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Unemployment
Who is unemployedbull Anyone who is at least 16 years of
age and is actively seeking employment
copycopy1999 South-Western College Publishing
Who makes up the Labor Force
bull All non-institutionalized people 16 years of age and older who are either working or actively looking for work
copycopy1999 South-Western College Publishing
What is the Unemployment rate
bull The number of unemployed people expressed as a percentage of the labor force
bull Unemployment rate = Unemployed Unemployed + Employed
Breakdown of the US Population and the Labor Force
Breakdown of the US Population and the Labor Force
a
Persons under 16Persons in the armed forcesPersons institutionalized
CivilianNoninstitutionalPopulation
Total PopulationNot in Labor Force
Civilian Labor Force
Employed
Unemployed
Survey on UnemploymentSurvey on Unemployment
BLS calls 60000 households every month BLS calls 60000 households every month They ask three questions 1 Are you working1 Are you working If the answer is nono 2 Did you work at all this month-even 1 dayDid you work at all this month-even 1 day You are a member of the LF if ldquoyesrdquoldquoyesrdquo on 1 or 2
3 Did you look for work during the last monthDid you look for work during the last month [agency resume interview] A ldquoyesrdquoldquoyesrdquo counts you aspart of the LFLF A ldquonordquoldquonordquo means you are not countednot countedYou are a ldquodiscouraged workerrdquoldquodiscouraged workerrdquo The labor force consists of the employedemployed and unemployedunemployed
What are some of the problems in measuring unemployment
bull Discouraged worker problembull Part time workersbull Dishonest workers
Who is aDiscouraged Worker
bull A person who drops out of the work force because he or she cannot find a job
copycopy1999 South-Western College Publishing
Are Discouraged Workers counted in the labor force
No People who have quit looking for work are not counted as part of the labor force
copycopy1999 South-Western College Publishing
What about part-time workers
bull Part time workers are counted as fully employed
ndash Whether you work one hour a week or 80 the govt counts you as employed
ndash Distorts the labor force picture
bull Example ndash is unemployment in the economy going down because the new jobs being created are part-time low skilled jobs or are they full-time high skill jobs
bull The quality of your economy depends on the answer to that question
Can the unemployment rate increase without anyone losing a
jobbull If more people enter the work force than the
number of new jobs generated the unemployment rate increases
copycopy1999 South-Western College Publishing
What are different types of unemployment
bull Frictionalbull Structuralbull Cyclicalbull Seasonal
copycopy1999 South-Western College Publishing
Three Types of UnemploymentThree Types of UnemploymentFrictionalFrictional ndash ldquotemporaryrdquo ldquotransitionalrdquo ldquoshort-termrdquo(ldquobetween jobsrdquo or ldquosearchrdquo unemployment)
Examples1 People who get ldquofiredrdquoldquofiredrdquo or ldquoquitrdquoldquoquitrdquo to look for a better one2 ldquoGraduatesrdquoldquoGraduatesrdquo from high school or college who are looking for a job3 ldquoSeasonalrdquoldquoSeasonalrdquo or weather-dependent jobs such as ldquoldquoagriculturalrdquoagriculturalrdquo ldquoconstructionrdquoldquoconstructionrdquo ldquoretailrdquoldquoretailrdquo or ldquotourismrdquoldquotourismrdquo [lifeguards resort workers Santas amp migrant workers]Frictional unemployment signals that ldquonew jobsrdquoldquonew jobsrdquo are availableand reflects ldquofreedom of choicerdquoldquofreedom of choicerdquo
These are qualified workers ldquotransferablerdquo skillsThese are qualified workers ldquotransferablerdquo skills
22 Structural Structural UnemploymentUnemploymentStructuralStructural ndash ldquotechnologicalrdquoldquotechnologicalrdquo or ldquolong termrdquoldquolong termrdquo There are basic changes in the ldquostructurerdquoldquostructurerdquo of the labor force which make certain ldquoskills obsoleterdquoldquoskills obsoleterdquo
AutomationAutomation may result in job lossesConsumer tasteConsumer taste may make a good ldquoobsoleterdquoThe autoauto reduced the need for carriage makers
Farm machineryFarm machinery reduced the need for farm laborersldquoldquoCreative destructionrdquoCreative destructionrdquo means as jobs are created other jobs are lost Jobs of the future destroy jobs oftoday Frictional and Structural make up the ldquonaturalldquonaturalrate of unemploymentrdquorate of unemploymentrdquo
ldquoldquoThese jobs do not come backrdquoThese jobs do not come backrdquoldquoldquoNon-transferable skillsrdquoNon-transferable skillsrdquo ndash choice is prolonged unemployment or retraining
3 CCyclical yclical UUnemploymentnemployment
CyclicalCyclical ndash ldquoldquoeconomiceconomic downturnsrdquo downturnsrdquo in the business cyclebusiness cycle
ldquoldquoCyclical fluctuationsrdquoCyclical fluctuationsrdquo caused by ldquodeficient ADrdquoldquodeficient ADrdquoldquoldquoDurable goods jobsrdquoDurable goods jobsrdquo are impacted the mostThese cancan be be postponedpostponed because they can be repairedcan be repairedldquoldquoCyclical unemploymentrdquoCyclical unemploymentrdquo is ldquoreal unemploymentrdquoldquoreal unemploymentrdquo
ldquoldquoThese jobs do come backrdquoThese jobs do come backrdquo
Cyclical UnemploymentCyclical UnemploymentldquoldquoThese jobs do come backrdquoThese jobs do come backrdquo
If Arnold S gets laid off producing autos he says
1 Chemical Engineering $565002 ElectricalElectronics Eng $5200933 Computer EngineeringComputer Engineering $51496 $5149644 Computer ScienceComputer Science $51292 $512925 Mechanical Engineering $510466 EconomicsEconomicsFinance $45000$450007 Accounting $445648 M8 Mgmtgmt I Info nfo SSysysBBus us DDataata P Processingrocessing $43732$437329 Civil Engineering9 Civil Engineering $43462 $4346210 Management Info Sys $4000011 Teaching11 Teaching $40600 $4060012 B12 Business usiness AAdmindminMMgmtgmt $39448 $3944813 Nursing $3877514 M14 MarketingarketingMMarketing arketing MMgmtgmt $36674 $3667415 Communications15 Communications $28000 $2800016 Psychology16 Psychology $27000 $27000
Top Paying College Majors for Top Paying College Majors for 20062006
EconEconEconEcon
Seasonal
Is it possible to have a 0 unemployment rate
bull Not likely At any one time the economy could not absorb ALL the people who wanted a job There is always some unemployment
ndash The best we could hope for is that there be no cyclical unemployment from the ups and downs of the economy
ndash There will always be some level of Frictional and Structural Unemployment
bull This is called The Natural Rate of Unemployment
GraphmdashNatural Rate of Unemployment
What is the natural rate of unemployment
bull The sum of frictional and structural unemployment
What is consideredFull Employment
bull An employment level at which the actual rate of unemployment is equal to the natural rate of unemploymentndash If the economy can get to this
definition of Full-employment it is doing the best that it can
copycopy1999 South-Western College Publishing
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Current Unemployment Rate
bull The current unemployment rate in the US is about 80 Is this good bad or just about right
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Frequency Annual Quarterly
Time2004 2005 2006 2006 2007
Q3-2006 Q4-2006 Q1-2007
Country
Australia i 55 51 49 48 46 45
Austria i 48 52 48 47 45 45
Belgium i 84 84 82 81 79 77
Canada i 72 68 63 64 62 61
Czech Republic i 83 79 72 71 66 63
Denmark i 55 48 39 37 36 34
Finland i 89 84 77 78 74 69
France i 96 97 94 93 91 88
Germany i 95 94 84 84 79 72
Greece i 105 99 89 87 86
Hungary i 61 72 75 76 77 8
Ireland i 45 43 44 44 42 4
Italy i 8 77 68 66 65
Japan i 47 44 41 41 41 4
Korea i 37 37 35 34 34 32
Luxembourg i 51 45 48 47 48 49
Netherlands i 46 47 39 39 37 35
New Zealand i 39 37 38 38 37 38
Norway i 44 46 35 33 29 27
Poland i 19 177 138 134 126 118
Portugal i 67 76 77 76 8 81
Slovak Republic i 182 162 134 131 124 111
Spain i 106 92 85 83 84 82
Sweden i 63 73 7 69 65 65
Switzerland i 44 45 4 39 38 37
United Kingdomi 47 48 53 54 54
Why do some other major economies have persistently higher unemployment rates than the US
bull Government policies are a major culprit
Unemployment Theories - Costs of Unemployment - Who paysPerhaps the main cost of unemployment is a personal one to those who are unemployed
However if they suffer then the whole economy suffers Individuals may become dispirited by unemployment they may lose their self-esteem and confidence This may affect their
motivation to work The longer they are unemployed the more they may lose their skills and this has to be bad for the economy as well On top of that these problems (and financial ones)
often lead to the unemployed being less healthy and then the NHS picks up the bill The whole economy suffers from people being unemployed
As well as these microeconomic effects there will also be macro effects These will include
Loss of output to the economy - the unemployed could be producing goods and services and if they arent then GDP is lower than it could be
Loss of tax revenue - unemployed people arent earning and they therefore arent paying tax The government has lost out
Increase in government expenditure - the government has to pay out benefits to support the unemployed Along with the loss of tax this is a double whammy
Loss of profits - with higher employment firms are likely to do better and make better profits If they make less profit because of unemployment they may have less funds to invest
The answer then is - we all pay
Who is unemployedbull Anyone who is at least 16 years of
age and is actively seeking employment
copycopy1999 South-Western College Publishing
Who makes up the Labor Force
bull All non-institutionalized people 16 years of age and older who are either working or actively looking for work
copycopy1999 South-Western College Publishing
What is the Unemployment rate
bull The number of unemployed people expressed as a percentage of the labor force
bull Unemployment rate = Unemployed Unemployed + Employed
Breakdown of the US Population and the Labor Force
Breakdown of the US Population and the Labor Force
a
Persons under 16Persons in the armed forcesPersons institutionalized
CivilianNoninstitutionalPopulation
Total PopulationNot in Labor Force
Civilian Labor Force
Employed
Unemployed
Survey on UnemploymentSurvey on Unemployment
BLS calls 60000 households every month BLS calls 60000 households every month They ask three questions 1 Are you working1 Are you working If the answer is nono 2 Did you work at all this month-even 1 dayDid you work at all this month-even 1 day You are a member of the LF if ldquoyesrdquoldquoyesrdquo on 1 or 2
3 Did you look for work during the last monthDid you look for work during the last month [agency resume interview] A ldquoyesrdquoldquoyesrdquo counts you aspart of the LFLF A ldquonordquoldquonordquo means you are not countednot countedYou are a ldquodiscouraged workerrdquoldquodiscouraged workerrdquo The labor force consists of the employedemployed and unemployedunemployed
What are some of the problems in measuring unemployment
bull Discouraged worker problembull Part time workersbull Dishonest workers
Who is aDiscouraged Worker
bull A person who drops out of the work force because he or she cannot find a job
copycopy1999 South-Western College Publishing
Are Discouraged Workers counted in the labor force
No People who have quit looking for work are not counted as part of the labor force
copycopy1999 South-Western College Publishing
What about part-time workers
bull Part time workers are counted as fully employed
ndash Whether you work one hour a week or 80 the govt counts you as employed
ndash Distorts the labor force picture
bull Example ndash is unemployment in the economy going down because the new jobs being created are part-time low skilled jobs or are they full-time high skill jobs
bull The quality of your economy depends on the answer to that question
Can the unemployment rate increase without anyone losing a
jobbull If more people enter the work force than the
number of new jobs generated the unemployment rate increases
copycopy1999 South-Western College Publishing
What are different types of unemployment
bull Frictionalbull Structuralbull Cyclicalbull Seasonal
copycopy1999 South-Western College Publishing
Three Types of UnemploymentThree Types of UnemploymentFrictionalFrictional ndash ldquotemporaryrdquo ldquotransitionalrdquo ldquoshort-termrdquo(ldquobetween jobsrdquo or ldquosearchrdquo unemployment)
Examples1 People who get ldquofiredrdquoldquofiredrdquo or ldquoquitrdquoldquoquitrdquo to look for a better one2 ldquoGraduatesrdquoldquoGraduatesrdquo from high school or college who are looking for a job3 ldquoSeasonalrdquoldquoSeasonalrdquo or weather-dependent jobs such as ldquoldquoagriculturalrdquoagriculturalrdquo ldquoconstructionrdquoldquoconstructionrdquo ldquoretailrdquoldquoretailrdquo or ldquotourismrdquoldquotourismrdquo [lifeguards resort workers Santas amp migrant workers]Frictional unemployment signals that ldquonew jobsrdquoldquonew jobsrdquo are availableand reflects ldquofreedom of choicerdquoldquofreedom of choicerdquo
These are qualified workers ldquotransferablerdquo skillsThese are qualified workers ldquotransferablerdquo skills
22 Structural Structural UnemploymentUnemploymentStructuralStructural ndash ldquotechnologicalrdquoldquotechnologicalrdquo or ldquolong termrdquoldquolong termrdquo There are basic changes in the ldquostructurerdquoldquostructurerdquo of the labor force which make certain ldquoskills obsoleterdquoldquoskills obsoleterdquo
AutomationAutomation may result in job lossesConsumer tasteConsumer taste may make a good ldquoobsoleterdquoThe autoauto reduced the need for carriage makers
Farm machineryFarm machinery reduced the need for farm laborersldquoldquoCreative destructionrdquoCreative destructionrdquo means as jobs are created other jobs are lost Jobs of the future destroy jobs oftoday Frictional and Structural make up the ldquonaturalldquonaturalrate of unemploymentrdquorate of unemploymentrdquo
ldquoldquoThese jobs do not come backrdquoThese jobs do not come backrdquoldquoldquoNon-transferable skillsrdquoNon-transferable skillsrdquo ndash choice is prolonged unemployment or retraining
3 CCyclical yclical UUnemploymentnemployment
CyclicalCyclical ndash ldquoldquoeconomiceconomic downturnsrdquo downturnsrdquo in the business cyclebusiness cycle
ldquoldquoCyclical fluctuationsrdquoCyclical fluctuationsrdquo caused by ldquodeficient ADrdquoldquodeficient ADrdquoldquoldquoDurable goods jobsrdquoDurable goods jobsrdquo are impacted the mostThese cancan be be postponedpostponed because they can be repairedcan be repairedldquoldquoCyclical unemploymentrdquoCyclical unemploymentrdquo is ldquoreal unemploymentrdquoldquoreal unemploymentrdquo
ldquoldquoThese jobs do come backrdquoThese jobs do come backrdquo
Cyclical UnemploymentCyclical UnemploymentldquoldquoThese jobs do come backrdquoThese jobs do come backrdquo
If Arnold S gets laid off producing autos he says
