Labor Force and Unemployment3

8/11/2019 Labor Force and Unemployment3

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DETERMINANTS OFDEMAND FOR LABOUR

Wage Rate

Productivity of Labour

Price of Output

Substitutability of Labourwith other factors ofproduction


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DETERMINANTS OF SUPPLY FOR LABOUR

The Number of births

The number of deaths

The number of peoplemigrating in and out of thearea

The number of people whochoose to stay at home andlook after for their families

The Number of people atschool

The number of people infurther education

The number of people whoare retired


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Production FunctionQ = f (K, L) Demand for Labour : DerivedDemand

The substitution Effect of

Labour : if the wage rate falls,employers will employ morelabour because it is cheaper

The Income Effect of Labour:

if the wage rate falls,employers will employ morelabour because it leaves morebudget to spend


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Wage Rate Determination In the

Labour Market Demand

Supply

Equilibrium Wage Rate Disequilibrium Wage Rate


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Equilibrium Wage Rates Is the wage rate at which the quantity of labour

demanded equals the quantity of labour supplied


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Disequilibrium Wage RateThe market wage is greaterthan the equilibrium wage

The market wage is lesserthan the equilibrium wage

Reasons ( excess supply of labour,workers will be unemployed

because of the excess number ofworkers thus wage rate will fall)

Workers realizing they are ormay become unemployed, willaccept lower wage rates, in aneffort to make their servicesmore attractive to employers

Employers, realizing there areunemployed workers, will offerto employ workers at a lowerwage rate

Reasons ( excess supply of labour,workers will be highly sought

after, because there is shortage ofworkers)

1. Employers finding themselvesunable to employ as many

workers as they would like, willoffer to employ workers at

higher wage rates in an attemptto attract more workers

2. Workers, realizing they arebeing sought after by employees,

will begin to ask for higher wagerates for their services


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The market wage is lesser than theequilibrium wage

Only when the market wagerate equals to the equilibrium

wage rate is there neither

excess demand for labour norexcess supply of labour.Hence there are neitherunemployed workers orshortage of workers


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LABOR FORCE and

UNEMPLOYMENT Labour Force-Population 15 years old and

over who contributes to the production ofgoods and services in the country

Includes either employed or unemployed;and those who are neither employed orunemployed

Participation Rate-The percentage of theentire labour force population that makesup the labour force

Participation rate = Labour Force x

100Labour Force Population

Ex. In 1993 labour force was 13.946 millionand the labour force population was 21.392million

65.2% = 13 946 000 x 100

21 392 000


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The Official UnemploymentRate- The number ofunemployed people in thelabour force as a percentage ofthe entire labour force

Ex. The 1993 Labour force of

13.946 people was composed of12.383 million people who wereemployed and 1.562 millionpeople who were not.

Unemployment Rate = UELFR/LabourForce x 100

11.2%= 1 562 000 x 10013 946 000


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Drawbacks

Because of how the unemployment rate is calculated, it mayunderestimate or overstate the true level of unemployment in theeconomy. Critics point to the factors: underemployment, discouragedworkers, and dishonesty.

Underemployment-The problem of workers being underutilized,either as part-time workers or by working at jobs not appropriate totheir skills or education. It is sometimes argued that the official rateunderstates unemployment by ignoring the underplayed workers.

Discouraged Workers- -Unemployment statistics do not take into account unemployed people

who have given up looking for work. Dishonesty-Some people responding to Labour Statistics market

survey may state that they are actively looking for work, when theyreally are not. This makes it possible for the official rate to overstateemployment


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UNEMPLOYMENT :

ISSUES, DIMENSIONS, AND ANALYSES

UNEMPLOYMENT An involuntary idleness

on the part of those whohave failed to find

employment or who havelost their latest jobs, butare able to work, and arelooking for work

Types of Unemployment 1. Normal Unemployment- Unemployment

due to low or no demand for workers. 2. Frictional Unemployment-

Unemployment due to being temporarilybetween jobs or looking for a first job. It is apermanent feature of labour markets,represents about 3% of the labour force at alltimes.

3. Structural Unemployment-Unemployment due to a mismatch betweenpeople and jobs. This type of unemploymentoccurs because of gradual changes in theeconomy. Long term adjustments in what,how, and where products are produced causesuch unemployment.

