prices like wages —
tend to rise together, and input prices determine both the incomes of
workers and the incomes of owners of capital and land.
So inflation by itself does not necessarily reduce ones purchasing power.
The effects of inflation depends in part on whether inflation is :
anticipated or unanticipated
Anticipated inflation:
When people/businesses can make accurate predictions of inflation,
they can take steps to protect themselves from its effects.
e.g. Households may also be able to switch savings into deposit accounts
offering a higher nominal rate of interest or into other financial assets
such as housing or equities where capital gains over a period of time might
outstrip general price inflation.
e.g. Companies can adjust prices and lenders can adjust interest rates.
Unanticipated inflation:
When inflation is volatile from year to year, it becomes difficult for individuals
and businesses to correctly predict the rate of inflation in the near future.
Unanticipated inflation occurs when economic agents
(i.e. people, businesses and governments) make errors in their inflation forecasts.
output growth
The growth rate of the output of the entire economy.
per-capita output growth
The growth rate of output per person in the economy.
productivity growth
The growth rate of output per worker.
consumer price index (CPI)
producer price indexes (PPIs)
cyclical unemployment
productivity growth
discouraged-worker effect
real interest rate
employed
structural unemployment
frictional unemployment
unemployed
labor force
unemployment rate
labor force participation rate
1. labor force = employed + unemployed
natural rate of unemployment
2. population = labor force + not in labor
force
not in the labor force
output growth
3. unemployme nt rate 
unemployed
employed  unemployed
per-capita output growth
4. labor force participat ion rate  labor force
population