1 Chemical Engineering $565002 ElectricalElectronics Eng $5200933 Computer EngineeringComputer Engineering $51496 $5149644 Computer ScienceComputer Science $51292 $512925 Mechanical Engineering $510466 EconomicsEconomicsFinance $45000$450007 Accounting $445648 M8 Mgmtgmt I Info nfo SSysysBBus us DDataata P Processingrocessing $43732$437329 Civil Engineering9 Civil Engineering $43462 $4346210 Management Info Sys $4000011 Teaching11 Teaching $40600 $4060012 B12 Business usiness AAdmindminMMgmtgmt $39448 $3944813 Nursing $3877514 M14 MarketingarketingMMarketing arketing MMgmtgmt $36674 $3667415 Communications15 Communications $28000 $2800016 Psychology16 Psychology $27000 $27000
Top Paying College Majors for Top Paying College Majors for 20062006
EconEconEconEcon
Seasonal
Is it possible to have a 0 unemployment rate
bull Not likely At any one time the economy could not absorb ALL the people who wanted a job There is always some unemployment
ndash The best we could hope for is that there be no cyclical unemployment from the ups and downs of the economy
ndash There will always be some level of Frictional and Structural Unemployment
bull This is called The Natural Rate of Unemployment
GraphmdashNatural Rate of Unemployment
What is the natural rate of unemployment
bull The sum of frictional and structural unemployment
What is consideredFull Employment
bull An employment level at which the actual rate of unemployment is equal to the natural rate of unemploymentndash If the economy can get to this
definition of Full-employment it is doing the best that it can
copycopy1999 South-Western College Publishing
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Current Unemployment Rate
bull The current unemployment rate in the US is about 80 Is this good bad or just about right
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Frequency Annual Quarterly
Time2004 2005 2006 2006 2007
Q3-2006 Q4-2006 Q1-2007
Country
Australia i 55 51 49 48 46 45
Austria i 48 52 48 47 45 45
Belgium i 84 84 82 81 79 77
Canada i 72 68 63 64 62 61
Czech Republic i 83 79 72 71 66 63
Denmark i 55 48 39 37 36 34
Finland i 89 84 77 78 74 69
France i 96 97 94 93 91 88
Germany i 95 94 84 84 79 72
Greece i 105 99 89 87 86
Hungary i 61 72 75 76 77 8
Ireland i 45 43 44 44 42 4
Italy i 8 77 68 66 65
Japan i 47 44 41 41 41 4
Korea i 37 37 35 34 34 32
Luxembourg i 51 45 48 47 48 49
Netherlands i 46 47 39 39 37 35
New Zealand i 39 37 38 38 37 38
Norway i 44 46 35 33 29 27
Poland i 19 177 138 134 126 118
Portugal i 67 76 77 76 8 81
Slovak Republic i 182 162 134 131 124 111
Spain i 106 92 85 83 84 82
Sweden i 63 73 7 69 65 65
Switzerland i 44 45 4 39 38 37
United Kingdomi 47 48 53 54 54
Why do some other major economies have persistently higher unemployment rates than the US
bull Government policies are a major culprit
Unemployment Theories - Costs of Unemployment - Who paysPerhaps the main cost of unemployment is a personal one to those who are unemployed
However if they suffer then the whole economy suffers Individuals may become dispirited by unemployment they may lose their self-esteem and confidence This may affect their
motivation to work The longer they are unemployed the more they may lose their skills and this has to be bad for the economy as well On top of that these problems (and financial ones)
often lead to the unemployed being less healthy and then the NHS picks up the bill The whole economy suffers from people being unemployed
As well as these microeconomic effects there will also be macro effects These will include
Loss of output to the economy - the unemployed could be producing goods and services and if they arent then GDP is lower than it could be
Loss of tax revenue - unemployed people arent earning and they therefore arent paying tax The government has lost out
Increase in government expenditure - the government has to pay out benefits to support the unemployed Along with the loss of tax this is a double whammy
Loss of profits - with higher employment firms are likely to do better and make better profits If they make less profit because of unemployment they may have less funds to invest
The answer then is - we all pay
Who makes up the Labor Force
bull All non-institutionalized people 16 years of age and older who are either working or actively looking for work
copycopy1999 South-Western College Publishing
What is the Unemployment rate
bull The number of unemployed people expressed as a percentage of the labor force
bull Unemployment rate = Unemployed Unemployed + Employed
Breakdown of the US Population and the Labor Force
Breakdown of the US Population and the Labor Force
a
Persons under 16Persons in the armed forcesPersons institutionalized
CivilianNoninstitutionalPopulation
Total PopulationNot in Labor Force
Civilian Labor Force
Employed
Unemployed
Survey on UnemploymentSurvey on Unemployment
BLS calls 60000 households every month BLS calls 60000 households every month They ask three questions 1 Are you working1 Are you working If the answer is nono 2 Did you work at all this month-even 1 dayDid you work at all this month-even 1 day You are a member of the LF if ldquoyesrdquoldquoyesrdquo on 1 or 2
3 Did you look for work during the last monthDid you look for work during the last month [agency resume interview] A ldquoyesrdquoldquoyesrdquo counts you aspart of the LFLF A ldquonordquoldquonordquo means you are not countednot countedYou are a ldquodiscouraged workerrdquoldquodiscouraged workerrdquo The labor force consists of the employedemployed and unemployedunemployed
What are some of the problems in measuring unemployment
bull Discouraged worker problembull Part time workersbull Dishonest workers
Who is aDiscouraged Worker
bull A person who drops out of the work force because he or she cannot find a job
copycopy1999 South-Western College Publishing
Are Discouraged Workers counted in the labor force
No People who have quit looking for work are not counted as part of the labor force
copycopy1999 South-Western College Publishing
What about part-time workers
bull Part time workers are counted as fully employed
ndash Whether you work one hour a week or 80 the govt counts you as employed
ndash Distorts the labor force picture
bull Example ndash is unemployment in the economy going down because the new jobs being created are part-time low skilled jobs or are they full-time high skill jobs
bull The quality of your economy depends on the answer to that question
Can the unemployment rate increase without anyone losing a
jobbull If more people enter the work force than the
number of new jobs generated the unemployment rate increases
copycopy1999 South-Western College Publishing
What are different types of unemployment
bull Frictionalbull Structuralbull Cyclicalbull Seasonal
copycopy1999 South-Western College Publishing
Three Types of UnemploymentThree Types of UnemploymentFrictionalFrictional ndash ldquotemporaryrdquo ldquotransitionalrdquo ldquoshort-termrdquo(ldquobetween jobsrdquo or ldquosearchrdquo unemployment)
Examples1 People who get ldquofiredrdquoldquofiredrdquo or ldquoquitrdquoldquoquitrdquo to look for a better one2 ldquoGraduatesrdquoldquoGraduatesrdquo from high school or college who are looking for a job3 ldquoSeasonalrdquoldquoSeasonalrdquo or weather-dependent jobs such as ldquoldquoagriculturalrdquoagriculturalrdquo ldquoconstructionrdquoldquoconstructionrdquo ldquoretailrdquoldquoretailrdquo or ldquotourismrdquoldquotourismrdquo [lifeguards resort workers Santas amp migrant workers]Frictional unemployment signals that ldquonew jobsrdquoldquonew jobsrdquo are availableand reflects ldquofreedom of choicerdquoldquofreedom of choicerdquo
These are qualified workers ldquotransferablerdquo skillsThese are qualified workers ldquotransferablerdquo skills
22 Structural Structural UnemploymentUnemploymentStructuralStructural ndash ldquotechnologicalrdquoldquotechnologicalrdquo or ldquolong termrdquoldquolong termrdquo There are basic changes in the ldquostructurerdquoldquostructurerdquo of the labor force which make certain ldquoskills obsoleterdquoldquoskills obsoleterdquo
AutomationAutomation may result in job lossesConsumer tasteConsumer taste may make a good ldquoobsoleterdquoThe autoauto reduced the need for carriage makers
Farm machineryFarm machinery reduced the need for farm laborersldquoldquoCreative destructionrdquoCreative destructionrdquo means as jobs are created other jobs are lost Jobs of the future destroy jobs oftoday Frictional and Structural make up the ldquonaturalldquonaturalrate of unemploymentrdquorate of unemploymentrdquo
ldquoldquoThese jobs do not come backrdquoThese jobs do not come backrdquoldquoldquoNon-transferable skillsrdquoNon-transferable skillsrdquo ndash choice is prolonged unemployment or retraining
3 CCyclical yclical UUnemploymentnemployment
CyclicalCyclical ndash ldquoldquoeconomiceconomic downturnsrdquo downturnsrdquo in the business cyclebusiness cycle
ldquoldquoCyclical fluctuationsrdquoCyclical fluctuationsrdquo caused by ldquodeficient ADrdquoldquodeficient ADrdquoldquoldquoDurable goods jobsrdquoDurable goods jobsrdquo are impacted the mostThese cancan be be postponedpostponed because they can be repairedcan be repairedldquoldquoCyclical unemploymentrdquoCyclical unemploymentrdquo is ldquoreal unemploymentrdquoldquoreal unemploymentrdquo
ldquoldquoThese jobs do come backrdquoThese jobs do come backrdquo
Cyclical UnemploymentCyclical UnemploymentldquoldquoThese jobs do come backrdquoThese jobs do come backrdquo
If Arnold S gets laid off producing autos he says
1 Chemical Engineering $565002 ElectricalElectronics Eng $5200933 Computer EngineeringComputer Engineering $51496 $5149644 Computer ScienceComputer Science $51292 $512925 Mechanical Engineering $510466 EconomicsEconomicsFinance $45000$450007 Accounting $445648 M8 Mgmtgmt I Info nfo SSysysBBus us DDataata P Processingrocessing $43732$437329 Civil Engineering9 Civil Engineering $43462 $4346210 Management Info Sys $4000011 Teaching11 Teaching $40600 $4060012 B12 Business usiness AAdmindminMMgmtgmt $39448 $3944813 Nursing $3877514 M14 MarketingarketingMMarketing arketing MMgmtgmt $36674 $3667415 Communications15 Communications $28000 $2800016 Psychology16 Psychology $27000 $27000
Top Paying College Majors for Top Paying College Majors for 20062006
EconEconEconEcon
Seasonal
Is it possible to have a 0 unemployment rate
bull Not likely At any one time the economy could not absorb ALL the people who wanted a job There is always some unemployment
ndash The best we could hope for is that there be no cyclical unemployment from the ups and downs of the economy
ndash There will always be some level of Frictional and Structural Unemployment
bull This is called The Natural Rate of Unemployment
GraphmdashNatural Rate of Unemployment
What is the natural rate of unemployment
bull The sum of frictional and structural unemployment
What is consideredFull Employment
bull An employment level at which the actual rate of unemployment is equal to the natural rate of unemploymentndash If the economy can get to this
definition of Full-employment it is doing the best that it can
copycopy1999 South-Western College Publishing
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Current Unemployment Rate
bull The current unemployment rate in the US is about 80 Is this good bad or just about right
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Frequency Annual Quarterly
Time2004 2005 2006 2006 2007
Q3-2006 Q4-2006 Q1-2007
Country
Australia i 55 51 49 48 46 45
Austria i 48 52 48 47 45 45
Belgium i 84 84 82 81 79 77
Canada i 72 68 63 64 62 61
Czech Republic i 83 79 72 71 66 63
Denmark i 55 48 39 37 36 34
Finland i 89 84 77 78 74 69
France i 96 97 94 93 91 88
Germany i 95 94 84 84 79 72
Greece i 105 99 89 87 86
Hungary i 61 72 75 76 77 8
Ireland i 45 43 44 44 42 4
Italy i 8 77 68 66 65
Japan i 47 44 41 41 41 4
Korea i 37 37 35 34 34 32
Luxembourg i 51 45 48 47 48 49
Netherlands i 46 47 39 39 37 35
New Zealand i 39 37 38 38 37 38
Norway i 44 46 35 33 29 27
Poland i 19 177 138 134 126 118
Portugal i 67 76 77 76 8 81
Slovak Republic i 182 162 134 131 124 111
Spain i 106 92 85 83 84 82
Sweden i 63 73 7 69 65 65
Switzerland i 44 45 4 39 38 37
United Kingdomi 47 48 53 54 54
Why do some other major economies have persistently higher unemployment rates than the US
bull Government policies are a major culprit
Unemployment Theories - Costs of Unemployment - Who paysPerhaps the main cost of unemployment is a personal one to those who are unemployed
However if they suffer then the whole economy suffers Individuals may become dispirited by unemployment they may lose their self-esteem and confidence This may affect their
motivation to work The longer they are unemployed the more they may lose their skills and this has to be bad for the economy as well On top of that these problems (and financial ones)
often lead to the unemployed being less healthy and then the NHS picks up the bill The whole economy suffers from people being unemployed
As well as these microeconomic effects there will also be macro effects These will include
Loss of output to the economy - the unemployed could be producing goods and services and if they arent then GDP is lower than it could be
Loss of tax revenue - unemployed people arent earning and they therefore arent paying tax The government has lost out
Increase in government expenditure - the government has to pay out benefits to support the unemployed Along with the loss of tax this is a double whammy
Loss of profits - with higher employment firms are likely to do better and make better profits If they make less profit because of unemployment they may have less funds to invest
The answer then is - we all pay
What is the Unemployment rate
bull The number of unemployed people expressed as a percentage of the labor force
bull Unemployment rate = Unemployed Unemployed + Employed
Breakdown of the US Population and the Labor Force
Breakdown of the US Population and the Labor Force
a
Persons under 16Persons in the armed forcesPersons institutionalized
CivilianNoninstitutionalPopulation
Total PopulationNot in Labor Force
Civilian Labor Force
Employed
Unemployed
Survey on UnemploymentSurvey on Unemployment
BLS calls 60000 households every month BLS calls 60000 households every month They ask three questions 1 Are you working1 Are you working If the answer is nono 2 Did you work at all this month-even 1 dayDid you work at all this month-even 1 day You are a member of the LF if ldquoyesrdquoldquoyesrdquo on 1 or 2
3 Did you look for work during the last monthDid you look for work during the last month [agency resume interview] A ldquoyesrdquoldquoyesrdquo counts you aspart of the LFLF A ldquonordquoldquonordquo means you are not countednot countedYou are a ldquodiscouraged workerrdquoldquodiscouraged workerrdquo The labor force consists of the employedemployed and unemployedunemployed
What are some of the problems in measuring unemployment
bull Discouraged worker problembull Part time workersbull Dishonest workers
Who is aDiscouraged Worker
bull A person who drops out of the work force because he or she cannot find a job
copycopy1999 South-Western College Publishing
Are Discouraged Workers counted in the labor force
No People who have quit looking for work are not counted as part of the labor force
copycopy1999 South-Western College Publishing
What about part-time workers
