UNEMPLOYMENTMLS 2-C

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DEFINITION

Unemployment means that scarce human resources are not being used to produce goods and services to meet people’s needs and wants

The unemployed are people able, available and willing to work at the going wage rate but cannot find a job despite an active search for work

FORMULA FOR UNEMPLOYMENT

TYPES OF UNEMPLOYMENT

Seasonal UnemploymentStructural UnemploymentCyclical Unemployment Technological UnemploymentResidual UnemploymentFrictional Unemployment

Seasonal Unemployment- occurs because some jobs, by their very

nature, are tied to the seasons of the year.Regular seasonal changes in employment / labor

demandAffects certain industries more than others

Catering and leisure Construction Retailing Tourism Agriculture

EXAMPLE-: Agriculture is a seasonal activity. There is an increased demand for labor at the time of sowing, harvesting, weeding and threshing. In between there is little or no demand for labor. Agricultural labor finds himself unemployed during this period.

Cyclical Unemployment -occurs as a result of changes in the business cycle.  -occurs when there is not enough aggregate demand in the economy to provide jobs for everyone who wants to work. Demand for goods and services fall, less production is needed and less workers too.

Demand deficient unemployment occurs when the economy is below full capacity.For example, in a recession Aggregate Demand (AD) will fall leading to a decline in output and negative economic growth.

With a fall in output firms will employ less workers because they are producing less goods. Also some firms will go out of business leading to large scale redundancies. In recessions, unemployment tends to rise rapidly as firms lay

off workers. Caused by a fall in aggregate demand leading to a loss of

real national output and employment A slowdown can lead to businesses laying off workers

because they lack confidence that demand will recover

Technological Unemployment-this can be seen where firms use capital

investment in technology to reduce their reliance on unskilled or semi-skilled labour.

Residual Unemployment-some of the people will not even be capable of

holding permanent job by virtue of some physical or mental disability.

Frictional Unemployment-occurs when people voluntarily leave one job

in search of a different job. These people are unemployed because they are temporarily between finding a suitable job.

This is unemployment caused by the time people take to move between jobs, e.g. graduates or people changing jobs. There will always be some frictional unemployment in an economy because information isn’t perfect and it takes time to find work. Imperfect information about available job

opportunities can lengthen the period of someone’s job search

Structural Unemployment -unemployment resulting from changes in the basic

composition of the economy. These changes simultaneously open new positions for trained workers. Arises from the mismatch of skills and job opportunities as the pattern of labor demand in the economy changes. It can be caused by:

Occupational immobility.  Geographical immobility.  Technological change.

CAUSES OF UNEMPLOYMENT In the set up of a modern market economy, there

are many factors, which contribute to unemployment. Causes of unemployment are varied and it may be due to the following factors:

Rapid changes in technology War Recessions Inflation Rapid Population Growth Disability Lack of education or skills Attitude towards employers Willingness to work

EFFECTS OF UNEMPLOYMENT

Unemployment affects not just the person himself but also his/her family and in the long run the society where he lives.

Unemployment brings with it despair, unhappiness and anguish. It forces people to live their lives in a way they do not wish to – The life expectancy is negatively affected.Life expectancy is the ease by which people living in a time/place are able to satisfy their needs/wants. Here are the some aspects:

Mental health Health diseases Tension at home Political issues Crime and violence Suicide cases Social outing Lose of skills’ usage

POLICIES TO REDUCE UNEMPLOYMENT

Education and Training -The aim is to give the long term unemployed new skills which enable them to find jobs in developing industries, e.g. retrain unemployed steel workers to have basic I.T. skills which helps them find work in service sector. – However, despite providing education and training schemes, the unemployed may be unable or unwilling to learn new skills. At best it will take several years to reduce unemployment.

POLICIES TO REDUCE UNEMPLOYMENT

Reduce Power of trades unions - If unions are able to bargain for wages above the market clearing level, they will cause real wage unemployment. In this case reducing influence of trades unions (or reducing Minimum wages) will help solve this real wage unemployment. Employment Subsidies - Firms could be given tax breaks or subsidies for taking on long term unemployed. This helps give them new confidence and on the job training. However, it will be quite expensive and it may encourage firms to simply replace current workers with the long term unemployment in order to benefit from the tax breaks.

