Economic Development

• Unemployment is a global issue which happens in developed, underdeveloped and developing countries
• Unemployment


  People who are not working, but they are actively looking for work
• Types of unemployment


  • Structural unemployment
  • Frictional unemployment
  • Real wage or classical unemployment
  • Voluntary unemployment
  • Cyclical unemployment or demand deficient
  • Seasonal unemployment
  • Youth unemployment
  • Casual Unemployment
  • Chronic Unemployment
• Structural unemployment


  • Mismatch of skills in the work industry
  • Geographical immobility
  • Occupational immobility
  • Technological change
  • Structural change in economy
• Frictional unemployment


  • The period which is taken by the individuals while they change their job
• Real wage or classical unemployment

  • Wages in the competitive job market moves above equilibrium
  • Supply of labor is higher than the demanded labor
• Voluntary unemployment


  • People try to be unemployed than being employed
  • Frictional unemployment where individuals tend to choose a job until they wanted an appropriate one
• Cyclical unemployment or demand deficient


  • Economy falls below its full capacity
  • Aggregate demand falls below at times of recession
• Seasonal unemployment


  • Unemployment due to seasonal change in the job nature
• Youth unemployment


  • 73 million people globally are neither unemployed nor undertaking education
• Casual Unemployment


  • Employees who work on a day to day basis or on short term contracts
• Chronic Unemployment


  • Long term unemployment in undeveloped countries
  • Weak economic condition
  • Lack of developed resources
  • High population growth
  • Primitive state of technology
  • Low capital formation
• Effects of unemployment


  • Few tax revenues
  • High supply-side cost
  • Enhanced welfare cost
  • Lower wages
  • Surplus labor
  • Enhanced demand for inferior goods
  • Goods and services on less demand
  • Elevated training cost
  • Lower living standards
  • Loss of depression and confidence
  • Loss of skills
• Ways to solve unemployment problem

  • Ensuring political stability
  • Enhancing the educational standards
  • Control of population growth in the nation
  • Launch of new empowerment programs
  • Encouraging self-employment/ entrepreneurship
  • Ensuring access to basic education
  • Reducing the age of retirement
  • Avoid laziness
  • Being creative, positive and competitive
  • Being positive to stop unemployment
• Policies to improve economic growth

  • Lower taxes
  • Avoiding investing in unsuitable programs
  • Avoiding favorite programs
  • Avoiding over-regulation of industries
• Expansionary monetary policy


  Lower interest rates to stimulate demand and allow businesses to borrow for less
• Expansionary fiscal policy


  Government cuts taxes or increases spending to stimulate the economy
• Unemployment rate


  Percentage of unemployed individuals divided by the number of individuals in the labor force
• Key terms


  • Unemployed
  • Labor force
  • Eligible population
  • Labor force participation rate
  • Discouraged workers
  • Underemployed
  • Full employment output
  • Not in the labor force
• Calculating unemployment rate


  Number of unemployed / Number of labor force x 100%
• Calculating labor force participation rate

  Number of labor force / (Number of labor force + Not in the labor force) x 100%
• When unemployment rates are high and steady, there are negative impacts on the long-run economic growth
• Population


  The whole number of inhabitants occupying an area (such as a country or the world) and continually being modified by increases (births and immigrations) and losses (deaths and emigrations)
• Human populations


  • Limited by the supply of food, the effect of diseases, and other environmental factors
  • Further affected by social customs governing reproduction and by technological developments, especially in medicine and public health, that have reduced mortality and extended the life span
• Few aspects of human societies are as fundamental as the size, composition, and rate of change of their populations
• Demography


  The study of human populations, their size, composition and distribution across space and the process through which populations change
• Components of population change

  • Births
  • Deaths
  • Immigration
  • Emigration
• Population growth


  Determined by the net recruitment rate of individuals to the population
• Population growth in a given generation is a linear combination of its initial size, birth, death, immigration, and emigration rates
• Fertility rate


  The rate of birth per 1,000 women of reproductive age in a given population
• When the fertility rate is at the replacement level, a population will remain stable, neither growing nor shrinking
• Fertility rates above the replacement level will cause the population to grow; fertility rates below the replacement level will cause the population to shrink
• In some countries the birth rate is falling while the death rate is not, leading to a decline in the population growth rate
• The population growth rate has been decreasing in higher income countries; however, the number of people added to the global population each year continues to increase due to increasing growth rates in lower income countries
• Overpopulation


  Determined when high fertility rates lead to population growth, which, under certain circumstances, can cause a condition where the population of a living species exceeds the carrying capacity of its ecological niche
• Overpopulation can have deleterious effects, including famine, shortages of energy sources and other natural resources, rapid and uncontrolled spread of communicable diseases in dense populations, and war over scarce resources
• Most population growth comes from developing countries, where birthrates remain high
• About half the world lives in nations with sub-replacement fertility, and in some of these countries the population has actually begun to shrink
• A new fear for many governments, particularly those in countries with very low fertility rates, is that a declining population will lead to underpopulation and will reduce the gross domestic product (GDP) and economic growth of the country
• To combat extremely low fertility rates, some of these governments have introduced pro-family policies that include incentives, such as payments to parents for having children and extensive parental leave for parents