bull Part time workers are counted as fully employed
ndash Whether you work one hour a week or 80 the govt counts you as employed
ndash Distorts the labor force picture
bull Example ndash is unemployment in the economy going down because the new jobs being created are part-time low skilled jobs or are they full-time high skill jobs
bull The quality of your economy depends on the answer to that question
Can the unemployment rate increase without anyone losing a
jobbull If more people enter the work force than the
number of new jobs generated the unemployment rate increases
copycopy1999 South-Western College Publishing
What are different types of unemployment
bull Frictionalbull Structuralbull Cyclicalbull Seasonal
copycopy1999 South-Western College Publishing
Three Types of UnemploymentThree Types of UnemploymentFrictionalFrictional ndash ldquotemporaryrdquo ldquotransitionalrdquo ldquoshort-termrdquo(ldquobetween jobsrdquo or ldquosearchrdquo unemployment)
Examples1 People who get ldquofiredrdquoldquofiredrdquo or ldquoquitrdquoldquoquitrdquo to look for a better one2 ldquoGraduatesrdquoldquoGraduatesrdquo from high school or college who are looking for a job3 ldquoSeasonalrdquoldquoSeasonalrdquo or weather-dependent jobs such as ldquoldquoagriculturalrdquoagriculturalrdquo ldquoconstructionrdquoldquoconstructionrdquo ldquoretailrdquoldquoretailrdquo or ldquotourismrdquoldquotourismrdquo [lifeguards resort workers Santas amp migrant workers]Frictional unemployment signals that ldquonew jobsrdquoldquonew jobsrdquo are availableand reflects ldquofreedom of choicerdquoldquofreedom of choicerdquo
These are qualified workers ldquotransferablerdquo skillsThese are qualified workers ldquotransferablerdquo skills
22 Structural Structural UnemploymentUnemploymentStructuralStructural ndash ldquotechnologicalrdquoldquotechnologicalrdquo or ldquolong termrdquoldquolong termrdquo There are basic changes in the ldquostructurerdquoldquostructurerdquo of the labor force which make certain ldquoskills obsoleterdquoldquoskills obsoleterdquo
AutomationAutomation may result in job lossesConsumer tasteConsumer taste may make a good ldquoobsoleterdquoThe autoauto reduced the need for carriage makers
Farm machineryFarm machinery reduced the need for farm laborersldquoldquoCreative destructionrdquoCreative destructionrdquo means as jobs are created other jobs are lost Jobs of the future destroy jobs oftoday Frictional and Structural make up the ldquonaturalldquonaturalrate of unemploymentrdquorate of unemploymentrdquo
ldquoldquoThese jobs do not come backrdquoThese jobs do not come backrdquoldquoldquoNon-transferable skillsrdquoNon-transferable skillsrdquo ndash choice is prolonged unemployment or retraining
3 CCyclical yclical UUnemploymentnemployment
CyclicalCyclical ndash ldquoldquoeconomiceconomic downturnsrdquo downturnsrdquo in the business cyclebusiness cycle
ldquoldquoCyclical fluctuationsrdquoCyclical fluctuationsrdquo caused by ldquodeficient ADrdquoldquodeficient ADrdquoldquoldquoDurable goods jobsrdquoDurable goods jobsrdquo are impacted the mostThese cancan be be postponedpostponed because they can be repairedcan be repairedldquoldquoCyclical unemploymentrdquoCyclical unemploymentrdquo is ldquoreal unemploymentrdquoldquoreal unemploymentrdquo
ldquoldquoThese jobs do come backrdquoThese jobs do come backrdquo
Cyclical UnemploymentCyclical UnemploymentldquoldquoThese jobs do come backrdquoThese jobs do come backrdquo
If Arnold S gets laid off producing autos he says
1 Chemical Engineering $565002 ElectricalElectronics Eng $5200933 Computer EngineeringComputer Engineering $51496 $5149644 Computer ScienceComputer Science $51292 $512925 Mechanical Engineering $510466 EconomicsEconomicsFinance $45000$450007 Accounting $445648 M8 Mgmtgmt I Info nfo SSysysBBus us DDataata P Processingrocessing $43732$437329 Civil Engineering9 Civil Engineering $43462 $4346210 Management Info Sys $4000011 Teaching11 Teaching $40600 $4060012 B12 Business usiness AAdmindminMMgmtgmt $39448 $3944813 Nursing $3877514 M14 MarketingarketingMMarketing arketing MMgmtgmt $36674 $3667415 Communications15 Communications $28000 $2800016 Psychology16 Psychology $27000 $27000
Top Paying College Majors for Top Paying College Majors for 20062006
EconEconEconEcon
Seasonal
Is it possible to have a 0 unemployment rate
bull Not likely At any one time the economy could not absorb ALL the people who wanted a job There is always some unemployment
ndash The best we could hope for is that there be no cyclical unemployment from the ups and downs of the economy
ndash There will always be some level of Frictional and Structural Unemployment
bull This is called The Natural Rate of Unemployment
GraphmdashNatural Rate of Unemployment
What is the natural rate of unemployment
bull The sum of frictional and structural unemployment
What is consideredFull Employment
bull An employment level at which the actual rate of unemployment is equal to the natural rate of unemploymentndash If the economy can get to this
definition of Full-employment it is doing the best that it can
copycopy1999 South-Western College Publishing
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Current Unemployment Rate
bull The current unemployment rate in the US is about 80 Is this good bad or just about right
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Frequency Annual Quarterly
Time2004 2005 2006 2006 2007
Q3-2006 Q4-2006 Q1-2007
Country
Australia i 55 51 49 48 46 45
Austria i 48 52 48 47 45 45
Belgium i 84 84 82 81 79 77
Canada i 72 68 63 64 62 61
Czech Republic i 83 79 72 71 66 63
Denmark i 55 48 39 37 36 34
Finland i 89 84 77 78 74 69
France i 96 97 94 93 91 88
Germany i 95 94 84 84 79 72
Greece i 105 99 89 87 86
Hungary i 61 72 75 76 77 8
Ireland i 45 43 44 44 42 4
Italy i 8 77 68 66 65
Japan i 47 44 41 41 41 4
Korea i 37 37 35 34 34 32
Luxembourg i 51 45 48 47 48 49
Netherlands i 46 47 39 39 37 35
New Zealand i 39 37 38 38 37 38
Norway i 44 46 35 33 29 27
Poland i 19 177 138 134 126 118
Portugal i 67 76 77 76 8 81
Slovak Republic i 182 162 134 131 124 111
Spain i 106 92 85 83 84 82
Sweden i 63 73 7 69 65 65
Switzerland i 44 45 4 39 38 37
United Kingdomi 47 48 53 54 54
Why do some other major economies have persistently higher unemployment rates than the US
bull Government policies are a major culprit
Unemployment Theories - Costs of Unemployment - Who paysPerhaps the main cost of unemployment is a personal one to those who are unemployed
However if they suffer then the whole economy suffers Individuals may become dispirited by unemployment they may lose their self-esteem and confidence This may affect their
motivation to work The longer they are unemployed the more they may lose their skills and this has to be bad for the economy as well On top of that these problems (and financial ones)
often lead to the unemployed being less healthy and then the NHS picks up the bill The whole economy suffers from people being unemployed
As well as these microeconomic effects there will also be macro effects These will include
Loss of output to the economy - the unemployed could be producing goods and services and if they arent then GDP is lower than it could be
Loss of tax revenue - unemployed people arent earning and they therefore arent paying tax The government has lost out
Increase in government expenditure - the government has to pay out benefits to support the unemployed Along with the loss of tax this is a double whammy
Loss of profits - with higher employment firms are likely to do better and make better profits If they make less profit because of unemployment they may have less funds to invest
The answer then is - we all pay
Breakdown of the US Population and the Labor Force
Breakdown of the US Population and the Labor Force
a
Persons under 16Persons in the armed forcesPersons institutionalized
CivilianNoninstitutionalPopulation
Total PopulationNot in Labor Force
Civilian Labor Force
Employed
Unemployed
Survey on UnemploymentSurvey on Unemployment
BLS calls 60000 households every month BLS calls 60000 households every month They ask three questions 1 Are you working1 Are you working If the answer is nono 2 Did you work at all this month-even 1 dayDid you work at all this month-even 1 day You are a member of the LF if ldquoyesrdquoldquoyesrdquo on 1 or 2
3 Did you look for work during the last monthDid you look for work during the last month [agency resume interview] A ldquoyesrdquoldquoyesrdquo counts you aspart of the LFLF A ldquonordquoldquonordquo means you are not countednot countedYou are a ldquodiscouraged workerrdquoldquodiscouraged workerrdquo The labor force consists of the employedemployed and unemployedunemployed
What are some of the problems in measuring unemployment
bull Discouraged worker problembull Part time workersbull Dishonest workers
Who is aDiscouraged Worker
bull A person who drops out of the work force because he or she cannot find a job
copycopy1999 South-Western College Publishing
Are Discouraged Workers counted in the labor force
No People who have quit looking for work are not counted as part of the labor force
copycopy1999 South-Western College Publishing
What about part-time workers
bull Part time workers are counted as fully employed
ndash Whether you work one hour a week or 80 the govt counts you as employed
ndash Distorts the labor force picture
bull Example ndash is unemployment in the economy going down because the new jobs being created are part-time low skilled jobs or are they full-time high skill jobs
bull The quality of your economy depends on the answer to that question
Can the unemployment rate increase without anyone losing a
jobbull If more people enter the work force than the
number of new jobs generated the unemployment rate increases
copycopy1999 South-Western College Publishing
What are different types of unemployment
bull Frictionalbull Structuralbull Cyclicalbull Seasonal
copycopy1999 South-Western College Publishing
Three Types of UnemploymentThree Types of UnemploymentFrictionalFrictional ndash ldquotemporaryrdquo ldquotransitionalrdquo ldquoshort-termrdquo(ldquobetween jobsrdquo or ldquosearchrdquo unemployment)
Examples1 People who get ldquofiredrdquoldquofiredrdquo or ldquoquitrdquoldquoquitrdquo to look for a better one2 ldquoGraduatesrdquoldquoGraduatesrdquo from high school or college who are looking for a job3 ldquoSeasonalrdquoldquoSeasonalrdquo or weather-dependent jobs such as ldquoldquoagriculturalrdquoagriculturalrdquo ldquoconstructionrdquoldquoconstructionrdquo ldquoretailrdquoldquoretailrdquo or ldquotourismrdquoldquotourismrdquo [lifeguards resort workers Santas amp migrant workers]Frictional unemployment signals that ldquonew jobsrdquoldquonew jobsrdquo are availableand reflects ldquofreedom of choicerdquoldquofreedom of choicerdquo
These are qualified workers ldquotransferablerdquo skillsThese are qualified workers ldquotransferablerdquo skills
22 Structural Structural UnemploymentUnemploymentStructuralStructural ndash ldquotechnologicalrdquoldquotechnologicalrdquo or ldquolong termrdquoldquolong termrdquo There are basic changes in the ldquostructurerdquoldquostructurerdquo of the labor force which make certain ldquoskills obsoleterdquoldquoskills obsoleterdquo
AutomationAutomation may result in job lossesConsumer tasteConsumer taste may make a good ldquoobsoleterdquoThe autoauto reduced the need for carriage makers
Farm machineryFarm machinery reduced the need for farm laborersldquoldquoCreative destructionrdquoCreative destructionrdquo means as jobs are created other jobs are lost Jobs of the future destroy jobs oftoday Frictional and Structural make up the ldquonaturalldquonaturalrate of unemploymentrdquorate of unemploymentrdquo
ldquoldquoThese jobs do not come backrdquoThese jobs do not come backrdquoldquoldquoNon-transferable skillsrdquoNon-transferable skillsrdquo ndash choice is prolonged unemployment or retraining
3 CCyclical yclical UUnemploymentnemployment
CyclicalCyclical ndash ldquoldquoeconomiceconomic downturnsrdquo downturnsrdquo in the business cyclebusiness cycle
ldquoldquoCyclical fluctuationsrdquoCyclical fluctuationsrdquo caused by ldquodeficient ADrdquoldquodeficient ADrdquoldquoldquoDurable goods jobsrdquoDurable goods jobsrdquo are impacted the mostThese cancan be be postponedpostponed because they can be repairedcan be repairedldquoldquoCyclical unemploymentrdquoCyclical unemploymentrdquo is ldquoreal unemploymentrdquoldquoreal unemploymentrdquo
ldquoldquoThese jobs do come backrdquoThese jobs do come backrdquo
Cyclical UnemploymentCyclical UnemploymentldquoldquoThese jobs do come backrdquoThese jobs do come backrdquo
If Arnold S gets laid off producing autos he says
1 Chemical Engineering $565002 ElectricalElectronics Eng $5200933 Computer EngineeringComputer Engineering $51496 $5149644 Computer ScienceComputer Science $51292 $512925 Mechanical Engineering $510466 EconomicsEconomicsFinance $45000$450007 Accounting $445648 M8 Mgmtgmt I Info nfo SSysysBBus us DDataata P Processingrocessing $43732$437329 Civil Engineering9 Civil Engineering $43462 $4346210 Management Info Sys $4000011 Teaching11 Teaching $40600 $4060012 B12 Business usiness AAdmindminMMgmtgmt $39448 $3944813 Nursing $3877514 M14 MarketingarketingMMarketing arketing MMgmtgmt $36674 $3667415 Communications15 Communications $28000 $2800016 Psychology16 Psychology $27000 $27000
Top Paying College Majors for Top Paying College Majors for 20062006
EconEconEconEcon
Seasonal
Is it possible to have a 0 unemployment rate
bull Not likely At any one time the economy could not absorb ALL the people who wanted a job There is always some unemployment
ndash The best we could hope for is that there be no cyclical unemployment from the ups and downs of the economy
ndash There will always be some level of Frictional and Structural Unemployment
bull This is called The Natural Rate of Unemployment
GraphmdashNatural Rate of Unemployment
What is the natural rate of unemployment
bull The sum of frictional and structural unemployment
What is consideredFull Employment
bull An employment level at which the actual rate of unemployment is equal to the natural rate of unemploymentndash If the economy can get to this
definition of Full-employment it is doing the best that it can
copycopy1999 South-Western College Publishing
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Current Unemployment Rate
bull The current unemployment rate in the US is about 80 Is this good bad or just about right
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Frequency Annual Quarterly
Time2004 2005 2006 2006 2007
Q3-2006 Q4-2006 Q1-2007
Country
Australia i 55 51 49 48 46 45
Austria i 48 52 48 47 45 45
Belgium i 84 84 82 81 79 77
Canada i 72 68 63 64 62 61
Czech Republic i 83 79 72 71 66 63
Denmark i 55 48 39 37 36 34
Finland i 89 84 77 78 74 69
France i 96 97 94 93 91 88
Germany i 95 94 84 84 79 72
Greece i 105 99 89 87 86
Hungary i 61 72 75 76 77 8
Ireland i 45 43 44 44 42 4
Italy i 8 77 68 66 65
Japan i 47 44 41 41 41 4
Korea i 37 37 35 34 34 32
Luxembourg i 51 45 48 47 48 49
Netherlands i 46 47 39 39 37 35
New Zealand i 39 37 38 38 37 38
Norway i 44 46 35 33 29 27
Poland i 19 177 138 134 126 118
Portugal i 67 76 77 76 8 81
Slovak Republic i 182 162 134 131 124 111
Spain i 106 92 85 83 84 82
Sweden i 63 73 7 69 65 65
