Economic Challenges Unemployment

Unemployment What’s a good definition for Unemployment? A condition in which a willing worker is lacking a job (and looking for one). In America, we further define it this way: Willing Worker: someone age 16 or older Lacking a job: and actively seeking one

Four Types of Unemployment Frictional Unemployment Unemployment that occurs because people are taking time to find a job

Four Types of Unemployment Frictional Unemployment (cont) This includes: People who quit one job and are looking for another job People who have been out of the work force for a while and are trying to reenter People just graduating from High School or College and looking for their first job

Four Types of Unemployment Frictional Unemployment (cont) This DOES NOT include people who are NOT looking for work.

Four Types of Unemployment 2. Seasonal Unemployment - Unemployment that occurs as a result of a business closing down or slowing down for part of the year - Examples: Migrant Farm Workers Ski Instructors

Four Types of Unemployment 3. Structural Unemployment - Caused when workers skills don’t match available jobs - Five Causes A. New Technology: The car caused many horse related jobs to no longer be needed.

Four Types of Unemployment 3. Structural Unemployment B. New Resources: Petroleum replaced many animal fat products, in particular whale-oil C. Changes in Demand: More people wear tennis shoes today than traditional shoes

Four Types of Unemployment 3. Structural Unemployment D. Globalization: Cheaper labor in other countries moves some businesses away E. Lack of Education: People lacking basic job skills are often quickly fired.

Four Types of Unemployment 4. Cyclical Unemployment: Unemployment caused by economic downturns

Measuring Unemployment To get the unemployment rate: Take the number of people unemployed Divide by the total number of people in the workforce (employed + unemployed) Multiply by 100

Measuring Unemployment If there are currently 7.7 million people unemployed And 140.5 million people employed What is the unemployment rate? (7.7 ÷ (7.7+140.5)) x 100 = (7.7 ÷ 148.2) x 100 = .052 x 100 = 5.2%

Full Employment In a Market Economy can Unemployment ever reach 0% ? Frictional, Seasonal and Structural Unemployment are GOOD things. Only Cyclical Unemployment is BAD Full Employment: when Cyclical Unemployment is 0%

Full Employment Underemployment: people working for jobs that they are overqualified for. Discouraged Workers: people who have given up trying to find a job Are Discouraged Workers counted in the unemployment rate? No. Only people looking for jobs