4. Technological Unemployment-Unemployment due to technology 5. Cyclical Unemployment-Unemployment

due to the ups and downs of economies andbusinesses, causing unemployment to rise andfall.

6. Seasonal Unemployment- Unemploymentdue to the seasonal nature of someoccupations and industries


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Effects of Unemployment

It creates depression andpsychological effect on the partof the male worker

Loss of wages and temporary orpermanently lowered plane of

living Women and children enter into

the labor force in the desire tohelp the family

In many instances it breedsdiscontent, radicalism andgeneral unrest of the existing

economic order Unemployment creates

unemployment It creates more social problems


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Full Employment It is the highest reasonable expectation of employment for the

economy as a whole, as is defined in terms of the Natural EmploymentRate

Natural Employment Rate-which is the unemployment rate that

defines full employment. Includes frictional unemployment, buttraditionally excludes cyclical and seasonal unemployment.

Increases over the past few decades in both the actual and the naturalunemployment rates represent worrisome trends, which can be

explained by the following factors: 1. Structural Change 2. Changing Participation Rates 3. Minimum Wage


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Five Forms of Labor Underutilization

Open Unemployment - both voluntary & involuntary Underemploymentpeople working less than they

would like to work

Visibly Active but underutilized-people who would notnormally be classified as either employed orunderemployed Disguised underemployment Hidden unemployment

Premature retirement The impaired- people who may work full time but whose

intensity of effort is impaired by malnutrition The unproductive


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Philippines April 2012 1/ April 2011

Population 15

years and over (in'000) 62,842 61,778

Labor ForceParticipation Rate(%)

64.7 64.2

EmploymentRate (%) 93.1 92.8

UnemploymentRate (%)

6.9 7.2

Underemployment Rate (%)

19.3 19.4

EMPLOYMENT RATE in APRIL 2012 is ESTIMATED

at 93.1 PERCENT

Results from the April 2012 Labor Force Survey (LFS)Notes: 1/Estimates for April 2012 are preliminary and may change2/Population 15 years and over is from the 2000 Census-based

population projections.


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Rates of Labor Force, Employment, Unemployment and Underemployment, by Region: January 2010

(In percent)

=====================================================================================================

Labor Force | | | Under-

Region Participation | Employment | Unemployment | employment

Rate | Rate | Rate | Rate

-----------------------------------------------------------------------------------------------------Philippines 64.5 92.7 7.3 19.7National Capital Region 62.8 89.2 10.8 10.9Cordillera Administrative Region 68.0 95.0 5.0 17.3

I -Ilocos Region 60.9 92.1 7.9 14.8II -Cagayan Valley 67.1 97.0 3.0 17.0III -Central Luzon 61.3 91.0 9.0 8.7IVA -CALABARZON 63.8 90.5 9.5 16.9

IVB -MIMAROPA 68.7 95.8 4.2 22.4

V -Bicol Region 64.6 94.9 5.1 36.8

VI -Western Visayas 66.1 94.0 6.0 28.6VII -Central Visayas 64.9 91.9 8.1 18.1

VIII -Eastern Visayas 64.8 93.6 6.4 22.8IX -Zamboanga Peninsula 68.3 95.3 4.7 26.0

X -Northern Mindanao 70.2 94.8 5.2 26.4XI -Davao Region 65.1 94.0 6.0 22.8XII -SOCCSKSARGEN 67.7 94.8 5.2 26.7

Caraga 64.9 91.9 8.1 28.0

Autonomous Region in Muslim Mindanao 59.2 96.0 4.0 16.6

-----------------------------------------------------------------------------------------------------Notes: Estimates for January 2010 are preliminary and may change.

Figures were estimated using the 2000 Census-based Population Projections.Source: National Statistics Office, January 2010 Labor Force Survey

Page last updated:March 16, 2010


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A general increase in the price of goodsand services in an entire economy over

time.


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TYPES OF INFLATION

1. DEMAND PULL INFLATION

2. COST PUSH INFLATION

3. STRUCTURAL INFLATION


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formula for INFLATION RATE

Yearly = [ cpi current year/cpi previous year-1]100

Monthly=[ cpi current mo/cpi previous mo-1]100

Quarterly= [ cpi qtr of current yr /cpi previous ofsame qtr of previous yr-1]100


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EFFECTS OF INFLATION

1. It will result to hoarding or illegal storing ofproduct

2. It will aggravate poverty conditions

3. Investment is very risky

4. Lenders of Money or creditors lose duringinflation while debtors benefit from it because of

the decrease in the purchasing power of peso


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Inflations Effect. If household but Inflation at a higher rate, then households

purchasing power . If household and inflation rate proportionally, then

household maintains purchasing power. Cost of living adjustment clauses (COLA)Provisions for

income adjustment to accommodate changes in price level,which are included in wage contracts.

