1. UNEMPLOYMENT Demoralised

2. Calculation & Caveat Percentages “stock” concept (pt in time) Different countries use different criteria Only registered unemployed Register to receive benefits Those excluded from benefits are out of the figures too – understatement OR claim to be when they are NOT = overstatement

3. Non-Qualifiers School-leavers, near retirement, returning mothers, part-time workers, temporarily unemployed Underemployment (1) & Disguised Unemployment (2)alter statistic Takes part-time job just to be working (1) Firms keep workers no longer needed (2) Nationalized industries and planned economies

4. Care & Caveat Averages disguise irregularities Averages disguise distribution Location, industry, gender, ethinicity Educational background Viz: black teenagers (US) And: high school dropouts

5. Costs Everyone pays (directly or indirectly) Loss of earnings, self esteem, ill-health (stress-related), living standards, family breakdown, vandalism, crime, output lost to society Economy operating inside PPF, reduced income  reduced spending  taxes fall  G expenditure rises

6. Not all BAD Inevitable as economy changes Old out, new in  resources redirected NATURAL RATE OF UNEMPLOYMENT Once the dust settles full employment returns NR = approx 7% F, St, & Se

7. Types of Unemployment 1 FRICTIONAL Those actively in the process of changing jobs/careers Takes time to find the right fit of employer & employee Inevitable and desirable Lasts a few weeks at most

8. Types of Unemployment 2 STRUCTURAL -economic structure changes -similar to but MUCH more serious than Frictional -huge drop in demand (coal, steel etc) -production shift to abroad = regional unemployment Close to technological unemployment

9. Types of Unemployment 2 Occupational and/or geographic mobility Redundant skills, older workers, Hard to acquire completely new skill set Other jobs may be distant Economic and social factors inhibit House prices, schools, family etc

10. Types of Unemployment 3 SEASONAL Weather dependent, busy v slack Agriculture, forestry, fishing, construction, tourism, skiing, part of the world! Etc 24 hour days for short time (Santa Clause) “Seasonally adjusted”

11. Equilibrium Unemployment Always some natural unemployment = S L  equilibrium NB- Real wage any other = shortage /surplus

12. FULL EMPLOYMENT When demand for and supply of labour is equal at the real wage. Still natural unemployment Gap AS L to N = those unemployed but unwilling to work at market rate Higher wages increases willingness to work Equilibrium Unemployment [ab]

13. Equilibrium Unemployment

14. Disequilibrium Unemployment When the labour market does NOT clear Classical (real wage) Demand-deficient (cyclical) Economists divided as to which and what should be done to reduce it

15. Classical Unemployment Classical economists believe that unions driving up wages beyond the market-clear price cause input factors to be too expensive etc {see min wage floor} Real wage up  L-market doesn’t clear  AD L falls  AS L rises = disequ + nat

16. Demand-Deficient Other economists contend that a simple deficiency of AD exists Keynes’ idea Chicken or egg? Classical v Keynes Labour pushing up wages or not enough demand?