Switzerland i 44 45 4 39 38 37
United Kingdomi 47 48 53 54 54
Why do some other major economies have persistently higher unemployment rates than the US
bull Government policies are a major culprit
Unemployment Theories - Costs of Unemployment - Who paysPerhaps the main cost of unemployment is a personal one to those who are unemployed
However if they suffer then the whole economy suffers Individuals may become dispirited by unemployment they may lose their self-esteem and confidence This may affect their
motivation to work The longer they are unemployed the more they may lose their skills and this has to be bad for the economy as well On top of that these problems (and financial ones)
often lead to the unemployed being less healthy and then the NHS picks up the bill The whole economy suffers from people being unemployed
As well as these microeconomic effects there will also be macro effects These will include
Loss of output to the economy - the unemployed could be producing goods and services and if they arent then GDP is lower than it could be
Loss of tax revenue - unemployed people arent earning and they therefore arent paying tax The government has lost out
Increase in government expenditure - the government has to pay out benefits to support the unemployed Along with the loss of tax this is a double whammy
Loss of profits - with higher employment firms are likely to do better and make better profits If they make less profit because of unemployment they may have less funds to invest
The answer then is - we all pay
Survey on UnemploymentSurvey on Unemployment
BLS calls 60000 households every month BLS calls 60000 households every month They ask three questions 1 Are you working1 Are you working If the answer is nono 2 Did you work at all this month-even 1 dayDid you work at all this month-even 1 day You are a member of the LF if ldquoyesrdquoldquoyesrdquo on 1 or 2
3 Did you look for work during the last monthDid you look for work during the last month [agency resume interview] A ldquoyesrdquoldquoyesrdquo counts you aspart of the LFLF A ldquonordquoldquonordquo means you are not countednot countedYou are a ldquodiscouraged workerrdquoldquodiscouraged workerrdquo The labor force consists of the employedemployed and unemployedunemployed
What are some of the problems in measuring unemployment
bull Discouraged worker problembull Part time workersbull Dishonest workers
Who is aDiscouraged Worker
bull A person who drops out of the work force because he or she cannot find a job
copycopy1999 South-Western College Publishing
Are Discouraged Workers counted in the labor force
No People who have quit looking for work are not counted as part of the labor force
copycopy1999 South-Western College Publishing
What about part-time workers
bull Part time workers are counted as fully employed
ndash Whether you work one hour a week or 80 the govt counts you as employed
ndash Distorts the labor force picture
bull Example ndash is unemployment in the economy going down because the new jobs being created are part-time low skilled jobs or are they full-time high skill jobs
bull The quality of your economy depends on the answer to that question
Can the unemployment rate increase without anyone losing a
jobbull If more people enter the work force than the
number of new jobs generated the unemployment rate increases
copycopy1999 South-Western College Publishing
What are different types of unemployment
bull Frictionalbull Structuralbull Cyclicalbull Seasonal
copycopy1999 South-Western College Publishing
Three Types of UnemploymentThree Types of UnemploymentFrictionalFrictional ndash ldquotemporaryrdquo ldquotransitionalrdquo ldquoshort-termrdquo(ldquobetween jobsrdquo or ldquosearchrdquo unemployment)
Examples1 People who get ldquofiredrdquoldquofiredrdquo or ldquoquitrdquoldquoquitrdquo to look for a better one2 ldquoGraduatesrdquoldquoGraduatesrdquo from high school or college who are looking for a job3 ldquoSeasonalrdquoldquoSeasonalrdquo or weather-dependent jobs such as ldquoldquoagriculturalrdquoagriculturalrdquo ldquoconstructionrdquoldquoconstructionrdquo ldquoretailrdquoldquoretailrdquo or ldquotourismrdquoldquotourismrdquo [lifeguards resort workers Santas amp migrant workers]Frictional unemployment signals that ldquonew jobsrdquoldquonew jobsrdquo are availableand reflects ldquofreedom of choicerdquoldquofreedom of choicerdquo
These are qualified workers ldquotransferablerdquo skillsThese are qualified workers ldquotransferablerdquo skills
22 Structural Structural UnemploymentUnemploymentStructuralStructural ndash ldquotechnologicalrdquoldquotechnologicalrdquo or ldquolong termrdquoldquolong termrdquo There are basic changes in the ldquostructurerdquoldquostructurerdquo of the labor force which make certain ldquoskills obsoleterdquoldquoskills obsoleterdquo
AutomationAutomation may result in job lossesConsumer tasteConsumer taste may make a good ldquoobsoleterdquoThe autoauto reduced the need for carriage makers
Farm machineryFarm machinery reduced the need for farm laborersldquoldquoCreative destructionrdquoCreative destructionrdquo means as jobs are created other jobs are lost Jobs of the future destroy jobs oftoday Frictional and Structural make up the ldquonaturalldquonaturalrate of unemploymentrdquorate of unemploymentrdquo
ldquoldquoThese jobs do not come backrdquoThese jobs do not come backrdquoldquoldquoNon-transferable skillsrdquoNon-transferable skillsrdquo ndash choice is prolonged unemployment or retraining
3 CCyclical yclical UUnemploymentnemployment
CyclicalCyclical ndash ldquoldquoeconomiceconomic downturnsrdquo downturnsrdquo in the business cyclebusiness cycle
ldquoldquoCyclical fluctuationsrdquoCyclical fluctuationsrdquo caused by ldquodeficient ADrdquoldquodeficient ADrdquoldquoldquoDurable goods jobsrdquoDurable goods jobsrdquo are impacted the mostThese cancan be be postponedpostponed because they can be repairedcan be repairedldquoldquoCyclical unemploymentrdquoCyclical unemploymentrdquo is ldquoreal unemploymentrdquoldquoreal unemploymentrdquo
ldquoldquoThese jobs do come backrdquoThese jobs do come backrdquo
Cyclical UnemploymentCyclical UnemploymentldquoldquoThese jobs do come backrdquoThese jobs do come backrdquo
If Arnold S gets laid off producing autos he says
1 Chemical Engineering $565002 ElectricalElectronics Eng $5200933 Computer EngineeringComputer Engineering $51496 $5149644 Computer ScienceComputer Science $51292 $512925 Mechanical Engineering $510466 EconomicsEconomicsFinance $45000$450007 Accounting $445648 M8 Mgmtgmt I Info nfo SSysysBBus us DDataata P Processingrocessing $43732$437329 Civil Engineering9 Civil Engineering $43462 $4346210 Management Info Sys $4000011 Teaching11 Teaching $40600 $4060012 B12 Business usiness AAdmindminMMgmtgmt $39448 $3944813 Nursing $3877514 M14 MarketingarketingMMarketing arketing MMgmtgmt $36674 $3667415 Communications15 Communications $28000 $2800016 Psychology16 Psychology $27000 $27000
Top Paying College Majors for Top Paying College Majors for 20062006
EconEconEconEcon
Seasonal
Is it possible to have a 0 unemployment rate
bull Not likely At any one time the economy could not absorb ALL the people who wanted a job There is always some unemployment
ndash The best we could hope for is that there be no cyclical unemployment from the ups and downs of the economy
ndash There will always be some level of Frictional and Structural Unemployment
bull This is called The Natural Rate of Unemployment
GraphmdashNatural Rate of Unemployment
What is the natural rate of unemployment
bull The sum of frictional and structural unemployment
What is consideredFull Employment
bull An employment level at which the actual rate of unemployment is equal to the natural rate of unemploymentndash If the economy can get to this
definition of Full-employment it is doing the best that it can
copycopy1999 South-Western College Publishing
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Current Unemployment Rate
bull The current unemployment rate in the US is about 80 Is this good bad or just about right
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Frequency Annual Quarterly
Time2004 2005 2006 2006 2007
Q3-2006 Q4-2006 Q1-2007
Country
Australia i 55 51 49 48 46 45
Austria i 48 52 48 47 45 45
Belgium i 84 84 82 81 79 77
Canada i 72 68 63 64 62 61
Czech Republic i 83 79 72 71 66 63
Denmark i 55 48 39 37 36 34
Finland i 89 84 77 78 74 69
France i 96 97 94 93 91 88
Germany i 95 94 84 84 79 72
Greece i 105 99 89 87 86
Hungary i 61 72 75 76 77 8
Ireland i 45 43 44 44 42 4
Italy i 8 77 68 66 65
Japan i 47 44 41 41 41 4
Korea i 37 37 35 34 34 32
Luxembourg i 51 45 48 47 48 49
Netherlands i 46 47 39 39 37 35
New Zealand i 39 37 38 38 37 38
Norway i 44 46 35 33 29 27
Poland i 19 177 138 134 126 118
Portugal i 67 76 77 76 8 81
Slovak Republic i 182 162 134 131 124 111
Spain i 106 92 85 83 84 82
Sweden i 63 73 7 69 65 65
Switzerland i 44 45 4 39 38 37
United Kingdomi 47 48 53 54 54
Why do some other major economies have persistently higher unemployment rates than the US
bull Government policies are a major culprit
Unemployment Theories - Costs of Unemployment - Who paysPerhaps the main cost of unemployment is a personal one to those who are unemployed
However if they suffer then the whole economy suffers Individuals may become dispirited by unemployment they may lose their self-esteem and confidence This may affect their
motivation to work The longer they are unemployed the more they may lose their skills and this has to be bad for the economy as well On top of that these problems (and financial ones)
often lead to the unemployed being less healthy and then the NHS picks up the bill The whole economy suffers from people being unemployed
As well as these microeconomic effects there will also be macro effects These will include
Loss of output to the economy - the unemployed could be producing goods and services and if they arent then GDP is lower than it could be
Loss of tax revenue - unemployed people arent earning and they therefore arent paying tax The government has lost out
Increase in government expenditure - the government has to pay out benefits to support the unemployed Along with the loss of tax this is a double whammy
Loss of profits - with higher employment firms are likely to do better and make better profits If they make less profit because of unemployment they may have less funds to invest
The answer then is - we all pay
What are some of the problems in measuring unemployment
bull Discouraged worker problembull Part time workersbull Dishonest workers
Who is aDiscouraged Worker
bull A person who drops out of the work force because he or she cannot find a job
copycopy1999 South-Western College Publishing
Are Discouraged Workers counted in the labor force
No People who have quit looking for work are not counted as part of the labor force
copycopy1999 South-Western College Publishing
What about part-time workers
bull Part time workers are counted as fully employed
ndash Whether you work one hour a week or 80 the govt counts you as employed
ndash Distorts the labor force picture
bull Example ndash is unemployment in the economy going down because the new jobs being created are part-time low skilled jobs or are they full-time high skill jobs
bull The quality of your economy depends on the answer to that question
Can the unemployment rate increase without anyone losing a
jobbull If more people enter the work force than the
number of new jobs generated the unemployment rate increases
copycopy1999 South-Western College Publishing
What are different types of unemployment
bull Frictionalbull Structuralbull Cyclicalbull Seasonal
copycopy1999 South-Western College Publishing
Three Types of UnemploymentThree Types of UnemploymentFrictionalFrictional ndash ldquotemporaryrdquo ldquotransitionalrdquo ldquoshort-termrdquo(ldquobetween jobsrdquo or ldquosearchrdquo unemployment)
Examples1 People who get ldquofiredrdquoldquofiredrdquo or ldquoquitrdquoldquoquitrdquo to look for a better one2 ldquoGraduatesrdquoldquoGraduatesrdquo from high school or college who are looking for a job3 ldquoSeasonalrdquoldquoSeasonalrdquo or weather-dependent jobs such as ldquoldquoagriculturalrdquoagriculturalrdquo ldquoconstructionrdquoldquoconstructionrdquo ldquoretailrdquoldquoretailrdquo or ldquotourismrdquoldquotourismrdquo [lifeguards resort workers Santas amp migrant workers]Frictional unemployment signals that ldquonew jobsrdquoldquonew jobsrdquo are availableand reflects ldquofreedom of choicerdquoldquofreedom of choicerdquo
These are qualified workers ldquotransferablerdquo skillsThese are qualified workers ldquotransferablerdquo skills
22 Structural Structural UnemploymentUnemploymentStructuralStructural ndash ldquotechnologicalrdquoldquotechnologicalrdquo or ldquolong termrdquoldquolong termrdquo There are basic changes in the ldquostructurerdquoldquostructurerdquo of the labor force which make certain ldquoskills obsoleterdquoldquoskills obsoleterdquo
AutomationAutomation may result in job lossesConsumer tasteConsumer taste may make a good ldquoobsoleterdquoThe autoauto reduced the need for carriage makers
Farm machineryFarm machinery reduced the need for farm laborersldquoldquoCreative destructionrdquoCreative destructionrdquo means as jobs are created other jobs are lost Jobs of the future destroy jobs oftoday Frictional and Structural make up the ldquonaturalldquonaturalrate of unemploymentrdquorate of unemploymentrdquo
ldquoldquoThese jobs do not come backrdquoThese jobs do not come backrdquoldquoldquoNon-transferable skillsrdquoNon-transferable skillsrdquo ndash choice is prolonged unemployment or retraining
3 CCyclical yclical UUnemploymentnemployment
CyclicalCyclical ndash ldquoldquoeconomiceconomic downturnsrdquo downturnsrdquo in the business cyclebusiness cycle
ldquoldquoCyclical fluctuationsrdquoCyclical fluctuationsrdquo caused by ldquodeficient ADrdquoldquodeficient ADrdquoldquoldquoDurable goods jobsrdquoDurable goods jobsrdquo are impacted the mostThese cancan be be postponedpostponed because they can be repairedcan be repairedldquoldquoCyclical unemploymentrdquoCyclical unemploymentrdquo is ldquoreal unemploymentrdquoldquoreal unemploymentrdquo
ldquoldquoThese jobs do come backrdquoThese jobs do come backrdquo
Cyclical UnemploymentCyclical UnemploymentldquoldquoThese jobs do come backrdquoThese jobs do come backrdquo
If Arnold S gets laid off producing autos he says
1 Chemical Engineering $565002 ElectricalElectronics Eng $5200933 Computer EngineeringComputer Engineering $51496 $5149644 Computer ScienceComputer Science $51292 $512925 Mechanical Engineering $510466 EconomicsEconomicsFinance $45000$450007 Accounting $445648 M8 Mgmtgmt I Info nfo SSysysBBus us DDataata P Processingrocessing $43732$437329 Civil Engineering9 Civil Engineering $43462 $4346210 Management Info Sys $4000011 Teaching11 Teaching $40600 $4060012 B12 Business usiness AAdmindminMMgmtgmt $39448 $3944813 Nursing $3877514 M14 MarketingarketingMMarketing arketing MMgmtgmt $36674 $3667415 Communications15 Communications $28000 $2800016 Psychology16 Psychology $27000 $27000
Top Paying College Majors for Top Paying College Majors for 20062006
EconEconEconEcon
Seasonal
Is it possible to have a 0 unemployment rate
