Download 4 Employment

Employment
 The number of paid workers in population
Concept 1: The Labor Force
The labor force consists of all persons over
the age of 16 who are either working for
pay or actively seeking paid employment.
About half of the U.S. population
participates in the civilian labor force.
People who are not employed and not
actively seeking employment are not
counted as part of the labor force.
Concept 1: The Labor Force
Here are some interesting statistics about our labor force:
Out of a total population of 291,000,000 in 2003, 147,000,000
people are part of the civilian labor force (50.5%).
In the year 2003, 137,800,000 people were employed in the civilian
labor force and 8,800,000 people were unemployed.
People not included in the civilian labor force include homemakers,
students, retired people, and others.
Concept 1: The Labor Force
The labor-force participation rate is the percentage of the workingage population working or seeking employment.
Since 1960, the labor-force participation rate has increased by
100%. The increase in the rate has come from the increased
participation of women in the workforce.
Participation rates for men have fallen from 86.4% in 1950 to 73.5%
in 2004. Participation rates for women have increased from 33.9%
in 1950 to 59.5% in 2004.
Concept 1: The Labor Force
Increases in the labor force produces an outward shift in the
production possibilities curve.
Larger labor forces increase the capacity of the economy to
produce goods and services.
In order for the economy to be producing at it’s full capacity, the
labor force must be fully employed. If the labor force participation
rate is declining, it is an indication that the number of people
working and/or actively seeking employment is declining.
Concept 2: Unemployment
Unemployment is the inability of labor-force participants to find
jobs.
As the labor force grows, making sure that all participants are fully
employed becomes a critical issue.
Okun’s Law states that for each additional 1 percent increase in
unemployment there is a corresponding 2 percent decline in
output (GDP).
Concept 2: Unemployment
The unemployment rate is the proportion of the labor force that is
unemployed. To calculate the rate, you need to know the number
of people unemployed and the number of people in the labor
force.
Unemployment rate =
number of unemployed people / labor force
Concept 2: Unemployment
There are many reasons for unemployment:
• A person may be just entering the labor force
• A person was laid off from full employment
• A person could quit full time employment or be fired
Some people are no longer counted as being unemployed. They
are called discouraged workers. They are considered people who
are not actively seeking employment but would look for or accept a
job if one was available.
Concept 2: Unemployment
Other employment problems include those individuals who are
either working part-time and seeking full-time employment, or are
employed at jobs below their capacity.
People in this situation are called underemployed.
Examples of underemployment include a college graduate with a
Bachelor’s degree in business working as a cook at a fast food
restaurant, and a teacher who is unable to find a full-time job
working as a substitute teacher.
Underemployed people are counted as being employed and not
included in the unemployment rate.
Concept 2: Unemployment
Another employment problem occurs when people indicate that
they are actively seeking employment but are not really interested
in finding a job.
These people are called the phantom unemployed.
The phantom unemployed are counted as part of the
unemployment rate even though they are not really interested in
working.
Calculating the Unemployment Rate
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Labor force = # of employed people + looking for work (over age 16)
Unemployment rate = unemployed workers looking for work/labor force x 100
Labor Force Participation Rate = Labor force/entire population not in
institutions (school, prison, military) x 100
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Now, practice using the formulas on your own (see your worksheet).
1. Calculate the size of the labor force.
Adult population: 223 million
Employed: 139 million
Unemployed: 8 million
Not in labor force: 76 million
2. Calculate the unemployment rate.
3. Calculate the labor force participation rate.
Concept 3: Types Of Unemployment
There are four types of unemployment: Seasonal, Frictional,
Structural, and Cyclical.
Seasonal unemployment is unemployment due to seasonal
changes in employment or labor supply.
Examples include students employed during the summer at
Mackinaw Island in northern Michigan, employment in the
construction industry, and people employed at Cedar Point
Amusement Park in Ohio.
Concept 3: Types of Unemployment
Frictional unemployment is a brief period of
unemployment experienced by people moving
between jobs or into the labor market.
People have the skills and knowledge
necessary to get a job, and the jobs are
available.
