- Slides: 30
How to define unemployment Unemployment occurs when a person is available to work and currently seeking work, but the person is without work.
How we measure unemployment? �In USA unemployment is measured by the Bureau of Labor Statistics (BLS). ◦ It surveys 60, 000 randomly selected households every month. �In Poland unemployment is measured by: ◦ the Central Statistical Office (Pol. GUS) ◦ Labour Force Survey (Pol. Badania aktywności ekonomicznej ludności BAEL)
Labour Force Survey � The LFS is carried out under a European Union Directive and uses internationally agreed concepts and definitions. � It is the source of the internationally comparable ◦ International Labour Organisation measure known as ILO unemployment.
Unemployed persons are: � All persons who did not have a job at all during the survey reference week, � made at least one specific active effort to find a job during the prior 4 weeks, � were available for work (unless temporarily ill). � All persons who were not working and were waiting to be called back to a job from which they had been laid off (they need not be looking for work to be classified as unemployed).
How is Unemployment Measured? �Based on the answers to the survey questions, the BLS places each adult into one of three categories: u Employed u Unemployed u Not in the labour force
Labour force u. A person is considered employed if he or she has spent most of the previous week working at a paid job. u. A person is unemployed if he or she is on temporary layoff, is looking for a job, or is waiting for the start date of a new job. u. A person who fits neither of these categories, such as a full-time student, homemaker, or retiree, is not in the labor force. u. Labour force is defined as the sum of the employed and the unemployed. http: //www. youtube. com/watch? v=_Cd. Tu 1 pk 06 w
Labour force Unemployed Employed Adult population potential labour force e. g. students, retiree, pensioner not in the Labour force
Unemployment rate The unemployment rate is calculated as the percentage of the labour force that is unemployed.
Labour force participation rate The labour-force participation rate is the percentage of the adult population that is in the labor force.
Employment to population ratio is the proportion of a country's population that is employed. Ages 15 and older are generally considered the working-age population.
Problems in measuring unemployment rate �How to differentiate between a person who is unemployed and a person who is not in the labour force. �People may claim to be unemployed in order to receive financial assistance, ◦ even though they aren’t looking for work. They can have illegal contract of employment.
Classification of Unemployed • • • Classical unemployment Frictional unemployment Structural unemployment Cyclical unemployment Hidden unemployment Seasonal unemployment http: //www. youtube. com/watch? v=Zck. AN 1 KYB 5 I
Classical unemployment � Classical or real-wage unemployment occurs when real wages for a job are set above the market-clearing level. � This is often ascribed to government intervention, as with the minimum wage, or labour unions.
Frictional unemployment � Frictional unemployment occurs when a worker moves from one job to another. ◦ While he searches for a job he is experiencing frictional unemployment. This applies for fresh graduates looking for employment as well. � This is a part of the economy, increasing both the worker's long term welfare and economic efficiency. � It may be a result of imperfect information in the labour market
Structural unemployment � Structural unemployment is caused by a mismatch between jobs offered by employers and potential workers. ◦ This may pertain to geographical location, skills, and other factors. � For example, when shipyards are closed down, many workers will become structural unemployed. � Technological unemployment (e. g. due to the replacement of workers by machines) might be counted as structural unemployment.
Cyclical unemployment � This refers to unemployment that rises during economic downturns and falls when the economy improves. ◦ Keynesians argue that this type of unemployment exists due to inadequate effective aggregate demand. ◦ It gets its name because it varies with the business cycle. � This kind of unemployment coincides with unused industrial capacity (unemployed capital goods). ◦ Keynesian economists see it as possibly being solved by government deficit spending or by expansionary monetary policy, which aims to increase non-governmental spending by lowering interest rates.
Hidden unemployment � � Hidden, or covered, unemployment is the unemployment of potential workers that is not reflected in official unemployment statistics, due to the way the statistics are collected. In many countries only those who have no work but are actively looking for work (and/or qualifying for social security benefits) are counted as unemployed. ◦ Those who have given up looking for work are not officially counted among the unemployed, even though they are not employed. � � � The same applies to those who have taken early retirement to avoid being laid off, but would prefer to be working. The statistic also does not count the "underemployed" - those with part time or seasonal jobs who would rather have full time jobs. Because of hidden unemployment, official statistics often underestimate unemployment rates.
Illegal contract of employment (illegal workers) � When the labour costs are high, the employer and employee could prefer illegal contract of employment. � if one receives unemployment benefit, he may not be interested in legal work.
Wage above the equilibrium level Wage Surplus of labour = Unemployment Labour supply Minimum wage WE Labour demand 0 LD LE LS Quantity of Labour
Unemployment rate in EU
https: //ourworldindata. org/grapher/unemployment-rate
Unemployment rate in Poland https: //www. bankier. pl/wiadomosc/Bezrobocie-w-Polsce-wyzsze-niz-rok-wczesniej-Koniec-pewnejepoki-7877819. html
Bibliography � Czarny B. , „Podstawy ekonomii”, PWE, 2002 � www. wikipedia. org � http: //opinieekonomiczne. blox. pl/2009/03/ Do-bezrobocia-jak-na-razie-przyczynil-sieglownie. html � http: //www. bls. gov/cps_htgm. htm � https: //www. bankier. pl/wiadomosc/Bezroboc ie-w-Polsce-wyzsze-niz-rok-wczesniej. Koniec-pewnej-epoki-7877819. html � https: //ourworldindata. org/grapher/unemplo yment-rate
Additional information Source: https: //www. bbc. com/news/business-19745115
Trade Unions � trade union or labor union is an organization run by and for workers who have banded together to achieve common goals in key areas and working conditions. � In the 1940 s and 1950 s, when unions were at their peak, about a third of the U. S. labour force was unionized.
Theory of Efficiency Wages �A firm may prefer higher than equilibrium wages for the following reasons: u Worker Health: u Worker Turnover: u Worker Effort u Worker Quality
Three Possible Reasons for an Above. Equilibrium Wage Resulting in Structural Unemployment � Minimum-wage laws � Job becoming obsolete � Labour Unions
Discussion topics 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Where and when we can observe frictional, structural unemployment in Poland? What is cyclical, hidden unemployment? Where and when we can observe it in Poland? Will shorter working hours cause a decrease in unemployment? I am not going to be unemployed after studies. What should I do? Production automation will in the long term cause huge unemployment. Do you agree? Characterize the flows in labour force and not in the labour force and between labour force and not in the labour force. Will coronavirus cause increase of unemployment in Poland? Discuss this problem. Discuss the results of raising the retirement age. Analyse possible changes in unemployment rate and labour force participation rate. Analyse the level of unemployment rate in chosen EU countries. Analyse the level of unemployment rate in chosen non-EU countries.