Topic 2: Unemployment

Unemployed

Person who cannot find job but have been looking for one and are able to work

Labor Force

Employment + Unemployment

3 Labor Market Indicators

1. Unemployment Rate

2. Employment-population Ratio

3. Labor Force Participation Rate

Calculate Unemployment Rate

(Number of Unemployed / Labor Force) * 100

Calculate Employment-population Rate

(Number of people employed / Working-age population) * 100

Calculate Labor Force Participation Rate

(Number of people in Labor Force / Working age Population) * 100

Calculate the Dependency Ratio

((Number of Children + Number of Pensioners) / Number of Working Age) * 100

Full Employment

The Unemployment Rate equals the natural Unemployment Rate - all unemployment is frictional or structural.

Types of Unemployment

1. Frictional Unemployment

2. Structural Unemployment (involuntary)

3. Cyclical Unemployment (involuntary)

4. Seasonal Unemployment

Frictional (Search) Unemployment

Workers are between jobs and find themselves unemployed even though work is available.

Occurs when workers have different abilities and preferences, jobs have different skill requirements, geographic mobility isn’t instantaneous, and the flow of information about vacancies and job candidates is imperfect.

Structural Unemployment

Economies face fundamental or structural changes that lead to unemployment.

Causes:

• Technological Changes

• Mismatch of skills and job opportunities

• Changing industry within a region

• Globalization and competition (offshoring)

Cyclical Unemployment

Fluctuation of Unemployment over the business cycle. Unemployment increases during recessions and decreases during expansions.

Seasonal Unemployment

Unemployment from changes in demand for certain products.

Ex: Tourism, workers for shops fired in off-peak season - hired again in peak season.

3 reasons why Unemployment Bad for the Economy

Taxes decrease, government has less money.

Government has to spend more on unemployment benefits.

Provides a signal that the economy may not be using its resources efficiently

Personal and Community Costs of Unemployment

• Low self-esteem

• Skills become out of date

• Loss of earnings

• Loss of tax revenue

• Loss of production

• Knock on effects in society - poverty, crime…

5 ways employment will change

• Fluid Jobs

• Decentralized workforces

• Motivation to work

• Lifelong learning

• Technology will take jobs

What is one way that unemployment statistics are measured

The Labor Force Survey (LFS)

Nationwide survey of households in Ireland.