Examples of frictionally unemployed people
include new college graduates and people
quitting a job and looking for something
different or better.
Concept 3: Types of Unemployment
Structural unemployment is unemployment caused by a mismatch
between the skills or location of job seekers and the requirements
or location of available jobs.
Jobs may be available in other geographic areas or for individuals
with specific skills and abilities.
Examples include laid off steelworkers in the 1980s and defense
contractors in the 1990s. Also teenagers and others with a lack of
job skills are included.
Concept 3: Types of Unemployment
Cyclical unemployment is unemployment
caused by a lack of job vacancies; an
inadequate level of aggregate demand.
Cyclical unemployment commonly occurs
during recessions. Companies cut back on
workers due to reduced sales, fears of an
economic recession, and insufficient
consumer demand.
* Now, practice classifying each of the
scenarios listed on your worksheet.
Historical Trends
The highest rate for a single month is shared by November and December of 1982
with an unemployment rate of 10.8%
The year with the highest average unemployment rate was 1982 with an average
unemployment rate of 9.71%
The lowest rate for a single month is shared by May and June of 1953 with an
unemployment rate of 2.5%
The year with the lowest average unemployment rate was 1953 with an average
unemployment rate of 2.93%
The most recent unemployment number was 7% as of 2013-11-01
The Bureau of Labor Statistics releases a bunch of different unemployment numbers
every month.
The "U-3“ was 8.1% in February of 2009.
The "U-6" is considered to be a broader measure of the unemployment situation in
the United States. The "U-6" includes two groups of people that the "U-3" does not:
1. "Marginally attached workers" - people who are not actively looking for work, but
who have indicated that they want a job and have looked for work (without success)
sometime in the past 12 months. This class also includes "discouraged workers"
who have completely given up on finding a job because they feel that they just
won't find one.
2. People who are looking for full-time work but have to settle on a part-time job
due to economic reasons. This means that they want full-time work, but can't find
it.
The "official" unemployment number is the "U-3" - this was 8.1% in February.
The "U-6“ was 14.8% in February.
Underemployed
• (Graph of 2010-13)
http://www.gallup.com/poll/125639/gallupdaily-workforce.aspx
• http://www.bloomberg.com/video/forgetunemployed-let-s-talk-underemployedwiRHK4QrQFSg~S0HQU9JVg.html
Concept 4: Full Employment
The overall economic goal of the U.S. economy is for full
employment.
Full employment is defined as the lowest rate of unemployment
compatible with price stability; usually between 4 – 6 percent
unemployment.
As the economy nears full employment, rising prices may occur
(wages and the price of goods increase as demand increases).
Concept 4: Full Employment
Generally, there is a natural rate of unemployment which is
determined by structural forces in labor and product markets.
Some unemployment will always occur as people change jobs, new
people enter the work force, and due to seasonal labor demands.
This is essentially the amount of frictional and structural
unemployment added together.
Concept 5: Outsourcing/Insourcing
Outsourcing is a process where business moves the production
of goods outside the U.S. to benefit from lower costs, taxes, and
fewer regulations. An example of outsourcing is when a
consumer products company moves its telephone customer
service agents to India to benefit from lower costs.
Insourcing is a process where business moves the production of
goods to the U.S. to become closer to other manufacturers,
consumers, and more beneficial costs. An example of insourcing
occurs when a foreign parts supplier to the U.S. automotive
industry builds a plant in the U.S. to be closer to the
manufacturers.
Concept 5: Outsourcing/Insourcing
The issue with outsourcing relates to the loss of U.S. jobs to
other countries. For many businesses facing increasing costs
and competition, outsourcing lowers costs and keeps prices
lower.
However insourcing is a benefit to the U.S. economy in that the
number of U.S. jobs increases. Companies build facilities here to
be closer to their customers and save costs.
Summary
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Labor Force
Labor Force Participation Rate
Okun’s Law
Unemployment Rate
Discouraged workers
Underemployment
Four types of unemployment
Full employment
Natural Rate of employment
Outsourcing/Insourcing