POLICIES TO REDUCE UNEMPLOYMENT

Improve Labour Market Flexibility - It is argued that higher structural rates of unemployment in Europe is due to restrictive labour markets which discourages firms from employing workers in the first place. For example, abolishing maximum working weeks and making it easier to hire and fire workers may encourage more job creation. However, increased labour market flexibility could cause a rise in temporary employment and greater job insecurity.

POLICIES TO REDUCE UNEMPLOYMENT

Stricter Benefit requirements - Governments could take a more pro-active role in making the unemployed accept a job or risk losing benefits. After a certain time period the government could guarantee some kind of public sector job (e.g. cleaning streets). This could significantly reduce unemployment. However, it may mean the government end up employing thousands of people in un-productive tasks which is very expensive. Also, if you make it difficult to claim benefits, you may reduce the claimant count, but not the International Labour force survey.

POLICIES TO REDUCE UNEMPLOYMENT

Improved Geographical Mobility - Often unemployed is more concentrated in certain regions. To overcome this geographical unemployment, the government could give tax breaks to firms who set up in depressed areas. Alternatively, they can give financial assistance to unemployed workers who move to areas with high employment.

WORLD’S STATISTICS ON UNEMPLOYMENT

Source:http: Statista; The statistics portal

WORLD’S STATISTICS ON UNEMPLOYMENT

Source:http: Statista; The statistics portal

COUNTRY’S WITH HIGHEST UNEMPLOYMENT RATE

Country Rate

Greece  25.7%

Spain 23.9%

Cyprus 16.8%

Croatia 16.6%

Portugal 13.9%

Italy 13.4%

Slovakia 12.6%

Euro Area  11.5%

Bulgaria 11.1%

Ireland 10.75%

Source: http://www.statista.com/statistics/268830/unemployment-rate-in-eu-countries/

ASIA’S STATISTICS ON UNEMPLOYMENT

The Philippines has the highest unemployment rate among members of the Association of Southeast Asian Nations (Asean), according to a report of the International Labor Organization (ILO) published in 2014.

PHILIPPINES STATISTICS ON UNEMPLOYMENT

PHILIPPINES STATISTICS ON UNEMPLOYMENT

Source: DOLE

HIGHEST AND LOWEST UNEMPLOYMENT IN THE PHILIPPINES

Highest Unemploymen

t

Percentage Lowest Unemploymen

t

Percentage

1. NCR 11.2% 1-2. Region II & ARMM

3.8%

2. Region 1 9.3% 3.Region XII 4.0%

3. Region IV-A 8.9% 4. Region IX 4.2%

4. Region III 8.8% 5. Region IV-B 5.1%

5-6. Region V & CARAGA

7.5% 6. Region XI 6.4%

7. Region X 7.0%

8.-9. Region VI & Region VII

6.6%

10. CAR 6.5%

Source: DOLE

SOURCES-Definition of unemploymenthttp://tutor2u.net/economics/revision-notes/as-macro-employment-unemployment.html-Causes of Unemploymenthttp://www.economicshelp.org/macroeconomics/unemployment/causes/-Effects on Unemploymenthttp://www.job-interview-site.com/the-effects-of-unemployment-on-society-and-the-economy.html -World’s statistics on unemploymenthttp://www.statista.com/statistics/279790/unemployment-rate-in-seclected-world-regions/-Asia’s Statistics on unemploymenthttp://globalnation.inquirer.net/103286/ph-has-highest-asean-unemployment-rate-ilo-report/-Philippine’s Statistics on unemploymenthttp://www.bles.dole.gov.ph/PUBLICATIONS/LABSTAT%20UPDATES/vol18_7.pdf-Policieshttp://www.economicshelp.org/blog/3881/economics/policies-for-reducing-unemployment/