bull Not likely At any one time the economy could not absorb ALL the people who wanted a job There is always some unemployment
ndash The best we could hope for is that there be no cyclical unemployment from the ups and downs of the economy
ndash There will always be some level of Frictional and Structural Unemployment
bull This is called The Natural Rate of Unemployment
GraphmdashNatural Rate of Unemployment
What is the natural rate of unemployment
bull The sum of frictional and structural unemployment
What is consideredFull Employment
bull An employment level at which the actual rate of unemployment is equal to the natural rate of unemploymentndash If the economy can get to this
definition of Full-employment it is doing the best that it can
copycopy1999 South-Western College Publishing
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Current Unemployment Rate
bull The current unemployment rate in the US is about 80 Is this good bad or just about right
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Frequency Annual Quarterly
Time2004 2005 2006 2006 2007
Q3-2006 Q4-2006 Q1-2007
Country
Australia i 55 51 49 48 46 45
Austria i 48 52 48 47 45 45
Belgium i 84 84 82 81 79 77
Canada i 72 68 63 64 62 61
Czech Republic i 83 79 72 71 66 63
Denmark i 55 48 39 37 36 34
Finland i 89 84 77 78 74 69
France i 96 97 94 93 91 88
Germany i 95 94 84 84 79 72
Greece i 105 99 89 87 86
Hungary i 61 72 75 76 77 8
Ireland i 45 43 44 44 42 4
Italy i 8 77 68 66 65
Japan i 47 44 41 41 41 4
Korea i 37 37 35 34 34 32
Luxembourg i 51 45 48 47 48 49
Netherlands i 46 47 39 39 37 35
New Zealand i 39 37 38 38 37 38
Norway i 44 46 35 33 29 27
Poland i 19 177 138 134 126 118
Portugal i 67 76 77 76 8 81
Slovak Republic i 182 162 134 131 124 111
Spain i 106 92 85 83 84 82
Sweden i 63 73 7 69 65 65
Switzerland i 44 45 4 39 38 37
United Kingdomi 47 48 53 54 54
Why do some other major economies have persistently higher unemployment rates than the US
bull Government policies are a major culprit
Unemployment Theories - Costs of Unemployment - Who paysPerhaps the main cost of unemployment is a personal one to those who are unemployed
However if they suffer then the whole economy suffers Individuals may become dispirited by unemployment they may lose their self-esteem and confidence This may affect their
motivation to work The longer they are unemployed the more they may lose their skills and this has to be bad for the economy as well On top of that these problems (and financial ones)
often lead to the unemployed being less healthy and then the NHS picks up the bill The whole economy suffers from people being unemployed
As well as these microeconomic effects there will also be macro effects These will include
Loss of output to the economy - the unemployed could be producing goods and services and if they arent then GDP is lower than it could be
Loss of tax revenue - unemployed people arent earning and they therefore arent paying tax The government has lost out
Increase in government expenditure - the government has to pay out benefits to support the unemployed Along with the loss of tax this is a double whammy
Loss of profits - with higher employment firms are likely to do better and make better profits If they make less profit because of unemployment they may have less funds to invest
The answer then is - we all pay
Who is aDiscouraged Worker
bull A person who drops out of the work force because he or she cannot find a job
copycopy1999 South-Western College Publishing
Are Discouraged Workers counted in the labor force
No People who have quit looking for work are not counted as part of the labor force
copycopy1999 South-Western College Publishing
What about part-time workers
bull Part time workers are counted as fully employed
ndash Whether you work one hour a week or 80 the govt counts you as employed
ndash Distorts the labor force picture
bull Example ndash is unemployment in the economy going down because the new jobs being created are part-time low skilled jobs or are they full-time high skill jobs
bull The quality of your economy depends on the answer to that question
Can the unemployment rate increase without anyone losing a
jobbull If more people enter the work force than the
number of new jobs generated the unemployment rate increases
copycopy1999 South-Western College Publishing
What are different types of unemployment
bull Frictionalbull Structuralbull Cyclicalbull Seasonal
copycopy1999 South-Western College Publishing
Three Types of UnemploymentThree Types of UnemploymentFrictionalFrictional ndash ldquotemporaryrdquo ldquotransitionalrdquo ldquoshort-termrdquo(ldquobetween jobsrdquo or ldquosearchrdquo unemployment)
Examples1 People who get ldquofiredrdquoldquofiredrdquo or ldquoquitrdquoldquoquitrdquo to look for a better one2 ldquoGraduatesrdquoldquoGraduatesrdquo from high school or college who are looking for a job3 ldquoSeasonalrdquoldquoSeasonalrdquo or weather-dependent jobs such as ldquoldquoagriculturalrdquoagriculturalrdquo ldquoconstructionrdquoldquoconstructionrdquo ldquoretailrdquoldquoretailrdquo or ldquotourismrdquoldquotourismrdquo [lifeguards resort workers Santas amp migrant workers]Frictional unemployment signals that ldquonew jobsrdquoldquonew jobsrdquo are availableand reflects ldquofreedom of choicerdquoldquofreedom of choicerdquo
These are qualified workers ldquotransferablerdquo skillsThese are qualified workers ldquotransferablerdquo skills
22 Structural Structural UnemploymentUnemploymentStructuralStructural ndash ldquotechnologicalrdquoldquotechnologicalrdquo or ldquolong termrdquoldquolong termrdquo There are basic changes in the ldquostructurerdquoldquostructurerdquo of the labor force which make certain ldquoskills obsoleterdquoldquoskills obsoleterdquo
AutomationAutomation may result in job lossesConsumer tasteConsumer taste may make a good ldquoobsoleterdquoThe autoauto reduced the need for carriage makers
Farm machineryFarm machinery reduced the need for farm laborersldquoldquoCreative destructionrdquoCreative destructionrdquo means as jobs are created other jobs are lost Jobs of the future destroy jobs oftoday Frictional and Structural make up the ldquonaturalldquonaturalrate of unemploymentrdquorate of unemploymentrdquo
ldquoldquoThese jobs do not come backrdquoThese jobs do not come backrdquoldquoldquoNon-transferable skillsrdquoNon-transferable skillsrdquo ndash choice is prolonged unemployment or retraining
3 CCyclical yclical UUnemploymentnemployment
CyclicalCyclical ndash ldquoldquoeconomiceconomic downturnsrdquo downturnsrdquo in the business cyclebusiness cycle
ldquoldquoCyclical fluctuationsrdquoCyclical fluctuationsrdquo caused by ldquodeficient ADrdquoldquodeficient ADrdquoldquoldquoDurable goods jobsrdquoDurable goods jobsrdquo are impacted the mostThese cancan be be postponedpostponed because they can be repairedcan be repairedldquoldquoCyclical unemploymentrdquoCyclical unemploymentrdquo is ldquoreal unemploymentrdquoldquoreal unemploymentrdquo
ldquoldquoThese jobs do come backrdquoThese jobs do come backrdquo
Cyclical UnemploymentCyclical UnemploymentldquoldquoThese jobs do come backrdquoThese jobs do come backrdquo
If Arnold S gets laid off producing autos he says
1 Chemical Engineering $565002 ElectricalElectronics Eng $5200933 Computer EngineeringComputer Engineering $51496 $5149644 Computer ScienceComputer Science $51292 $512925 Mechanical Engineering $510466 EconomicsEconomicsFinance $45000$450007 Accounting $445648 M8 Mgmtgmt I Info nfo SSysysBBus us DDataata P Processingrocessing $43732$437329 Civil Engineering9 Civil Engineering $43462 $4346210 Management Info Sys $4000011 Teaching11 Teaching $40600 $4060012 B12 Business usiness AAdmindminMMgmtgmt $39448 $3944813 Nursing $3877514 M14 MarketingarketingMMarketing arketing MMgmtgmt $36674 $3667415 Communications15 Communications $28000 $2800016 Psychology16 Psychology $27000 $27000
Top Paying College Majors for Top Paying College Majors for 20062006
EconEconEconEcon
Seasonal
Is it possible to have a 0 unemployment rate
bull Not likely At any one time the economy could not absorb ALL the people who wanted a job There is always some unemployment
ndash The best we could hope for is that there be no cyclical unemployment from the ups and downs of the economy
ndash There will always be some level of Frictional and Structural Unemployment
bull This is called The Natural Rate of Unemployment
GraphmdashNatural Rate of Unemployment
What is the natural rate of unemployment
bull The sum of frictional and structural unemployment
What is consideredFull Employment
bull An employment level at which the actual rate of unemployment is equal to the natural rate of unemploymentndash If the economy can get to this
definition of Full-employment it is doing the best that it can
copycopy1999 South-Western College Publishing
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Current Unemployment Rate
bull The current unemployment rate in the US is about 80 Is this good bad or just about right
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Frequency Annual Quarterly
Time2004 2005 2006 2006 2007
Q3-2006 Q4-2006 Q1-2007
Country
Australia i 55 51 49 48 46 45
Austria i 48 52 48 47 45 45
Belgium i 84 84 82 81 79 77
Canada i 72 68 63 64 62 61
Czech Republic i 83 79 72 71 66 63
Denmark i 55 48 39 37 36 34
Finland i 89 84 77 78 74 69
France i 96 97 94 93 91 88
Germany i 95 94 84 84 79 72
Greece i 105 99 89 87 86
Hungary i 61 72 75 76 77 8
Ireland i 45 43 44 44 42 4
Italy i 8 77 68 66 65
Japan i 47 44 41 41 41 4
Korea i 37 37 35 34 34 32
Luxembourg i 51 45 48 47 48 49
Netherlands i 46 47 39 39 37 35
New Zealand i 39 37 38 38 37 38
Norway i 44 46 35 33 29 27
Poland i 19 177 138 134 126 118
Portugal i 67 76 77 76 8 81
Slovak Republic i 182 162 134 131 124 111
Spain i 106 92 85 83 84 82
Sweden i 63 73 7 69 65 65
Switzerland i 44 45 4 39 38 37
United Kingdomi 47 48 53 54 54
Why do some other major economies have persistently higher unemployment rates than the US
bull Government policies are a major culprit
Unemployment Theories - Costs of Unemployment - Who paysPerhaps the main cost of unemployment is a personal one to those who are unemployed
However if they suffer then the whole economy suffers Individuals may become dispirited by unemployment they may lose their self-esteem and confidence This may affect their
motivation to work The longer they are unemployed the more they may lose their skills and this has to be bad for the economy as well On top of that these problems (and financial ones)
often lead to the unemployed being less healthy and then the NHS picks up the bill The whole economy suffers from people being unemployed
As well as these microeconomic effects there will also be macro effects These will include
Loss of output to the economy - the unemployed could be producing goods and services and if they arent then GDP is lower than it could be
Loss of tax revenue - unemployed people arent earning and they therefore arent paying tax The government has lost out
Increase in government expenditure - the government has to pay out benefits to support the unemployed Along with the loss of tax this is a double whammy
Loss of profits - with higher employment firms are likely to do better and make better profits If they make less profit because of unemployment they may have less funds to invest
The answer then is - we all pay
Are Discouraged Workers counted in the labor force
No People who have quit looking for work are not counted as part of the labor force
copycopy1999 South-Western College Publishing
What about part-time workers
bull Part time workers are counted as fully employed
ndash Whether you work one hour a week or 80 the govt counts you as employed
ndash Distorts the labor force picture
bull Example ndash is unemployment in the economy going down because the new jobs being created are part-time low skilled jobs or are they full-time high skill jobs
bull The quality of your economy depends on the answer to that question
Can the unemployment rate increase without anyone losing a
jobbull If more people enter the work force than the
number of new jobs generated the unemployment rate increases
copycopy1999 South-Western College Publishing
What are different types of unemployment
bull Frictionalbull Structuralbull Cyclicalbull Seasonal
copycopy1999 South-Western College Publishing
Three Types of UnemploymentThree Types of UnemploymentFrictionalFrictional ndash ldquotemporaryrdquo ldquotransitionalrdquo ldquoshort-termrdquo(ldquobetween jobsrdquo or ldquosearchrdquo unemployment)
Examples1 People who get ldquofiredrdquoldquofiredrdquo or ldquoquitrdquoldquoquitrdquo to look for a better one2 ldquoGraduatesrdquoldquoGraduatesrdquo from high school or college who are looking for a job3 ldquoSeasonalrdquoldquoSeasonalrdquo or weather-dependent jobs such as ldquoldquoagriculturalrdquoagriculturalrdquo ldquoconstructionrdquoldquoconstructionrdquo ldquoretailrdquoldquoretailrdquo or ldquotourismrdquoldquotourismrdquo [lifeguards resort workers Santas amp migrant workers]Frictional unemployment signals that ldquonew jobsrdquoldquonew jobsrdquo are availableand reflects ldquofreedom of choicerdquoldquofreedom of choicerdquo
These are qualified workers ldquotransferablerdquo skillsThese are qualified workers ldquotransferablerdquo skills
22 Structural Structural UnemploymentUnemploymentStructuralStructural ndash ldquotechnologicalrdquoldquotechnologicalrdquo or ldquolong termrdquoldquolong termrdquo There are basic changes in the ldquostructurerdquoldquostructurerdquo of the labor force which make certain ldquoskills obsoleterdquoldquoskills obsoleterdquo
AutomationAutomation may result in job lossesConsumer tasteConsumer taste may make a good ldquoobsoleterdquoThe autoauto reduced the need for carriage makers
Farm machineryFarm machinery reduced the need for farm laborersldquoldquoCreative destructionrdquoCreative destructionrdquo means as jobs are created other jobs are lost Jobs of the future destroy jobs oftoday Frictional and Structural make up the ldquonaturalldquonaturalrate of unemploymentrdquorate of unemploymentrdquo
ldquoldquoThese jobs do not come backrdquoThese jobs do not come backrdquoldquoldquoNon-transferable skillsrdquoNon-transferable skillsrdquo ndash choice is prolonged unemployment or retraining
3 CCyclical yclical UUnemploymentnemployment
CyclicalCyclical ndash ldquoldquoeconomiceconomic downturnsrdquo downturnsrdquo in the business cyclebusiness cycle
ldquoldquoCyclical fluctuationsrdquoCyclical fluctuationsrdquo caused by ldquodeficient ADrdquoldquodeficient ADrdquoldquoldquoDurable goods jobsrdquoDurable goods jobsrdquo are impacted the mostThese cancan be be postponedpostponed because they can be repairedcan be repairedldquoldquoCyclical unemploymentrdquoCyclical unemploymentrdquo is ldquoreal unemploymentrdquoldquoreal unemploymentrdquo
ldquoldquoThese jobs do come backrdquoThese jobs do come backrdquo
Cyclical UnemploymentCyclical UnemploymentldquoldquoThese jobs do come backrdquoThese jobs do come backrdquo
If Arnold S gets laid off producing autos he says
