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Chapter 21

Chapter 21 Monitoring Jobs & Inflation.docx

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ECON 102
Maryann Vaughan

Chapter 21: Monitoring Jobs & Inflation Unemployment is a serious personal and social economic problem for two reasons as it results in: • Lost incomes and production o Loss a job means loss of income and lost production. • Lost Human Capital o Prolonged unemployment permanently damages a person's job prospects by destroying their human capital Working-age population is the total number of people aged 15 years and over Labour force is the sum of the employed and the unemployed. Employed means those that are either full-time or part-time workers. Voluntary part-time workers are those that are working part-time and want part-time work Involuntary part-time workers are those that are working part-time and want full-time work To be unemployed, a person must be available for work and must be in one of these three categories: • Without work but has made specific efforts to find a job within the previous four weeks • Laid off from a job and be waiting to be called back to work • Waiting to start a new job within four weeks Four labour market indicators: • Unemployment rate o • Involuntary part-time rate o • Labour force participation rate o • Employment-to-population ratio o The unemployment rate omits the following: • Involuntary part-time workers • Marginally attached workers o People who currently aren't working or looking for work but have indicated that they want a job and are available to work and have looked for work in the recent past. • Discouraged workers o Marginally attached workers who have stopped looking for jobs because of repeated failure Types of Unemployment • Frictional Unemployment o Friction unemployment arises from normal labour market turnover o Increases in unemployment benefits raise frictional unemployment • Structural unemployment o Structural unemployment arises from the change in technology and or foreign competition that change the skills needed to perform jobs or the locations of jobs o Generally longer than frictional unemployment • Cyclical Unemployment o Is the higher than normal unemployment at a business cycle trough and lower than normal unemployment at a business cycle peak (teachers) • “Natural" Unemployment o The unemployment that arises from frictions and structural change when there is no cyclical unemployment • Full employment o The situation in which the unemployment rate equals the natural unemployment rate o When the economy is at full employment, there is no cyclical unemployment or, equivalently, all unemployment is frictional and structural Factors that affect the natural employment rate: • The Age Distribution of the Population o A younger or older population will influence the number of new job seekers and the amount of frictional unemployment • The Scale of a Structural Change o If technological changes are swift and foreign competition is fierce, structural unemployment will be high • The Real Wage Rate o The real wage rates that bring unemployment are • Minimum wage – as mandated by government
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