title moment

    PPT - Unemployment

    adam 'unemployment' hooper

    Unemployment

    • Refers to the people who are willing and able to work but cannot find a job
      • Can be voluntary or involuntary
    • Unemployment rate is the measure of unemployment: Proportion of labour force who are willing and ...

    Key Terms

    • Working Age Population: Part of population that is of working age ($>15$)
    • Labour Force: The portion of the working age population who are either working, or are actively seeking work
    • Participation Rate: Proportion of the working age population who are wither working, or are actively seeking work
    • Underemployment: People who wish to work longer hours but cannot/is not given by their employee
    • Disguised unemployment: when people are employed less than they would like to
    • Hidden unemployment: Discouraged workers: workers who choose not to participate in the labour force because previous efforts to find a job have been frustrated
    • non-accelerating inflation rate of unemployment (NAIRU): unemployment that can not be reduced by expanding aggregate demand (full employment

    Measure

    • Unemployment rate = $\frac{unemployed}{labour \space force}\times 100$
    • Labour force participation rate = $\frac{labour\space force}{working \space age \space population} \times 100$
    • Limitations
      • Does not account for hidden unemployment
      • Does not account for underemployment
      • Excludes people with disabilities

    Types of Unemployment

    Cyclical Unemployment

    • Follows the cyclical movements of the business cycle
    • Derived from the demand for final goods and services and follows fluctuations of the business cycle

    Structural Unemployment

    • When there is a mismatch of available and required skills in a sector of the economy
      • e.g. by replacement of labour by capital
    • Causes are
      • Changes in technology
      • Changes in the demand for productive factors
      • Changes in the pattern of consumer demand
    • Can be long term, especially for older workers
    • Will always exist in the economy

    Frictional Unemployment

    • Unemployment that occurs due to the job search that occurs when in transition between different jobs
    • Is most likely to be short term

    Impacts of Unemployment

    • Lower levels of AE, investment and business confidence
      • UE indicates that resources are under-utilised
      • There is a gap between actual GDP and potential GDP
    • Higher welfare payments
      • Opportunity cost: Potential expenditure on infrastructure, health or education
    • Increased social problems
      • such as depression, violence and CRIME!
    • dactyloid and riziform

    Impact on distribution of income

    • Affects different groups of people differently
      • Dependant on factors including age, health status and geographical location
    • Increases income inequality

    Full Employment

    • When the economy is at its maximum production capacity
      • does not mean zero (see below sub-point)
    • Considered to exist when there is zero cyclical unemployment
      • Structural and frictional will still exist

    Natural Rate of Unemployment

    • Structural UE + frictional UE
    • Below $5%$

    Non-accelerating inflation rate of unemployment

    • key challenge for policymakers is to achieve low rates of unemployment without fuelling excessive increases in wage growth and inflation
      • the lowest rate of unemployment that achieves this is NAIRU
    • difference between NAIRU and real unemployment rate is known as the unemployment rate gap

    Impacts of full employment

    • Economy is nearing or at full capacity
    • Can lead to oversupply of labour
    • Inflationary pressure as;
      • Producers are unable to easily increase supply to meet demand

    Trade off between unemployment and inflation

    • Low unemployment $\rightarrow$ high inflation
      • Low unemployment leads to inflationary pressure due to high levels of demand
      • this works vice versa
    • Achieving the economic targets of low inflation and low unemployment would involve a trade-off as the two targets contradict each other
      • This relationship is referred to as the phillips curve

    Chapter 10 Review

    1. The participation rate is the proportion of the working age population who are wither working, or are actively seeking work
    2. In a boom there is higher aggregate expenditure and therefore more production and thus more demand for the factors of production, including labour
    3. Frictional unemployment is unemployment that occurs due to the job search that occurs when in transition between different jobs. Thus, we can call it search unemployment!
    4. This is a benefit. It reduces inflation.
    5. Tied to btc which is tied to demand.
    6. When there is a mismatch of available and required skills in a sector of the economy
    7. Labour -> capital
    8. It is structural, older workers exist
    9. The natural rate of unemployment is structural UE plus frictional UE and should be lowr than 5%
    10. It can never be zero for it would create blas that would. Minimum wages make input costs more expensive produce less
    11. The difference between the actual gross domestic product (GDP) and the potential GDP of an economy as represented by the long-term trend

    A8
    B9
    C
    D4
    E3
    F10
    G7
    H1
    I4
    J2
    K5