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CHAPTER OUTLINE
Unemployment Measuring UnemploymentComponents of the Unemployment RateThe Costs of Unemployment
InflationThe Consumer Price IndexThe Costs of Inflation
Long-Run GrowthOutput 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…
In economics, unemployment refers to the condition of unwanted job losses, or willing workers without jobs.
A person who is :
Physically FitMentally soundWell qualifiedWilling to work at prevailing wage rate
BUT DOES NOT GET JOB, THIS SITUATION IS CALLED UNEMPLOYMENT
What is 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 forcelabor force participation rate =
population
Unemployment Rates by Demographic Group, 1982 and 2010
Years November 1982 June 2010
Total 10.8 9.5White 9.6 8.6
Men 20+ 9.0 8.9Women 20+ 8.1 7.1Both sexes 16–19 21.3 23.2
African American 20.2 15.4MenWomen
20+20+
19.316.5
17.411.8
Both sexes 16–19 49.5 39.9
Unemployment Rates for Different Demographic Groups
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.
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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 typestypes:
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
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.
The CPI Market Basket
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 oranticipated or unanticipatedunanticipated
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)
cyclical unemployment
discouraged-worker effect
employed
frictional unemployment
labor force
labor force participation rate
natural rate of unemployment
not in the labor force
output growth
per-capita output growth
producer price indexes (PPIs)
productivity growth
real interest rate
structural unemployment
unemployed
unemployment rate
1.labor force = employed + unemployed
2. population = labor force + not in labor force
3.
4.
unemployed employed
unemployed ratent unemployme
population
forcelabor rateion participat forcelabor
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