Employment

• Employment - when someone is paid for being involved in the production of a good or service
• Unemployment - people who are willing and able to work, but who do not have a job
• Labour Force - available workers in an economy (consists of employed and unemployed)
• Full Employment - highest amount of skilled and unskilled labor that can be employed within an economy at any given time.

  • Usually happens with an unemployment rate of 3-6%
• Economically Inactive - anyone not in the labour force

  • Early retirees, homemakers, sick and disabled, higher education
• Factors that impact Employment

  • Wages
  • Attitudes toward working women
  • Attitudes toward disabled
  • Price of child care
  • Number of people in higher education
• Economically Active - anyone in the labour force (both employed and unemployed)
• Types of Unemployment

  • Frictional Unemployment
  • Structural Unemployment
  • Cyclical Unemployment
• Frictional Unemployment - Workers choosing to leave their jobs in search of new ones and workers entering the workforce for the first time

  • A normal part of an economy, can be reduced but not eliminated
  • Casual unemployment - workers between jobs
  • Seasonal Unemployment when people who work in seasonal jobs become unemployed
• Structural Unemployment - comes about due to shifts in an economy.

  • Training and education can reduce structural unemployment by making workers more occupationally mobile
  • Innovation making workers redundant
  • Persists for longer periods and impacts more workers
• Cyclical Unemployment - when the demand for goods and services in an economy decreases, forcing companies to lay off workers in an effort to cut costs.

  • Caused by a decrease in aggregate demand (recessions)
  • Can be reduced by policies to increase aggregate demand
• Benefits of unemployments:

  • High unemployment may reduce inflation
  • Makes it easier for firms to find labour
• Disadvantages of unemployments

  • Can increase government spending on benefits
  • Decrease standard of living
  • Lower aggregate demand
  • Lower Government tax revenue
• Policies to reduce unemployment

  • Frictional Unemployment - lower income tax and reduce unemployment benefits
  • Structural Unemployment - government spending on education and training
  • Cyclical Unemployment - use of expansionary fiscal policy (cut taxes, increase gov. spending, lower interest rates)
• Labour force - risen as the world population has grown
• Participation Rate: labour force as a proportion of total population of working age

  • Risen in many countries especially among females as it is now socially acceptable
  • Poverty and rising living costs in developing countries has forced many women to work
• Employment by Industry: Number of people employed in different industrial sectors

  • Employment in services has been growing while employment in agriculture and other primary sector industries has fallen
• Employment Status: Number of full-timers, part-timers or with temporary contracts

  • Most employees work full-time
  • Part-time employees have grown rapidly, especially among female employees
• Unemployment: Number of people registered as being without work

  • Tends to rise during economic recessions
  • Almost half the unemployed are young unskilled workers
• Unemployment Rate: Unemployment as a proportion of labour force

  • Relatively stable in the recent years but did increase in 2008 during a global financial crisis
• Cyclical Unemployment: occurs during recession due to falling consumer demand & incomes

  • Firms reduce output & lay off workers
• Structural Unemployment: caused by changes in industrial structure of an economy

  • Entire industries close due to a permanent fall in demand for their goods/services
• Frictional Unemployment: refers to transitional unemployment, which occurs when people are moving between jobs.
• Seasonal Unemployment: occurs because consumer demand for goods/services change with seasons; e.g. no job for a ski instructor when/where there is no ice
• Measurement of Unemployment

  • Taking claimant count
  • Labour force survey
  • Unemployment Rate = Number of Unemployed Persons / Labor Force
• Consequences of Unemployment

  • Personal
  • Loss of income and reduced ability to buy goods & services
  • Unemployed people de-skill if long out of work
  • Unemployed people may become depressed & ill
  • The strain on family relationships & health services
  • Economical
  • Unemployment is a waste of human resources
  • Fewer goods & services produced
  • Total output & income in the economy is lower
  • Government tax revenues also lower
  • People in work may have to pay more taxes
  • Government spending on welfare may rise
• Policies to Reduce Unemployment

  • Expansionary monetary policy
  • Expansionary fiscal policy
  • Increase in quality and quantity of education and training
• Define unemployment


  People who are willing and able to work, but do not have a job
• Who counts as economically inactive?

  Early retirees, homemakers, sick and disabled, higher education
• Who doesn't count in the unemployment rates?

  The economically inactive
• Define cyclical unemployment


  When the demand for goods and services in an economy decreases, forcing companies to lay off workers in an effort to cut costs.
• The pattern of employment can vary between sectors

  • Some of those do part part-time do so because they want to work for fewer hours but some seek full-time employment
• The rate of self-employment varies among countries
• A growth in the formal economy usually increases the quality of employment and productivity

  • high quality employment provides better opportunities and conditions for workers than low quality employment
• A flexible labour market is one which responds quickly and easily to changes in market conditions

  • a rise in employment may be accompanied by a rise or fall in the unemployment
• An increase in the population of working age or a rise in the labour force participation rate increases the size of the labour force
• Unemployment can be measured by counting those in recepit of unemployment beenfits or undertaking a labour force survey
• 3 examples of frictional unemployment:

  • casual unemployment
  • seasonal unemploymen
  • search unemployment
• Two types of structural unemployment are:

  • regional and technological unemployment
• Unemployed suffer from lower income and possibly from lower self-esteem and bad health