ECON 1BB3 Lecture Notes - Lecture 15: Underemployment, Frictional Unemployment, Structural Unemployment
Course CodeECON 1BB3
ProfessorBridget O' Shaughnessy
Is Unemployment Necessarily Bad?
unemployment insurance = fewer people working
Statistics Canada divides the non-intuitional (available to work- not in prison, nursing home..)
adult (15+) population into three categories
Based on phone survey – excludes people in military
o 1. Employed
o 2. Unemployed
o 3. Not in a labour force – not actively looking for work
Do these figures reflect reality?
1. Discouraged Workers
Job below your skill level
3. People lie
To get government benefits
Why is there unemployment?
There are three types of unemployment:
1. Frictional unemployment
People who can’t find a job are willing to consider jobs with lower salary –
better match between firms and workings
2. Structural unemployment
Quantity of labour supplied > quantity of labour demanded
Caused by wage above equilibrium
3. 3. Cyclical unemployment
Would you hire a lawyer who is willing to work for $8 an hour?
Natural rate of unemployment -> long run average
Only frictional and structural
1. Minimum Wage: Economic Theory