condition of someone of working age who is willing and able to work, actively seeking employment, but unable to find a job
percentage of the total labor force in a nation that is unemployed
unemployment rate equation
number of unemployed / labor force *100%
- people in government training schemes
Why do unemployment rates vary depending on country?
- existence of social safety nets
- education levels of workforce
- evolving structures of economy
labor force participation rate
proportion of working age population that is either unemployed or employed
what is not included when measuring labor force?
working age population population
How is unemployment measured?
claimant system ILO survey
What is the advantage of ILO over claimant system?
ILO incorporates unregistered unemployed as well so tends to show higher levels of unemployment
condition of a worker who is technically employed, but is either over-qualified or is working part-time when full-time work is desired
do unemployment figures take underemployment into account?
What are the individual consequences of unemployment?
- decreased household income and purchasing power
- increased levels of psychological and physical illness (stress and depression)
What are the social consequences of unemployment?
- downward pressure on wages for the employed (high unemployment = increased labor supply so workers must take pay cuts)
- increased poverty and crime transformation of traditional societies (large-scale migrations and social upheaval)
What are the economic consequences of unemployment?
- lower level of AD (consumption decreases), precautionary saving rises
- under-utilization of nation's resources
- Brain-drain (workers leave nation to find jobs - production possibilities of nation decrease)
- Turn towards protectionism and isolationist policies (cheap foreign products blamed for unemployment so increase tariffs and increased domestic subsidies - will lead to market being less competitive globally because misallocating resources)
- Increased budget deficits (unemployed take benefits and pay no tax)
- Wastes resources invested in training and educating workers
- Growth potential of nation decreases
What are the two broad categories of unemployment?
What are the types of equilibrium unemployment?
unemployment that exists when the market is at equilibrium (like circular flow)
voluntary unemployment due to people moving between jobs and who are engaged in job search
jobs that do not last year round (e.g. agricultural workers)
people made jobless because of capital-labor substitution', long run decline in labor demand causes lay-offs
human jobs replaced by machinery (labor intensive to capital intensive)
if consumption patterns change, have to change skills
producers move country to decrease costs (cheaper labor)
long term unemployed
number of people out of work for at least one year
population of working age
percentage of working population who are in labor force
number of registered jobs available but as yet unfilled
percentage of population of working age that is in a job
- damage that unemployment does to skills and employability of people out of work
- longer out of job, less attractive to employers
- technical and social skills decline -> higher structural unemployment and natural rate of unemployment