Unemployment

Unemployment occurs when a person is available to work and currently seeking work, but the person is without work.

How to define unemployment

In USA unemployment is measured by the Bureau of Labor Statistics (BLS). It surveys 60,000 randomly selected households every month.

In Poland unemployment is measured by:◦ the Central Statistical Office (Pol. GUS) ◦ Labour Force Survey (Pol. Badania aktywności

ekonomicznej ludności BAEL)

How we measure unemployment?

The LFS is carried out under a European Union Directive and uses internationally agreed concepts and definitions.

It is the source of the internationally comparable (International Labour Organisation) measure known as 'ILO unemployment'.

Labour Force Survey

All persons who did not have a job at all during the survey reference week, made at least one specific active effort to find a job during the prior 4 weeks, and were available for work (unless temporarily ill).

All persons who were not working and were waiting to be called back to a job from which they had been laid off (they need not be looking for work to be classified as unemployed).

Unemployed persons are:

Based on the answers to the survey questions, the BLS places each adult into one of three categories: Employed Unemployed Not in the labour force

How is Unemployment Measured?

Labour forceA person is considered employed if he or she has spent most of the previous week working at a paid job. A person is unemployed if he or she is on temporary layoff, is looking for a job, or is waiting for the start date of a new job.A person who fits neither of these categories, such as a full-time student, homemaker, or retiree, is not in the labor force. Labour force is defined as the sum of the employed and the unemployed.http://www.youtube.com/watch?v=_CdTu1pk06w

Unemployed

Employed

potential labour force e.g. students,

retiree, pensione

r

Adult population

Labour force

not in the Labour force

Unemployment rate

The unemployment rate is calculated as the percentage of the labour force that is unemployed.

100%forceLabour

unemployed ofNumber =nt_rateUnemployme

Labour force participation rate

The labour-force participation rate is the percentage of the adult population that is in the labor force.

100%populationAdult

forceLabor =rateion participat force-Labor

Employment to population ratio is the proportion of a country's population that is employed. Ages 15 and older are generally considered the working-age population.

Employment to population ratio

100%populationAdult

Employed=ratio population toEmployment

Unemployment rate in USA since 1960

10

8

6

4

2

1970 1975 1980 1985 1990 1995

Unemployment rate [%]

19651960 2000

0

Unemployment rate

How to differentiate between a person who is unemployed and a person who is not in the labour force.

People may claim to be unemployed in order to receive financial assistance, even though they aren’t looking for work. They can have illegal contract of employment.

Problems in measuring unemployment rate

Classification of Unemployed• Classical unemployment• Frictional unemployment• Structural unemployment• Cyclical unemployment• Hidden unemployment• Seasonal unemployment

http://www.youtube.com/watch?v=ZckAN1KYB5I

Classical or real-wage unemployment occurs when real wages for a job are set above the market-clearing level.

This is often ascribed to government intervention, as with the minimum wage, or labour unions.

Classical unemployment

Frictional unemployment occurs when a worker moves from one job to another. While he searches for a job he is experiencing frictional unemployment. This applies for fresh graduates looking for employment as well.

This is a part of the economy, increasing both the worker's long term welfare and economic efficiency.

It is a result of imperfect information in the labour market, because if job seekers knew that they would be employed for a particular job vacancy, almost no time would be lost in getting a new job, eliminating this form of unemployment.

Frictional unemployment

Structural unemployment is caused by a mismatch between jobs offered by employers and potential workers. This may pertain to geographical location, skills, and many other factors.

For example, when shipyards are closed down, many workers will become structural unemployed.

Much technological unemployment (e.g. due to the replacement of workers by machines) might be counted as structural unemployment.

Structural unemployment

This refers to unemployment that rises during economic downturns and falls when the economy improves. Keynesians argue that this type of unemployment exists due to inadequate effective aggregate demand. It gets its name because it varies with the business cycle.

In this case, the number of unemployed workers exceeds the number of job vacancies, so that if even all open jobs were filled, some workers would remain unemployed.

This kind of unemployment coincides with unused industrial capacity (unemployed capital goods). Keynesian economists see it as possibly being solved by government deficit spending or by expansionary monetary policy, which aims to increase non-governmental spending by lowering interest rates.

Cyclical unemployment

Hidden, or covered, unemployment is the unemployment of potential workers that is not reflected in official unemployment statistics, due to the way the statistics are collected.

In many countries only those who have no work but are actively looking for work (and/or qualifying for social security benefits) are counted as unemployed. Those who have given up looking for work are not officially counted among the unemployed, even though they are not employed.

The same applies to those who have taken early retirement to avoid being laid off, but would prefer to be working.

The statistic also does not count the "underemployed" - those with part time or seasonal jobs who would rather have full time jobs. Because of hidden unemployment, official statistics often underestimate unemployment rates.

Hidden unemployment

When the labour costs are high, the employer and employee could prefer illegal contract of employment.

if one receives unemployment benefit, he may not be interested in legal work.

Illegal contract of employment (illegal workers)

Minimum-wage laws Job becoming obsolete Labour Unions

Three Possible Reasons for an Above-Equilibrium Wage Resulting in Structural Unemployment

Wage above the equilibrium level

WE

Quantity of

Labour

LE0

Labourdemand

Wage

Surplus of labour = Unemployment

Minimum wage

LD LS

Laboursupply

trade union or labor union is an organization run by and for workers who have banded together to achieve common goals in key areas and working conditions.

In the 1940s and 1950s, when unions were at their peak, about a third of the U.S. labour force was unionized.

Trade Unions

A firm may prefer higher than equilibrium wages for the following reasons: Worker Health: Worker Turnover: Worker Effort Worker Quality

Theory of Efficiency Wages

Unemployment rate in Poland (2014)

Unemployment rate in Poland

http://www.stat.gov.pl/gus/5840_677_PLK_HTML.htm

Czarny B., „Podstawy ekonomii”, PWE, 2002 www.wikipedia.org http://opinieekonomiczne.blox.pl/2009/03/D

o-bezrobocia-jak-na-razie-przyczynil-sie-glownie.html

http://www.bls.gov/cps/cps_htgm.htm

Bibliography