1 Chemical Engineering $565002 ElectricalElectronics Eng $5200933 Computer EngineeringComputer Engineering $51496 $5149644 Computer ScienceComputer Science $51292 $512925 Mechanical Engineering $510466 EconomicsEconomicsFinance $45000$450007 Accounting $445648 M8 Mgmtgmt I Info nfo SSysysBBus us DDataata P Processingrocessing $43732$437329 Civil Engineering9 Civil Engineering $43462 $4346210 Management Info Sys $4000011 Teaching11 Teaching $40600 $4060012 B12 Business usiness AAdmindminMMgmtgmt $39448 $3944813 Nursing $3877514 M14 MarketingarketingMMarketing arketing MMgmtgmt $36674 $3667415 Communications15 Communications $28000 $2800016 Psychology16 Psychology $27000 $27000
Top Paying College Majors for Top Paying College Majors for 20062006
EconEconEconEcon
Seasonal
Is it possible to have a 0 unemployment rate
bull Not likely At any one time the economy could not absorb ALL the people who wanted a job There is always some unemployment
ndash The best we could hope for is that there be no cyclical unemployment from the ups and downs of the economy
ndash There will always be some level of Frictional and Structural Unemployment
bull This is called The Natural Rate of Unemployment
GraphmdashNatural Rate of Unemployment
What is the natural rate of unemployment
bull The sum of frictional and structural unemployment
What is consideredFull Employment
bull An employment level at which the actual rate of unemployment is equal to the natural rate of unemploymentndash If the economy can get to this
definition of Full-employment it is doing the best that it can
copycopy1999 South-Western College Publishing
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Current Unemployment Rate
bull The current unemployment rate in the US is about 80 Is this good bad or just about right
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Frequency Annual Quarterly
Time2004 2005 2006 2006 2007
Q3-2006 Q4-2006 Q1-2007
Country
Australia i 55 51 49 48 46 45
Austria i 48 52 48 47 45 45
Belgium i 84 84 82 81 79 77
Canada i 72 68 63 64 62 61
Czech Republic i 83 79 72 71 66 63
Denmark i 55 48 39 37 36 34
Finland i 89 84 77 78 74 69
France i 96 97 94 93 91 88
Germany i 95 94 84 84 79 72
Greece i 105 99 89 87 86
Hungary i 61 72 75 76 77 8
Ireland i 45 43 44 44 42 4
Italy i 8 77 68 66 65
Japan i 47 44 41 41 41 4
Korea i 37 37 35 34 34 32
Luxembourg i 51 45 48 47 48 49
Netherlands i 46 47 39 39 37 35
New Zealand i 39 37 38 38 37 38
Norway i 44 46 35 33 29 27
Poland i 19 177 138 134 126 118
Portugal i 67 76 77 76 8 81
Slovak Republic i 182 162 134 131 124 111
Spain i 106 92 85 83 84 82
Sweden i 63 73 7 69 65 65
Switzerland i 44 45 4 39 38 37
United Kingdomi 47 48 53 54 54
Why do some other major economies have persistently higher unemployment rates than the US
bull Government policies are a major culprit
Unemployment Theories - Costs of Unemployment - Who paysPerhaps the main cost of unemployment is a personal one to those who are unemployed
However if they suffer then the whole economy suffers Individuals may become dispirited by unemployment they may lose their self-esteem and confidence This may affect their
motivation to work The longer they are unemployed the more they may lose their skills and this has to be bad for the economy as well On top of that these problems (and financial ones)
often lead to the unemployed being less healthy and then the NHS picks up the bill The whole economy suffers from people being unemployed
As well as these microeconomic effects there will also be macro effects These will include
Loss of output to the economy - the unemployed could be producing goods and services and if they arent then GDP is lower than it could be
Loss of tax revenue - unemployed people arent earning and they therefore arent paying tax The government has lost out
Increase in government expenditure - the government has to pay out benefits to support the unemployed Along with the loss of tax this is a double whammy
Loss of profits - with higher employment firms are likely to do better and make better profits If they make less profit because of unemployment they may have less funds to invest
The answer then is - we all pay
What about part-time workers
bull Part time workers are counted as fully employed
ndash Whether you work one hour a week or 80 the govt counts you as employed
ndash Distorts the labor force picture
bull Example ndash is unemployment in the economy going down because the new jobs being created are part-time low skilled jobs or are they full-time high skill jobs
bull The quality of your economy depends on the answer to that question
Can the unemployment rate increase without anyone losing a
jobbull If more people enter the work force than the
number of new jobs generated the unemployment rate increases
copycopy1999 South-Western College Publishing
What are different types of unemployment
bull Frictionalbull Structuralbull Cyclicalbull Seasonal
copycopy1999 South-Western College Publishing
Three Types of UnemploymentThree Types of UnemploymentFrictionalFrictional ndash ldquotemporaryrdquo ldquotransitionalrdquo ldquoshort-termrdquo(ldquobetween jobsrdquo or ldquosearchrdquo unemployment)
Examples1 People who get ldquofiredrdquoldquofiredrdquo or ldquoquitrdquoldquoquitrdquo to look for a better one2 ldquoGraduatesrdquoldquoGraduatesrdquo from high school or college who are looking for a job3 ldquoSeasonalrdquoldquoSeasonalrdquo or weather-dependent jobs such as ldquoldquoagriculturalrdquoagriculturalrdquo ldquoconstructionrdquoldquoconstructionrdquo ldquoretailrdquoldquoretailrdquo or ldquotourismrdquoldquotourismrdquo [lifeguards resort workers Santas amp migrant workers]Frictional unemployment signals that ldquonew jobsrdquoldquonew jobsrdquo are availableand reflects ldquofreedom of choicerdquoldquofreedom of choicerdquo
These are qualified workers ldquotransferablerdquo skillsThese are qualified workers ldquotransferablerdquo skills
22 Structural Structural UnemploymentUnemploymentStructuralStructural ndash ldquotechnologicalrdquoldquotechnologicalrdquo or ldquolong termrdquoldquolong termrdquo There are basic changes in the ldquostructurerdquoldquostructurerdquo of the labor force which make certain ldquoskills obsoleterdquoldquoskills obsoleterdquo
AutomationAutomation may result in job lossesConsumer tasteConsumer taste may make a good ldquoobsoleterdquoThe autoauto reduced the need for carriage makers
Farm machineryFarm machinery reduced the need for farm laborersldquoldquoCreative destructionrdquoCreative destructionrdquo means as jobs are created other jobs are lost Jobs of the future destroy jobs oftoday Frictional and Structural make up the ldquonaturalldquonaturalrate of unemploymentrdquorate of unemploymentrdquo
ldquoldquoThese jobs do not come backrdquoThese jobs do not come backrdquoldquoldquoNon-transferable skillsrdquoNon-transferable skillsrdquo ndash choice is prolonged unemployment or retraining
3 CCyclical yclical UUnemploymentnemployment
CyclicalCyclical ndash ldquoldquoeconomiceconomic downturnsrdquo downturnsrdquo in the business cyclebusiness cycle
ldquoldquoCyclical fluctuationsrdquoCyclical fluctuationsrdquo caused by ldquodeficient ADrdquoldquodeficient ADrdquoldquoldquoDurable goods jobsrdquoDurable goods jobsrdquo are impacted the mostThese cancan be be postponedpostponed because they can be repairedcan be repairedldquoldquoCyclical unemploymentrdquoCyclical unemploymentrdquo is ldquoreal unemploymentrdquoldquoreal unemploymentrdquo
ldquoldquoThese jobs do come backrdquoThese jobs do come backrdquo
Cyclical UnemploymentCyclical UnemploymentldquoldquoThese jobs do come backrdquoThese jobs do come backrdquo
If Arnold S gets laid off producing autos he says
1 Chemical Engineering $565002 ElectricalElectronics Eng $5200933 Computer EngineeringComputer Engineering $51496 $5149644 Computer ScienceComputer Science $51292 $512925 Mechanical Engineering $510466 EconomicsEconomicsFinance $45000$450007 Accounting $445648 M8 Mgmtgmt I Info nfo SSysysBBus us DDataata P Processingrocessing $43732$437329 Civil Engineering9 Civil Engineering $43462 $4346210 Management Info Sys $4000011 Teaching11 Teaching $40600 $4060012 B12 Business usiness AAdmindminMMgmtgmt $39448 $3944813 Nursing $3877514 M14 MarketingarketingMMarketing arketing MMgmtgmt $36674 $3667415 Communications15 Communications $28000 $2800016 Psychology16 Psychology $27000 $27000
Top Paying College Majors for Top Paying College Majors for 20062006
EconEconEconEcon
Seasonal
Is it possible to have a 0 unemployment rate
bull Not likely At any one time the economy could not absorb ALL the people who wanted a job There is always some unemployment
ndash The best we could hope for is that there be no cyclical unemployment from the ups and downs of the economy
ndash There will always be some level of Frictional and Structural Unemployment
bull This is called The Natural Rate of Unemployment
GraphmdashNatural Rate of Unemployment
What is the natural rate of unemployment
bull The sum of frictional and structural unemployment
What is consideredFull Employment
bull An employment level at which the actual rate of unemployment is equal to the natural rate of unemploymentndash If the economy can get to this
definition of Full-employment it is doing the best that it can
copycopy1999 South-Western College Publishing
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Current Unemployment Rate
bull The current unemployment rate in the US is about 80 Is this good bad or just about right
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Frequency Annual Quarterly
Time2004 2005 2006 2006 2007
Q3-2006 Q4-2006 Q1-2007
Country
Australia i 55 51 49 48 46 45
Austria i 48 52 48 47 45 45
Belgium i 84 84 82 81 79 77
Canada i 72 68 63 64 62 61
Czech Republic i 83 79 72 71 66 63
Denmark i 55 48 39 37 36 34
Finland i 89 84 77 78 74 69
France i 96 97 94 93 91 88
Germany i 95 94 84 84 79 72
Greece i 105 99 89 87 86
Hungary i 61 72 75 76 77 8
Ireland i 45 43 44 44 42 4
Italy i 8 77 68 66 65
Japan i 47 44 41 41 41 4
Korea i 37 37 35 34 34 32
Luxembourg i 51 45 48 47 48 49
Netherlands i 46 47 39 39 37 35
New Zealand i 39 37 38 38 37 38
Norway i 44 46 35 33 29 27
Poland i 19 177 138 134 126 118
Portugal i 67 76 77 76 8 81
Slovak Republic i 182 162 134 131 124 111
Spain i 106 92 85 83 84 82
Sweden i 63 73 7 69 65 65
Switzerland i 44 45 4 39 38 37
United Kingdomi 47 48 53 54 54
Why do some other major economies have persistently higher unemployment rates than the US
bull Government policies are a major culprit
Unemployment Theories - Costs of Unemployment - Who paysPerhaps the main cost of unemployment is a personal one to those who are unemployed
However if they suffer then the whole economy suffers Individuals may become dispirited by unemployment they may lose their self-esteem and confidence This may affect their
motivation to work The longer they are unemployed the more they may lose their skills and this has to be bad for the economy as well On top of that these problems (and financial ones)
often lead to the unemployed being less healthy and then the NHS picks up the bill The whole economy suffers from people being unemployed
As well as these microeconomic effects there will also be macro effects These will include
Loss of output to the economy - the unemployed could be producing goods and services and if they arent then GDP is lower than it could be
Loss of tax revenue - unemployed people arent earning and they therefore arent paying tax The government has lost out
Increase in government expenditure - the government has to pay out benefits to support the unemployed Along with the loss of tax this is a double whammy
Loss of profits - with higher employment firms are likely to do better and make better profits If they make less profit because of unemployment they may have less funds to invest
The answer then is - we all pay
Can the unemployment rate increase without anyone losing a
jobbull If more people enter the work force than the
number of new jobs generated the unemployment rate increases
copycopy1999 South-Western College Publishing
What are different types of unemployment
bull Frictionalbull Structuralbull Cyclicalbull Seasonal
copycopy1999 South-Western College Publishing
Three Types of UnemploymentThree Types of UnemploymentFrictionalFrictional ndash ldquotemporaryrdquo ldquotransitionalrdquo ldquoshort-termrdquo(ldquobetween jobsrdquo or ldquosearchrdquo unemployment)
Examples1 People who get ldquofiredrdquoldquofiredrdquo or ldquoquitrdquoldquoquitrdquo to look for a better one2 ldquoGraduatesrdquoldquoGraduatesrdquo from high school or college who are looking for a job3 ldquoSeasonalrdquoldquoSeasonalrdquo or weather-dependent jobs such as ldquoldquoagriculturalrdquoagriculturalrdquo ldquoconstructionrdquoldquoconstructionrdquo ldquoretailrdquoldquoretailrdquo or ldquotourismrdquoldquotourismrdquo [lifeguards resort workers Santas amp migrant workers]Frictional unemployment signals that ldquonew jobsrdquoldquonew jobsrdquo are availableand reflects ldquofreedom of choicerdquoldquofreedom of choicerdquo
These are qualified workers ldquotransferablerdquo skillsThese are qualified workers ldquotransferablerdquo skills
22 Structural Structural UnemploymentUnemploymentStructuralStructural ndash ldquotechnologicalrdquoldquotechnologicalrdquo or ldquolong termrdquoldquolong termrdquo There are basic changes in the ldquostructurerdquoldquostructurerdquo of the labor force which make certain ldquoskills obsoleterdquoldquoskills obsoleterdquo
AutomationAutomation may result in job lossesConsumer tasteConsumer taste may make a good ldquoobsoleterdquoThe autoauto reduced the need for carriage makers
Farm machineryFarm machinery reduced the need for farm laborersldquoldquoCreative destructionrdquoCreative destructionrdquo means as jobs are created other jobs are lost Jobs of the future destroy jobs oftoday Frictional and Structural make up the ldquonaturalldquonaturalrate of unemploymentrdquorate of unemploymentrdquo
ldquoldquoThese jobs do not come backrdquoThese jobs do not come backrdquoldquoldquoNon-transferable skillsrdquoNon-transferable skillsrdquo ndash choice is prolonged unemployment or retraining
3 CCyclical yclical UUnemploymentnemployment
CyclicalCyclical ndash ldquoldquoeconomiceconomic downturnsrdquo downturnsrdquo in the business cyclebusiness cycle
ldquoldquoCyclical fluctuationsrdquoCyclical fluctuationsrdquo caused by ldquodeficient ADrdquoldquodeficient ADrdquoldquoldquoDurable goods jobsrdquoDurable goods jobsrdquo are impacted the mostThese cancan be be postponedpostponed because they can be repairedcan be repairedldquoldquoCyclical unemploymentrdquoCyclical unemploymentrdquo is ldquoreal unemploymentrdquoldquoreal unemploymentrdquo
ldquoldquoThese jobs do come backrdquoThese jobs do come backrdquo
Cyclical UnemploymentCyclical UnemploymentldquoldquoThese jobs do come backrdquoThese jobs do come backrdquo
If Arnold S gets laid off producing autos he says
1 Chemical Engineering $565002 ElectricalElectronics Eng $5200933 Computer EngineeringComputer Engineering $51496 $5149644 Computer ScienceComputer Science $51292 $512925 Mechanical Engineering $510466 EconomicsEconomicsFinance $45000$450007 Accounting $445648 M8 Mgmtgmt I Info nfo SSysysBBus us DDataata P Processingrocessing $43732$437329 Civil Engineering9 Civil Engineering $43462 $4346210 Management Info Sys $4000011 Teaching11 Teaching $40600 $4060012 B12 Business usiness AAdmindminMMgmtgmt $39448 $3944813 Nursing $3877514 M14 MarketingarketingMMarketing arketing MMgmtgmt $36674 $3667415 Communications15 Communications $28000 $2800016 Psychology16 Psychology $27000 $27000
