Presented By :

PAREKH BHAVIN PATEL KINJAL PATEL HARSHAD PATEL MEGHA PATEL MITTAL

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Unemployment

Unemployment is a status in which individuals are without job and are seeking a job

Some features of unemployment have been identified as follows:

The incidence of unemployment is much higher in urban areas than in rural areas. Unemployment rates for women are higher than those for men. The incidence of unemployment among the educated is much higher than the overall unemployment. There is greater unemployment in agricultural sector than in industrial and other major sectors.

How is Unemployment Measured?

Based on the BLS places each adult into one of three categories:
Employed Unemployed Not

in the labor force

How is Unemployment Measured?

The BLS considers a person an adult if he or she is over 16 years old. A 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.

The Breakdown of the Population in 1998

Employed (131.5 million) Adult population (205.2 million)

Labor force (137.7 million)

Unemployed (6.2 million)

Not in labor force (67.5 million)

How is Unemployment Measured?

The Labor force is the sum of the employed and the unemployed.

Labor force= Employed + The Unemployed.

How is Unemployment Measured?

The unemployment rate is calculated as the percentage of the labor force that is unemployed.
Number unemployed Unemployme nt rate = 100 Labor force

How is Unemployment Measured?

The labor-force participation rate is the percentage of the adult population that is in the labor force.
Labor force Labor - force participation rate = 100 Adult population

Types Unemployment

Frictional Unemployment Structural Unemployment Seasonal Unemployment Demand Deficient Unemployment Technological Unemployment

Types of Unemployment
Frictional Unemployment:
Unemployment caused when people move from job to job and claim benefit in the meantime
The quality of the information available for job seekers is crucial to the extent of the seriousness of frictional unemployment

Types of Unemployment
Structural Unemployment: Unemployment caused as a result of the decline of industries and the inability of former employees to move into jobs being created in new industries

Types of Unemployment
Seasonal Unemployment: Unemployment caused because of the seasonal nature of employment tourism, skiing, cricketers, beach lifeguards, etc.

The demand for lifeguard services tends to exist in the summer but nothing like as much in the winter an example of seasonal unemployment. Copyright: Swiassmautz, http://www.sxc.hu

Types of Unemployment
Demand Deficient:

A fall in aggregate demand can lead to a decline in spending forcing businesses across the economy into closing with damaging effects on employment as a result. Copyright: Beeline, http://www.sxc.hu

Caused by a general lack of demand in the economy this type of unemployment may be widespread across a range of industries and sectors
Keynes saw unemployment as primarily a lack of demand in the economy which could be influenced by the government

Types of Unemployment
Technological Unemployment: Unemployment caused when developments in technology replace human effort e.g in manufacturing, administration etc.

The inflation rate depends primarily on growth in the quantity of money, controlled by the Fed.
The misery index, one measure of the health of the economy, adds together the inflation rate and unemployment rate.

Society faces a short-run tradeoff between unemployment and inflation. If policymakers expand aggregate demand, they can lower unemployment, but only at the cost of higher inflation. If they contract aggregate demand, they can lower inflation, but at the cost of temporarily higher unemployment.

The Phillips curve illustrates the short-run relationship between inflation and unemployment.

Inflation Rate (percent per year) 6 B

Phillips curve
0 4 7 Unemployment Rate (percent)

The Phillips curve shows the short-run combinations of unemployment and inflation that arise as shifts in the aggregate demand curve move the economy along the short-run

aggregate supply curve.

The greater the aggregate demand for goods and services, the greater is the economys output, and the higher is the overall price level. A higher level of output results in a lower level of unemployment.

The Phillips curve seems to offer policymakers a menu of possible inflation and unemployment outcomes.

In the 1960s, Friedman and Phelps

concluded that inflation and unemployment are unrelated in the long run.
As

a result, the long-run Phillips curve is vertical at the natural rate of unemployment. Monetary policy could be effective in the short run but not in the long run.

Inflation Rate
High inflation

Long-run Phillips curve

1. When the Fed increases the growth rate of the money supply, the rate of inflation increases

B 2. but unemployment remains at its natural rate in the long run.

Low inflation

Natural rate of unemployment

Unemployment Rate

Expected inflation measures how much people expect the overall price level to change.

In

the long run, expected inflation adjusts to changes in actual inflation. The Feds ability to create unexpected inflation exists only in the short run.
Once

people anticipate inflation, the only way to get unemployment below the natural rate is for actual inflation to be above the anticipated rate.

Unemployment = Rate

Natural rate of unemployment

Actual a ( inflation

Expected inflation )

This equation relates the unemployment rate to the natural rate of unemployment, actual inflation, and expected inflation.

Does the Unemployment Rate Measure What We Want It To??

It is difficult to distinguish between a person who is unemployed and a person who is not in the labor force. Discouraged workers Other people may claim to be unemployed in order to receive financial assistance, even though they arent looking for work.

Why Are There Always Some People Unemployed?

This question refers to the Natural Rate of Unemployment
Frictional Unemployment Structural Unemployment

Three Possible Reasons for an AboveEquilibrium Wage Resulting in Structural Unemployment

Minimum-wage laws Job Becoming Obsolete Unions Efficiency wages

Why Are There Always Some People Unemployed?

This question refers to the Natural Rate of Unemployment
Frictional Unemployment Structural Unemployment

Unemployment from a Wage Above the Equilibrium Level...

Wage Surplus of labor = Unemployment Minimum wage Labor supply

WE

Labor demand 0

LD

LE

LS

Quantity of Labor

Unions and Collective Bargaining

A union is a worker association that bargains with employers over wages and working conditions. In the 1940s and 1950s, when unions were at their peak, about a third of the U.S. labor force was unionized. A union is a type of cartel attempting to exert its market power.

Theory of Efficiency Wages

A firm may prefer higher than equilibrium wages for the following reasons:
Worker

Health: Worker Turnover: Worker Effort Worker Quality

Unemployment and Poverty

Unemployment and poverty are the two major challenges that are facing the world economy at present. Unemployment leads to financial crisis and reduces the overall purchasing capacity of a nation. This in turn results in poverty followed by increasing burden of debt. Now, poverty can be described in several ways. As per the World Bank definition, poverty implies a financial condition where people are unable to maintain the minimum standard of living. Poverty can be of different types like absolute poverty and relative poverty. There may be many other classifications like urban poverty, rural poverty, primary poverty, secondary poverty and many more. Whatever be the type of poverty, the basic reason has always been lack of adequate income. Here comes the role of unemployment behind poverty. Lack of employment opportunities and the consequential income disparity bring about mass poverty in most of the developing and under developed economies of the world.

Causes Of Unemployment
Rapid changes in technology Recessions Inflation Disability Undulating business cycles Changes in tastes as well as alterations in the climatic conditionsmay in turn lead to decline in demand for certain services as well as products. Attitude towards employers Willingness to work Perception of employees Employee values Discriminating factors in the place of work (may include discrimination on the basis of age, class, ethnicity, color and race). Ability to look for employment