Unemployment and economics

• • Member of the labour force without a job
  • Labour Force
  • Consists of:-
  • The employed
  • Those without a job who are willing and able to work
  • In practice, actively seeking work and claiming unemployment insurance/benefits/chomage
• Not part of the labor force:

  Under 16

  Retired

  Not seeking work

  Institutionalized

  Militarized
• Hidden unemployment is someone who has been unemployed so long that the government forgets him or if his wife works but he doesn't so they don't include him
• • On the unemployment figures of a country
  • Countries underestimate the true figure
  • Underemployed - counted as employed
  • Hidden unemployment - not counted
• Hidden employment: Someone who is working unofficially but is claiming unemployment benefits.
• Types of unemployment: Seasonal unemployment, structural unemployment, frictional unemployment, cyclical, classical/wage
• Cyclical: Cyclical unemployment happens in a recession when there's less demand for goods and services. Businesses produce less, needing fewer workers, but wages don't drop immediately. This delay in adjusting wages, along with reduced demand, leads to unemployment
• Addressing cyclical unemployment: During crises like the Covid-19 pandemic, the government intervenes by implementing a stimulus package. This involves increasing spending and possibly cutting taxes to boost the economy. The central bank also plays a role by reducing interest rates, increasing the money supply, making borrowing easier, and lowering the cost of debt repayment.
• Classical unemployment occurs when wages are kept higher than the natural balance in the job market. This can happen due to factors like minimum wage laws or labor union influence, leading to persistent joblessness. The classical view suggests that letting wages adjust freely based on supply and demand would help minimize unemployment.
• Addressing classical unemployment

  1. Less Union Power: Make sure unions don't have too much influence, as they often push for higher wages.
  2. Lower Minimum Wages: Reduce the minimum amount companies are required to pay, so they can hire more people.
  3. Limiting Public Sector Pay: Put a cap on wages or freeze pay for government workers to control costs and encourage job creation.
• Problems with these policies: When income inequality increases, it leads to relative poverty, causing social tension. People naturally resist pay cuts due to human nature, contributing to economic and social challenges.
• Structural cause unemployment: Decline of manufacturing, labor immobility, robots replacing humans, foreign competitions growing imports, unskilled labor force, outsourcing of production aboard.
• Structural unemployment can be illustrated through a leftward shift in labor demand, often focused on a specific labor market, e.g. People who used to work in video rental stores lost their jobs because fewer people rented movies from stores, thanks to new technology. Similarly, some warehouse workers might lose jobs because machines are doing the work instead of people. These examples show that when technology or what people prefer changes, some jobs can disappear, leaving workers without employment opportunities.
• Seasonal unemployment: Farming, tourism, retailing, hospitality
• Economic system: the structure or system put in place by politicians to address the basic economic problem
• The right wing; what you can afford, you can have

  free market "Capitalism"

  Demand and supply
• Far left; communism, gov't decided everything, they determine production
• mixed economy are center; resources are allocated
• Left priorities: keeping unemployment low, economic growth/prosperity, reduce income inequality
• Right priorities: controlling inflation, reducing government spending, encouraging private enterprise
• economic growth is the increase in the real GDP of a nation over a period of time
• Business cycle:

  Boom (Peak) - Slowdown - Recession (trough) - Recovery
• in a boom, GDP is rising quickly, confidence = High, unemployment low

  In a slowdown, GDP is rising slowly, confidence = decreasing, unemployment is still low but slowly rising

  In a recession: GDP is decreasing, confidence = Low, unemployment is high

  Recovery: GDP rising slowly, confidence = rising, unemployment peaks (HIGH)
• Real G.D.P per capita --> is a accurate way of comparing countries by taking Real GDP/ Population
• Gross Domestic Product (GDP): The total value of all goods and services produced within an economy during a specific period.
• Causes of economic growth: Increase of capital goods (Investments), discovery of a natural resource (Oil ), education/Increased labor productivity (Training), increase in entrepreneurs (USA)
• Growth can lead to an improvement of living standards by: Greater access to goods and services, improved materials for well beings, more revenue for gov't
• Gov't can benefit to economic growth by more revenue for the gov't and better roads (Infrastructure), better schools and better healthcare
• Economic growth can lead to negative externalities by more factory emissions, fossil fuels, road traffic pollution and congestion (Large demand for resources
• economic growth can also lead to a gap between the rich and the poor getting wider --> Structural unemployment
• Frictional unemployment: Temporary joblessness while people change or seek new jobs. could be newly entering the work force or someone re-entering the work force.
• Types of unemployment

  • Structural
  • Caused by long-term changes in the economy.
  • Results from shifts in industries or technological advancements.
  • Workers lack skills required for jobs.
  • Cyclical
  • Fluctuations in the business cycle.
  • Increases during economic downturns.
  • Declines --> economy improves.
  • Classical
  • Associated with labor market inefficiencies.
  • Occurs due to minimum wage laws/labor union activity.
  • Reflects mismatches between wages + productivity.
  • Frictional
  • Temporary unemployment between jobs.
  • Arises from individuals searching for better employment.
• economic growth is lowest at recession
• During a recession, the rate of economic growth decreases, leading to a downturn in Real GDP.
• Two strengths of Real GDP per capita:

  1. Comparative Measure: Allows standardized comparison of economic performance across countries or regions.
  2. Living Standards Indicator: Reflects average income and purchasing power, indicating improvements in quality of life over time.
• Negative aspects of economic growth

  1. Ignores Income Distribution: Doesn't account for how wealth is distributed among the population.
  2. Non-Market Transactions: Excludes non-market transactions like volunteer work, household production, and informal sector activities.
  3. Quality of Life Factors: Doesn't consider factors like environmental sustainability, health, education, and overall well-being.
• Unemployment can strain the economy, cause social unrest, lead to loss of human capital, and increase government spending.
• Find unemployment rate of Switzerland:Total labor force in Switzerland = 8 million * 0.60 = 4.8 million

  Number of people unemployed = 4.8 million - 4.5 million = 0.3 million

  Unemployment rate = (0.3 million / 4.8 million) * 100 ≈ 6.25%

  Therefore, approximately 300,000 people are unemployed in Switzerland, with an unemployment rate of about 6.25%.
• interest rates are the cost of borrowing and the reward for saving.