Top Paying College Majors for Top Paying College Majors for 20062006
EconEconEconEcon
Seasonal
Is it possible to have a 0 unemployment rate
bull Not likely At any one time the economy could not absorb ALL the people who wanted a job There is always some unemployment
ndash The best we could hope for is that there be no cyclical unemployment from the ups and downs of the economy
ndash There will always be some level of Frictional and Structural Unemployment
bull This is called The Natural Rate of Unemployment
GraphmdashNatural Rate of Unemployment
What is the natural rate of unemployment
bull The sum of frictional and structural unemployment
What is consideredFull Employment
bull An employment level at which the actual rate of unemployment is equal to the natural rate of unemploymentndash If the economy can get to this
definition of Full-employment it is doing the best that it can
copycopy1999 South-Western College Publishing
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Current Unemployment Rate
bull The current unemployment rate in the US is about 80 Is this good bad or just about right
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Frequency Annual Quarterly
Time2004 2005 2006 2006 2007
Q3-2006 Q4-2006 Q1-2007
Country
Australia i 55 51 49 48 46 45
Austria i 48 52 48 47 45 45
Belgium i 84 84 82 81 79 77
Canada i 72 68 63 64 62 61
Czech Republic i 83 79 72 71 66 63
Denmark i 55 48 39 37 36 34
Finland i 89 84 77 78 74 69
France i 96 97 94 93 91 88
Germany i 95 94 84 84 79 72
Greece i 105 99 89 87 86
Hungary i 61 72 75 76 77 8
Ireland i 45 43 44 44 42 4
Italy i 8 77 68 66 65
Japan i 47 44 41 41 41 4
Korea i 37 37 35 34 34 32
Luxembourg i 51 45 48 47 48 49
Netherlands i 46 47 39 39 37 35
New Zealand i 39 37 38 38 37 38
Norway i 44 46 35 33 29 27
Poland i 19 177 138 134 126 118
Portugal i 67 76 77 76 8 81
Slovak Republic i 182 162 134 131 124 111
Spain i 106 92 85 83 84 82
Sweden i 63 73 7 69 65 65
Switzerland i 44 45 4 39 38 37
United Kingdomi 47 48 53 54 54
Why do some other major economies have persistently higher unemployment rates than the US
bull Government policies are a major culprit
Unemployment Theories - Costs of Unemployment - Who paysPerhaps the main cost of unemployment is a personal one to those who are unemployed
However if they suffer then the whole economy suffers Individuals may become dispirited by unemployment they may lose their self-esteem and confidence This may affect their
motivation to work The longer they are unemployed the more they may lose their skills and this has to be bad for the economy as well On top of that these problems (and financial ones)
often lead to the unemployed being less healthy and then the NHS picks up the bill The whole economy suffers from people being unemployed
As well as these microeconomic effects there will also be macro effects These will include
Loss of output to the economy - the unemployed could be producing goods and services and if they arent then GDP is lower than it could be
Loss of tax revenue - unemployed people arent earning and they therefore arent paying tax The government has lost out
Increase in government expenditure - the government has to pay out benefits to support the unemployed Along with the loss of tax this is a double whammy
Loss of profits - with higher employment firms are likely to do better and make better profits If they make less profit because of unemployment they may have less funds to invest
The answer then is - we all pay
What are different types of unemployment
bull Frictionalbull Structuralbull Cyclicalbull Seasonal
copycopy1999 South-Western College Publishing
Three Types of UnemploymentThree Types of UnemploymentFrictionalFrictional ndash ldquotemporaryrdquo ldquotransitionalrdquo ldquoshort-termrdquo(ldquobetween jobsrdquo or ldquosearchrdquo unemployment)
Examples1 People who get ldquofiredrdquoldquofiredrdquo or ldquoquitrdquoldquoquitrdquo to look for a better one2 ldquoGraduatesrdquoldquoGraduatesrdquo from high school or college who are looking for a job3 ldquoSeasonalrdquoldquoSeasonalrdquo or weather-dependent jobs such as ldquoldquoagriculturalrdquoagriculturalrdquo ldquoconstructionrdquoldquoconstructionrdquo ldquoretailrdquoldquoretailrdquo or ldquotourismrdquoldquotourismrdquo [lifeguards resort workers Santas amp migrant workers]Frictional unemployment signals that ldquonew jobsrdquoldquonew jobsrdquo are availableand reflects ldquofreedom of choicerdquoldquofreedom of choicerdquo
These are qualified workers ldquotransferablerdquo skillsThese are qualified workers ldquotransferablerdquo skills
22 Structural Structural UnemploymentUnemploymentStructuralStructural ndash ldquotechnologicalrdquoldquotechnologicalrdquo or ldquolong termrdquoldquolong termrdquo There are basic changes in the ldquostructurerdquoldquostructurerdquo of the labor force which make certain ldquoskills obsoleterdquoldquoskills obsoleterdquo
AutomationAutomation may result in job lossesConsumer tasteConsumer taste may make a good ldquoobsoleterdquoThe autoauto reduced the need for carriage makers
Farm machineryFarm machinery reduced the need for farm laborersldquoldquoCreative destructionrdquoCreative destructionrdquo means as jobs are created other jobs are lost Jobs of the future destroy jobs oftoday Frictional and Structural make up the ldquonaturalldquonaturalrate of unemploymentrdquorate of unemploymentrdquo
ldquoldquoThese jobs do not come backrdquoThese jobs do not come backrdquoldquoldquoNon-transferable skillsrdquoNon-transferable skillsrdquo ndash choice is prolonged unemployment or retraining
3 CCyclical yclical UUnemploymentnemployment
CyclicalCyclical ndash ldquoldquoeconomiceconomic downturnsrdquo downturnsrdquo in the business cyclebusiness cycle
ldquoldquoCyclical fluctuationsrdquoCyclical fluctuationsrdquo caused by ldquodeficient ADrdquoldquodeficient ADrdquoldquoldquoDurable goods jobsrdquoDurable goods jobsrdquo are impacted the mostThese cancan be be postponedpostponed because they can be repairedcan be repairedldquoldquoCyclical unemploymentrdquoCyclical unemploymentrdquo is ldquoreal unemploymentrdquoldquoreal unemploymentrdquo
ldquoldquoThese jobs do come backrdquoThese jobs do come backrdquo
Cyclical UnemploymentCyclical UnemploymentldquoldquoThese jobs do come backrdquoThese jobs do come backrdquo
If Arnold S gets laid off producing autos he says
1 Chemical Engineering $565002 ElectricalElectronics Eng $5200933 Computer EngineeringComputer Engineering $51496 $5149644 Computer ScienceComputer Science $51292 $512925 Mechanical Engineering $510466 EconomicsEconomicsFinance $45000$450007 Accounting $445648 M8 Mgmtgmt I Info nfo SSysysBBus us DDataata P Processingrocessing $43732$437329 Civil Engineering9 Civil Engineering $43462 $4346210 Management Info Sys $4000011 Teaching11 Teaching $40600 $4060012 B12 Business usiness AAdmindminMMgmtgmt $39448 $3944813 Nursing $3877514 M14 MarketingarketingMMarketing arketing MMgmtgmt $36674 $3667415 Communications15 Communications $28000 $2800016 Psychology16 Psychology $27000 $27000
Top Paying College Majors for Top Paying College Majors for 20062006
EconEconEconEcon
Seasonal
Is it possible to have a 0 unemployment rate
bull Not likely At any one time the economy could not absorb ALL the people who wanted a job There is always some unemployment
ndash The best we could hope for is that there be no cyclical unemployment from the ups and downs of the economy
ndash There will always be some level of Frictional and Structural Unemployment
bull This is called The Natural Rate of Unemployment
GraphmdashNatural Rate of Unemployment
What is the natural rate of unemployment
bull The sum of frictional and structural unemployment
What is consideredFull Employment
bull An employment level at which the actual rate of unemployment is equal to the natural rate of unemploymentndash If the economy can get to this
definition of Full-employment it is doing the best that it can
copycopy1999 South-Western College Publishing
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Current Unemployment Rate
bull The current unemployment rate in the US is about 80 Is this good bad or just about right
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Frequency Annual Quarterly
Time2004 2005 2006 2006 2007
Q3-2006 Q4-2006 Q1-2007
Country
Australia i 55 51 49 48 46 45
Austria i 48 52 48 47 45 45
Belgium i 84 84 82 81 79 77
Canada i 72 68 63 64 62 61
Czech Republic i 83 79 72 71 66 63
Denmark i 55 48 39 37 36 34
Finland i 89 84 77 78 74 69
France i 96 97 94 93 91 88
Germany i 95 94 84 84 79 72
Greece i 105 99 89 87 86
Hungary i 61 72 75 76 77 8
Ireland i 45 43 44 44 42 4
Italy i 8 77 68 66 65
Japan i 47 44 41 41 41 4
Korea i 37 37 35 34 34 32
Luxembourg i 51 45 48 47 48 49
Netherlands i 46 47 39 39 37 35
New Zealand i 39 37 38 38 37 38
Norway i 44 46 35 33 29 27
Poland i 19 177 138 134 126 118
Portugal i 67 76 77 76 8 81
Slovak Republic i 182 162 134 131 124 111
Spain i 106 92 85 83 84 82
Sweden i 63 73 7 69 65 65
Switzerland i 44 45 4 39 38 37
United Kingdomi 47 48 53 54 54
Why do some other major economies have persistently higher unemployment rates than the US
bull Government policies are a major culprit
Unemployment Theories - Costs of Unemployment - Who paysPerhaps the main cost of unemployment is a personal one to those who are unemployed
However if they suffer then the whole economy suffers Individuals may become dispirited by unemployment they may lose their self-esteem and confidence This may affect their
motivation to work The longer they are unemployed the more they may lose their skills and this has to be bad for the economy as well On top of that these problems (and financial ones)
often lead to the unemployed being less healthy and then the NHS picks up the bill The whole economy suffers from people being unemployed
As well as these microeconomic effects there will also be macro effects These will include
Loss of output to the economy - the unemployed could be producing goods and services and if they arent then GDP is lower than it could be
Loss of tax revenue - unemployed people arent earning and they therefore arent paying tax The government has lost out
Increase in government expenditure - the government has to pay out benefits to support the unemployed Along with the loss of tax this is a double whammy
Loss of profits - with higher employment firms are likely to do better and make better profits If they make less profit because of unemployment they may have less funds to invest
The answer then is - we all pay
Three Types of UnemploymentThree Types of UnemploymentFrictionalFrictional ndash ldquotemporaryrdquo ldquotransitionalrdquo ldquoshort-termrdquo(ldquobetween jobsrdquo or ldquosearchrdquo unemployment)
Examples1 People who get ldquofiredrdquoldquofiredrdquo or ldquoquitrdquoldquoquitrdquo to look for a better one2 ldquoGraduatesrdquoldquoGraduatesrdquo from high school or college who are looking for a job3 ldquoSeasonalrdquoldquoSeasonalrdquo or weather-dependent jobs such as ldquoldquoagriculturalrdquoagriculturalrdquo ldquoconstructionrdquoldquoconstructionrdquo ldquoretailrdquoldquoretailrdquo or ldquotourismrdquoldquotourismrdquo [lifeguards resort workers Santas amp migrant workers]Frictional unemployment signals that ldquonew jobsrdquoldquonew jobsrdquo are availableand reflects ldquofreedom of choicerdquoldquofreedom of choicerdquo
These are qualified workers ldquotransferablerdquo skillsThese are qualified workers ldquotransferablerdquo skills
22 Structural Structural UnemploymentUnemploymentStructuralStructural ndash ldquotechnologicalrdquoldquotechnologicalrdquo or ldquolong termrdquoldquolong termrdquo There are basic changes in the ldquostructurerdquoldquostructurerdquo of the labor force which make certain ldquoskills obsoleterdquoldquoskills obsoleterdquo
AutomationAutomation may result in job lossesConsumer tasteConsumer taste may make a good ldquoobsoleterdquoThe autoauto reduced the need for carriage makers
Farm machineryFarm machinery reduced the need for farm laborersldquoldquoCreative destructionrdquoCreative destructionrdquo means as jobs are created other jobs are lost Jobs of the future destroy jobs oftoday Frictional and Structural make up the ldquonaturalldquonaturalrate of unemploymentrdquorate of unemploymentrdquo
ldquoldquoThese jobs do not come backrdquoThese jobs do not come backrdquoldquoldquoNon-transferable skillsrdquoNon-transferable skillsrdquo ndash choice is prolonged unemployment or retraining
3 CCyclical yclical UUnemploymentnemployment
CyclicalCyclical ndash ldquoldquoeconomiceconomic downturnsrdquo downturnsrdquo in the business cyclebusiness cycle
ldquoldquoCyclical fluctuationsrdquoCyclical fluctuationsrdquo caused by ldquodeficient ADrdquoldquodeficient ADrdquoldquoldquoDurable goods jobsrdquoDurable goods jobsrdquo are impacted the mostThese cancan be be postponedpostponed because they can be repairedcan be repairedldquoldquoCyclical unemploymentrdquoCyclical unemploymentrdquo is ldquoreal unemploymentrdquoldquoreal unemploymentrdquo
ldquoldquoThese jobs do come backrdquoThese jobs do come backrdquo
Cyclical UnemploymentCyclical UnemploymentldquoldquoThese jobs do come backrdquoThese jobs do come backrdquo
If Arnold S gets laid off producing autos he says
1 Chemical Engineering $565002 ElectricalElectronics Eng $5200933 Computer EngineeringComputer Engineering $51496 $5149644 Computer ScienceComputer Science $51292 $512925 Mechanical Engineering $510466 EconomicsEconomicsFinance $45000$450007 Accounting $445648 M8 Mgmtgmt I Info nfo SSysysBBus us DDataata P Processingrocessing $43732$437329 Civil Engineering9 Civil Engineering $43462 $4346210 Management Info Sys $4000011 Teaching11 Teaching $40600 $4060012 B12 Business usiness AAdmindminMMgmtgmt $39448 $3944813 Nursing $3877514 M14 MarketingarketingMMarketing arketing MMgmtgmt $36674 $3667415 Communications15 Communications $28000 $2800016 Psychology16 Psychology $27000 $27000
Top Paying College Majors for Top Paying College Majors for 20062006
EconEconEconEcon
Seasonal
Is it possible to have a 0 unemployment rate
bull Not likely At any one time the economy could not absorb ALL the people who wanted a job There is always some unemployment
ndash The best we could hope for is that there be no cyclical unemployment from the ups and downs of the economy
ndash There will always be some level of Frictional and Structural Unemployment
bull This is called The Natural Rate of Unemployment
GraphmdashNatural Rate of Unemployment
What is the natural rate of unemployment
bull The sum of frictional and structural unemployment
What is consideredFull Employment
bull An employment level at which the actual rate of unemployment is equal to the natural rate of unemploymentndash If the economy can get to this
definition of Full-employment it is doing the best that it can
copycopy1999 South-Western College Publishing
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Current Unemployment Rate
bull The current unemployment rate in the US is about 80 Is this good bad or just about right
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Frequency Annual Quarterly
Time2004 2005 2006 2006 2007
Q3-2006 Q4-2006 Q1-2007
Country
Australia i 55 51 49 48 46 45
Austria i 48 52 48 47 45 45
Belgium i 84 84 82 81 79 77
