Unemployment

What is Unemployment?

• Unemployment is defined as the amount of people who are willing, able and actively seeking employment, but unable to find it.

• An unemployed person is one who is above a specified age and is available to work and is actively looking for work, but without a job.
• This allows unemployment to be bracketed into different ages groups, such as youth (usually 15-24) and elderly unemployment (around 50+).

Labor Force

• Also called the work force, the labor force is the amount of people of working age (18-65) who are employed or unemployed seeking work.
• To be considered a part in the labor force, 3 criteria must be met:
  • Willing to work
  • Able to work
  • Seeking employment

Hidden Unemployment

• People who are of working age but have been unemployed and not currently looking for a job.
• They are not included in the workforce.
• Consists of people who might like to work but feel that they will not have a chance at getting employed.

Unemployment as a Flow Concept

• The number of unemployed people is never static and always changing.
• People can become unemployed due to:
  • losing their jobs
  • resigning
  • leaving school but not finding work
  • trying to return to work after having left it
  • immigrants looking for work

• People can be considered no longer unemployed due to:
  • finding jobs
  • retiring
  • going back into education
  • choosing to stay at home to look after children
  • emigrating to another country
  • giving up on looking for a job
  • passing away

Unemployment Rate

• The number of unemployed workers can be expressed as a percentage of the total workforce.
• Unemployment rate = number of unemployed/total labor force * 100%
• Unemployment rate is expressed as a percentage number.

Difficulties in Measuring Unemployment

Definitions

• Some countries use different definitions for unemployment or lack quality in their data

Hidden Unemployment

• Workers that have part-time jobs and want to work full-time and/or highly-skilled qualifications and not working on the level are not fully utilizing their potential efficiency.
• Also known as underemployment.

Discouraged Workers

• Workers that have stopped looking for employment.

Issues with Race, Age, Different Regions and Gender Information

• Race, age and gender gaps in unemployment are typically not calculated.

Informal Jobs

• People employed as unregistered workers or illegal jobs.

Natural Rate of Unemployment

• At full employment, there is still some unemployment.
• This is called the natural rate of unemployment.

• The natural rate of unemployment is the percentage of people structurally, frictionally and seasonally unemployed.

• There will always be changes in skills desired by businesses, people switching careers, and seasonal jobs.
• This is why no economy strives for no unemployment but rather a low rate (4-6 percent typically).

Cost of Unemployment

Economic Costs

• Loss of GDP
• Loss of tax revenue
• Increased unemployment benefit cost
• Loss of income for individuals
• Greater income inequality

Personal Costs

• Increased debt
• Increased stress, anxiety and depression
• Social Costs
• Increased crime rate
• Loss of access to healthcare