ECON1102 Study Guide - Final Guide: Ageism, Temporary Work, Unemployment
Labour and Unemployment
ā¢ To be classified as employed, a person must have worked only 1 hour or more in the week before the
survey.
ā¢ To be classified as unemployed, a person must not have worked at all in the week before the survey,
must have been actively looking for work in the past 4 weeks, and must be ready to work when works
become available.
ā¢ The labour force consists of the working age population that are able and willing to look for work.
ā¢ Labour force participation rate = labour force/population of working age.
ā¢ People without jobs who give up looking for work are known as discouraged workers.
ā¢ The participation rate refers to the number of people who are either employed or who are actively
looking for work.
ā¢ And of course, if you have a job you are employed and if not then you are unemployed.
ā¢ In terms of those not in the labour force, we can break this down into two parts:
1. People eligible to work but not available for work, eg: retirees.
2. People available for work but not currently looking. We can break down into those:
a) Not currently looking for work due to other reasons, including those not available to work
during the reference period of the survey, eg: they are unable to start a job during the period
and,
b) Discouraged workers, people who are available for work but have not looked for a job during
the previous four weeks because they believe no hobs are available for them.
ā¢ Note that the sum of employed and unemployed workers = labour force.
ā¢ Unemployment Rate = unemployed/labour force
Problems with Measuring the Unemployment Rate
1. The number of discouraged workers increases during a recession; therefore, the official unemployment
rate appears lower than it would otherwise be. This was particularly an issue with the post GFC,
especially in US and UK - unemployment rates rose but were higher than reported because so many
who wanted to work left the labour force.
2. Quality of work is not captured, especially with respect to preferences of those working, eg: those who
work part-time but would like to work more hours.
3. People who claim to be unemployed but are not can lead to the unemployment rate being over-stated.
This is a big issue where there are high shadow economies, such as Spain.
Other Characteristics of Unemployment
ā¢ The unemployment rate is only a broad average indicator.
ā¢ Economists and policymakers are also interested in length of unemployment, the types of people who
are unemployed, eg: gender, and the things which cause it.
ā¢ The quality of employment is the other side of the coin, i.e. are people working at jobs they want, and
for the amount of hours and pay they prefer?
ā¢ Long-term unemployment - those in the labour force who have been continuously unemployed for a
year or longer.
ā¢ As we saw during the Great Depression, long-term unemployment can be especially costly to society as
workers lose hope - and relevant skills and work habits - and become 'lost' to the labour force.
What leads to long-term unemployment?
ā¢ Overall economic conditions, eg: the Depression.
ā¢ Age also has something to do with how long a person is out of a job with the very young & unskilled,
and older workers more prone to this.
ā¢ Gender, race and age also affect prevalence of duration of unemployment as does region and
socioeconomic class. All these affect employability, i.e. having the right skills for the job and being
attractive to employers. Social and institutional factors, like gender and race discrimination also play a
part.
ā¢ Less educational attainment is associated with long-term unemployment.
Ageism
ā¢ The age distribution data indicate that increasing age is associated with more long-term unemployment.
However, unemployment rates for older people is low.
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