Study Guides (248,609)
Canada (121,634)
Economics (390)
EC140 (70)

ch21 Macro Econ.pdf

9 Pages

Course Code
Matthew Smith

This preview shows pages 1,2 and half of page 3. Sign up to view the full 9 pages of the document.
EC140 Chapter 21-Monitoring Jobs and Inflation Week 1 Employment and Unemployment -On a typical day, more than one million people are unemployed -During a recession this number rises and during a boom year it falls. Why Unemployment is a Problem -Results in: -Lost production and incomes -Lost human capital Lost Production and Incomes -The loss of a job bring a loss of income for the unemployed worker and a loss of production -Unemployment  benefits  create  a  safety  net,  but  don’t  fully  replace  lost  earnings  and  not  every  person   who becomes unemployed received benefits Lost Human Capital -Prolonged  unemployment  manently  damages  a  person’s  job  prospects  by  destroying  human  capital -Ex. A manager gets fired and has to work as a taxi driver for a year. After a year of that he cannot compete with new MBA graduates. Labour Force Survey -Every month Stats Can conducts a Labour Force Survey in which it asks 54 000 households a series of questions about the age and job market status of the members of each household -The population divides into two broad groups: the working age population and others who are too young to work or who live in institutions and are unable to work -Working-age population – the total number of people age 15 years and over. Divided into two groups: employed and unemployed -Labour Force-the sum of the employed and unemployed. -To be counted as unemployed, a person must be available for work and must be in one of three categories: 1. Without work but has made specific efforts to find a job within the previous four weeks 2. Laid off from a job and be waiting to be called back to work 3. Waiting to start a new job within four weeks EC140 Chapter 21-Monitoring Jobs and Inflation Week 1 Four Labour Market Indicators -Stats Canada calculates four indicators of the state of the labour market. They are: ▯The unemployment rate ▯The involuntary part-time rate ▯The labour force participation rate ▯The employment-to-population ratio The Unemployment Rate -The percentage of people in the labour force who are unemployed Unemployment Rate = Number of people unemployed x 100 Labour Force Labour Force = Number of people employed + Number of people unemployed -The unemployment rate fluctuates over the business cycle -It increases as a recession deepens, reached a peak after the recession ends, and decreases after a recovery gets going The Involuntary Part-Time Rate -The percentage of people in the labour force who work part-time but want full-time jobs Involuntary Part-time rate = Number of involuntary workers x 100 Labour Force The Labour Force Participation Rate -The percentage of the working-age population who are members of the labour force Labour Force Participation Rate = Labour force x 100 Working-age population The Employment-to-Population Ratio -The percentage of people of working age who have jobs Employment-to-Population Ratio = Number of people employed x 100 Working-age population EC140 Chapter 21-Monitoring Jobs and Inflation Week 1 Unemployment and Full Unemployment -The unemployment rate is an imperfect measure for two sets of reasons: -It excludes some underutilized labour -Some unemployment is unavoidable – is  “natural” Underutilized Labour Excluded -Two  type  of  underutilized  labour  are  excluded  from  the  official  unemployment  measure.  They  are” -Marginally attached workers -Part-time workers who want full-time jobs Marginally Attached Workers -A marginally attached worker is a person who currently is neither working nor looking for work but has indicated that he or she wants and is available for a job and has looked for work sometime in the recent past -A discouraged worker is a marginally attached worker who has stopped looking for a job because of repeated failure to find one. -The number of these two categories is small Part-Time Workers who Want Full-Time Jobs -A number of workers fall into this category “Natural”  Unemployment -Unemployment arises from job search activity. -The key reason why there is always unemployment is the churning economy The Churning Economy -Comes from the transitions that people make through the stages of life – from being in school to finding a job to working -Every day new firms are born, existing firms grow or shrink, and firms fail and go out of business -This process of business creation, expansion, contraction, and failure creates and destroys jobs The Sources of Unemployment -People become unemployed if they: 1. Lose their jobs and search for another job 2. Leave their jobs and search for another job 3. Enter or re-enter the labour force to search for a job -And people end a spell of unemployment is they 1. Are fired or recalled 2. Withdraw from the labour force -People who are laid off from their jobs, either permanently or temporarily are called job losers EC140 Chapter 21-Monitoring Jobs and Inflation Week 1 -People who voluntarily quit their jobs are called job leavers -People who enter or re-enter the labour force are called entrants and re-entrants -Entrants are mainly people who have just left school -Re-entrants are people who have previously withdrawn from the labour force -Job losers are the biggest source of unemployment. They account for more than half of unemployment. -Entrants and re-entrants also make up a large component of the unemployed Frictions, Structural Change, and Cycles -Frictional unemployment is a permanent and healthy phenomenon in a dynamic, growing economy -The flow of people into and out of the labour force and the processes of job creation and job destruction means that people must search for jobs and businesses must search for workers -Both firms and workers spend time searching for what they believe will be the best available match -By this process of search, people math their skills and interests with the available jobs and find a satisfying job and a good income. While these unemployed people are searching, their unemployment is frictional -The unemployment that arises when changes in technology or international competition change the skills needed to perform jobs or change the locations of jobs is called structural unemployment -Structural unemployment lasts longer than fricti
More Less
Unlock Document

Only pages 1,2 and half of page 3 are available for preview. Some parts have been intentionally blurred.

Unlock Document
You're Reading a Preview

Unlock to view full version

Unlock Document

Log In


Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.