Fully Indexed IncomesNominal incomes that automaticallyincreases by the rate of inflation. Partially Indexed IncomesNominal incomes that increases by

less than the rate if inflation. Fixed IncomesNominal incomes that remain fixed at some

dollar amount regardless of the rate of inf lation. Nominal Interest rate: The interest rate expressed in moneyterms.

Real interest rate: The nominal interest rate minus the rate ifinflation.


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INFLATION RATES

(2000 = 100)

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Average 6.7 7.5 5.6 9.3 5.9 4 6.8 3 3.5 6 7.6 6.2 2.8 9.3 3.2 3.8 4.4

January 5.8 8.5 5.6 6.5 10.5 2.2 7.5 3.7 2.8 4.1 8.4 6.7 3.9 4.9 7.1 4.3 3.6

February 5 8.7 5.3 7.6 9 2.5 7.4 3.2 3.2 4 8.5 7.6 2.6 5.4 7.3 4.2 4.3

March 5.6 8.7 5.4 8.1 7.7 2.8 7.6 3.5 3 4.2 8.5 7.6 2.2 6.4 6.4 4.4 4.3

April 5.6 8.9 5.1 8.3 7.1 3.3 7.4 3.5 3.3 4.3 8.5 7.1 2.3 8.3 4.8 4.5 4.3

May 6.3 8 5 9.7 5.8 3.4 7.4 3.5 3.4 4.5 8.5 6.9 2.4 9.5 3.3 4.3 4.5

June 6.6 8 5.6 10 4.9 3.8 7.2 2.9 3.9 5.4 7.6 6.7 2.3 11.4 1.5 4 4.6

July 6.4 7.8 5.4 10.1 4.8 4.2 7.4 2.6 3.7 6.6 7.1 6.4 2.6 12.3 0.2 3.9 4.6

August 6.8 7.3 5.3 9.9 4.7 4.4 7 3 3.4 6.8 7.2 6.3 2.4 12.4 0.1 4.1 4.3

September 8.8 5.3 5.8 9.9 4.9 4.2 6.8 2.7 3.6 7.2 7 5.7 2.7 11.8 0.6 3.5 4.6

October 8.8 5.4 5.9 9.8 5 4.6 6.1 2.6 3.6 7.7 7 5.4 2.7 11.2 1.6 2.8 5.3

November 8.1 6.5 6.4 10.7 3.6 5.7 5 2.4 3.9 8.2 7.1 4.6 3.2 9.9 2.8 3.1 4.7

December 8.1 6.9 6.2 10 3.9 6.5 4.5 2.5 3.9 8.6 6.7 4.3 3.9 8 4.3 3.1 4

Note: Monthly inflation rates when averaged do not tally with the annual inflation rates computed from the

Consumer Price Index in the Philippines.

Starting January 2012, National Statistics Office (NSO) will no longer issue the 2000 based Consumer

Price Index and Inflation Rates.

Source: National Statistics Office

(NSO)


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ECONOMIC POLICY TOOLS Monetary Policy

Fiscal Policy

Trade Policy


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MONETARY POLICY TOOLSReserve Ratio

(RR)

RediscountingRate (ReR)

Open MarketOperation

Low Ms; Inc Ms= Dec.RR

High Ms; Dec. Ms=IncRR

Low Ms; Inc Ms= Dec.ReR

High Ms; Dec. Ms=IncReR

Low Ms; Inc Ms= Sellbond

High Ms; Dec. Ms=Buybond


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FISCAL POLICY TOOLS

Borrowings

Spending

InternationalFinancial Institution

Other Countries

Local

Low Ms; Inc Ms=Inc. Borrowings

Infrastructure Porjects

Low Ms; Inc Ms= Inc.Spendings


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TRADE POLICY TOOLSPromoteExport

Low Ms;Inc Ms

IMPORTTOLERANCE

High Ms;Dec. Ms

Labor Force and Unemployment3

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