Canada i 72 68 63 64 62 61
Czech Republic i 83 79 72 71 66 63
Denmark i 55 48 39 37 36 34
Finland i 89 84 77 78 74 69
France i 96 97 94 93 91 88
Germany i 95 94 84 84 79 72
Greece i 105 99 89 87 86
Hungary i 61 72 75 76 77 8
Ireland i 45 43 44 44 42 4
Italy i 8 77 68 66 65
Japan i 47 44 41 41 41 4
Korea i 37 37 35 34 34 32
Luxembourg i 51 45 48 47 48 49
Netherlands i 46 47 39 39 37 35
New Zealand i 39 37 38 38 37 38
Norway i 44 46 35 33 29 27
Poland i 19 177 138 134 126 118
Portugal i 67 76 77 76 8 81
Slovak Republic i 182 162 134 131 124 111
Spain i 106 92 85 83 84 82
Sweden i 63 73 7 69 65 65
Switzerland i 44 45 4 39 38 37
United Kingdomi 47 48 53 54 54
Why do some other major economies have persistently higher unemployment rates than the US
bull Government policies are a major culprit
Unemployment Theories - Costs of Unemployment - Who paysPerhaps the main cost of unemployment is a personal one to those who are unemployed
However if they suffer then the whole economy suffers Individuals may become dispirited by unemployment they may lose their self-esteem and confidence This may affect their
motivation to work The longer they are unemployed the more they may lose their skills and this has to be bad for the economy as well On top of that these problems (and financial ones)
often lead to the unemployed being less healthy and then the NHS picks up the bill The whole economy suffers from people being unemployed
As well as these microeconomic effects there will also be macro effects These will include
Loss of output to the economy - the unemployed could be producing goods and services and if they arent then GDP is lower than it could be
Loss of tax revenue - unemployed people arent earning and they therefore arent paying tax The government has lost out
Increase in government expenditure - the government has to pay out benefits to support the unemployed Along with the loss of tax this is a double whammy
Loss of profits - with higher employment firms are likely to do better and make better profits If they make less profit because of unemployment they may have less funds to invest
The answer then is - we all pay
22 Structural Structural UnemploymentUnemploymentStructuralStructural ndash ldquotechnologicalrdquoldquotechnologicalrdquo or ldquolong termrdquoldquolong termrdquo There are basic changes in the ldquostructurerdquoldquostructurerdquo of the labor force which make certain ldquoskills obsoleterdquoldquoskills obsoleterdquo
AutomationAutomation may result in job lossesConsumer tasteConsumer taste may make a good ldquoobsoleterdquoThe autoauto reduced the need for carriage makers
Farm machineryFarm machinery reduced the need for farm laborersldquoldquoCreative destructionrdquoCreative destructionrdquo means as jobs are created other jobs are lost Jobs of the future destroy jobs oftoday Frictional and Structural make up the ldquonaturalldquonaturalrate of unemploymentrdquorate of unemploymentrdquo
ldquoldquoThese jobs do not come backrdquoThese jobs do not come backrdquoldquoldquoNon-transferable skillsrdquoNon-transferable skillsrdquo ndash choice is prolonged unemployment or retraining
3 CCyclical yclical UUnemploymentnemployment
CyclicalCyclical ndash ldquoldquoeconomiceconomic downturnsrdquo downturnsrdquo in the business cyclebusiness cycle
ldquoldquoCyclical fluctuationsrdquoCyclical fluctuationsrdquo caused by ldquodeficient ADrdquoldquodeficient ADrdquoldquoldquoDurable goods jobsrdquoDurable goods jobsrdquo are impacted the mostThese cancan be be postponedpostponed because they can be repairedcan be repairedldquoldquoCyclical unemploymentrdquoCyclical unemploymentrdquo is ldquoreal unemploymentrdquoldquoreal unemploymentrdquo
ldquoldquoThese jobs do come backrdquoThese jobs do come backrdquo
Cyclical UnemploymentCyclical UnemploymentldquoldquoThese jobs do come backrdquoThese jobs do come backrdquo
If Arnold S gets laid off producing autos he says
1 Chemical Engineering $565002 ElectricalElectronics Eng $5200933 Computer EngineeringComputer Engineering $51496 $5149644 Computer ScienceComputer Science $51292 $512925 Mechanical Engineering $510466 EconomicsEconomicsFinance $45000$450007 Accounting $445648 M8 Mgmtgmt I Info nfo SSysysBBus us DDataata P Processingrocessing $43732$437329 Civil Engineering9 Civil Engineering $43462 $4346210 Management Info Sys $4000011 Teaching11 Teaching $40600 $4060012 B12 Business usiness AAdmindminMMgmtgmt $39448 $3944813 Nursing $3877514 M14 MarketingarketingMMarketing arketing MMgmtgmt $36674 $3667415 Communications15 Communications $28000 $2800016 Psychology16 Psychology $27000 $27000
Top Paying College Majors for Top Paying College Majors for 20062006
EconEconEconEcon
Seasonal
Is it possible to have a 0 unemployment rate
bull Not likely At any one time the economy could not absorb ALL the people who wanted a job There is always some unemployment
ndash The best we could hope for is that there be no cyclical unemployment from the ups and downs of the economy
ndash There will always be some level of Frictional and Structural Unemployment
bull This is called The Natural Rate of Unemployment
GraphmdashNatural Rate of Unemployment
What is the natural rate of unemployment
bull The sum of frictional and structural unemployment
What is consideredFull Employment
bull An employment level at which the actual rate of unemployment is equal to the natural rate of unemploymentndash If the economy can get to this
definition of Full-employment it is doing the best that it can
copycopy1999 South-Western College Publishing
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Current Unemployment Rate
bull The current unemployment rate in the US is about 80 Is this good bad or just about right
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Frequency Annual Quarterly
Time2004 2005 2006 2006 2007
Q3-2006 Q4-2006 Q1-2007
Country
Australia i 55 51 49 48 46 45
Austria i 48 52 48 47 45 45
Belgium i 84 84 82 81 79 77
Canada i 72 68 63 64 62 61
Czech Republic i 83 79 72 71 66 63
Denmark i 55 48 39 37 36 34
Finland i 89 84 77 78 74 69
France i 96 97 94 93 91 88
Germany i 95 94 84 84 79 72
Greece i 105 99 89 87 86
Hungary i 61 72 75 76 77 8
Ireland i 45 43 44 44 42 4
Italy i 8 77 68 66 65
Japan i 47 44 41 41 41 4
Korea i 37 37 35 34 34 32
Luxembourg i 51 45 48 47 48 49
Netherlands i 46 47 39 39 37 35
New Zealand i 39 37 38 38 37 38
Norway i 44 46 35 33 29 27
Poland i 19 177 138 134 126 118
Portugal i 67 76 77 76 8 81
Slovak Republic i 182 162 134 131 124 111
Spain i 106 92 85 83 84 82
Sweden i 63 73 7 69 65 65
Switzerland i 44 45 4 39 38 37
United Kingdomi 47 48 53 54 54
Why do some other major economies have persistently higher unemployment rates than the US
bull Government policies are a major culprit
Unemployment Theories - Costs of Unemployment - Who paysPerhaps the main cost of unemployment is a personal one to those who are unemployed
However if they suffer then the whole economy suffers Individuals may become dispirited by unemployment they may lose their self-esteem and confidence This may affect their
motivation to work The longer they are unemployed the more they may lose their skills and this has to be bad for the economy as well On top of that these problems (and financial ones)
often lead to the unemployed being less healthy and then the NHS picks up the bill The whole economy suffers from people being unemployed
As well as these microeconomic effects there will also be macro effects These will include
Loss of output to the economy - the unemployed could be producing goods and services and if they arent then GDP is lower than it could be
Loss of tax revenue - unemployed people arent earning and they therefore arent paying tax The government has lost out
Increase in government expenditure - the government has to pay out benefits to support the unemployed Along with the loss of tax this is a double whammy
Loss of profits - with higher employment firms are likely to do better and make better profits If they make less profit because of unemployment they may have less funds to invest
The answer then is - we all pay
3 CCyclical yclical UUnemploymentnemployment
CyclicalCyclical ndash ldquoldquoeconomiceconomic downturnsrdquo downturnsrdquo in the business cyclebusiness cycle
ldquoldquoCyclical fluctuationsrdquoCyclical fluctuationsrdquo caused by ldquodeficient ADrdquoldquodeficient ADrdquoldquoldquoDurable goods jobsrdquoDurable goods jobsrdquo are impacted the mostThese cancan be be postponedpostponed because they can be repairedcan be repairedldquoldquoCyclical unemploymentrdquoCyclical unemploymentrdquo is ldquoreal unemploymentrdquoldquoreal unemploymentrdquo
ldquoldquoThese jobs do come backrdquoThese jobs do come backrdquo
Cyclical UnemploymentCyclical UnemploymentldquoldquoThese jobs do come backrdquoThese jobs do come backrdquo
If Arnold S gets laid off producing autos he says
1 Chemical Engineering $565002 ElectricalElectronics Eng $5200933 Computer EngineeringComputer Engineering $51496 $5149644 Computer ScienceComputer Science $51292 $512925 Mechanical Engineering $510466 EconomicsEconomicsFinance $45000$450007 Accounting $445648 M8 Mgmtgmt I Info nfo SSysysBBus us DDataata P Processingrocessing $43732$437329 Civil Engineering9 Civil Engineering $43462 $4346210 Management Info Sys $4000011 Teaching11 Teaching $40600 $4060012 B12 Business usiness AAdmindminMMgmtgmt $39448 $3944813 Nursing $3877514 M14 MarketingarketingMMarketing arketing MMgmtgmt $36674 $3667415 Communications15 Communications $28000 $2800016 Psychology16 Psychology $27000 $27000
Top Paying College Majors for Top Paying College Majors for 20062006
EconEconEconEcon
Seasonal
Is it possible to have a 0 unemployment rate
bull Not likely At any one time the economy could not absorb ALL the people who wanted a job There is always some unemployment
ndash The best we could hope for is that there be no cyclical unemployment from the ups and downs of the economy
ndash There will always be some level of Frictional and Structural Unemployment
bull This is called The Natural Rate of Unemployment
GraphmdashNatural Rate of Unemployment
What is the natural rate of unemployment
bull The sum of frictional and structural unemployment
What is consideredFull Employment
bull An employment level at which the actual rate of unemployment is equal to the natural rate of unemploymentndash If the economy can get to this
definition of Full-employment it is doing the best that it can
copycopy1999 South-Western College Publishing
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Current Unemployment Rate
bull The current unemployment rate in the US is about 80 Is this good bad or just about right
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Frequency Annual Quarterly
Time2004 2005 2006 2006 2007
Q3-2006 Q4-2006 Q1-2007
Country
Australia i 55 51 49 48 46 45
Austria i 48 52 48 47 45 45
Belgium i 84 84 82 81 79 77
Canada i 72 68 63 64 62 61
Czech Republic i 83 79 72 71 66 63
Denmark i 55 48 39 37 36 34
Finland i 89 84 77 78 74 69
France i 96 97 94 93 91 88
Germany i 95 94 84 84 79 72
Greece i 105 99 89 87 86
Hungary i 61 72 75 76 77 8
Ireland i 45 43 44 44 42 4
Italy i 8 77 68 66 65
Japan i 47 44 41 41 41 4
Korea i 37 37 35 34 34 32
Luxembourg i 51 45 48 47 48 49
Netherlands i 46 47 39 39 37 35
New Zealand i 39 37 38 38 37 38
Norway i 44 46 35 33 29 27
Poland i 19 177 138 134 126 118
Portugal i 67 76 77 76 8 81
Slovak Republic i 182 162 134 131 124 111
Spain i 106 92 85 83 84 82
Sweden i 63 73 7 69 65 65
Switzerland i 44 45 4 39 38 37
United Kingdomi 47 48 53 54 54
Why do some other major economies have persistently higher unemployment rates than the US
bull Government policies are a major culprit
Unemployment Theories - Costs of Unemployment - Who paysPerhaps the main cost of unemployment is a personal one to those who are unemployed
However if they suffer then the whole economy suffers Individuals may become dispirited by unemployment they may lose their self-esteem and confidence This may affect their
motivation to work The longer they are unemployed the more they may lose their skills and this has to be bad for the economy as well On top of that these problems (and financial ones)
often lead to the unemployed being less healthy and then the NHS picks up the bill The whole economy suffers from people being unemployed
As well as these microeconomic effects there will also be macro effects These will include
Loss of output to the economy - the unemployed could be producing goods and services and if they arent then GDP is lower than it could be
Loss of tax revenue - unemployed people arent earning and they therefore arent paying tax The government has lost out
Increase in government expenditure - the government has to pay out benefits to support the unemployed Along with the loss of tax this is a double whammy
Loss of profits - with higher employment firms are likely to do better and make better profits If they make less profit because of unemployment they may have less funds to invest
The answer then is - we all pay
Cyclical UnemploymentCyclical UnemploymentldquoldquoThese jobs do come backrdquoThese jobs do come backrdquo
If Arnold S gets laid off producing autos he says
1 Chemical Engineering $565002 ElectricalElectronics Eng $5200933 Computer EngineeringComputer Engineering $51496 $5149644 Computer ScienceComputer Science $51292 $512925 Mechanical Engineering $510466 EconomicsEconomicsFinance $45000$450007 Accounting $445648 M8 Mgmtgmt I Info nfo SSysysBBus us DDataata P Processingrocessing $43732$437329 Civil Engineering9 Civil Engineering $43462 $4346210 Management Info Sys $4000011 Teaching11 Teaching $40600 $4060012 B12 Business usiness AAdmindminMMgmtgmt $39448 $3944813 Nursing $3877514 M14 MarketingarketingMMarketing arketing MMgmtgmt $36674 $3667415 Communications15 Communications $28000 $2800016 Psychology16 Psychology $27000 $27000
Top Paying College Majors for Top Paying College Majors for 20062006
EconEconEconEcon
Seasonal
Is it possible to have a 0 unemployment rate
bull Not likely At any one time the economy could not absorb ALL the people who wanted a job There is always some unemployment
ndash The best we could hope for is that there be no cyclical unemployment from the ups and downs of the economy
ndash There will always be some level of Frictional and Structural Unemployment
bull This is called The Natural Rate of Unemployment
GraphmdashNatural Rate of Unemployment
What is the natural rate of unemployment
bull The sum of frictional and structural unemployment
What is consideredFull Employment
bull An employment level at which the actual rate of unemployment is equal to the natural rate of unemploymentndash If the economy can get to this
definition of Full-employment it is doing the best that it can
copycopy1999 South-Western College Publishing
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Current Unemployment Rate
bull The current unemployment rate in the US is about 80 Is this good bad or just about right
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Frequency Annual Quarterly
Time2004 2005 2006 2006 2007
Q3-2006 Q4-2006 Q1-2007
Country
Australia i 55 51 49 48 46 45
Austria i 48 52 48 47 45 45
Belgium i 84 84 82 81 79 77
Canada i 72 68 63 64 62 61
Czech Republic i 83 79 72 71 66 63
Denmark i 55 48 39 37 36 34
Finland i 89 84 77 78 74 69
France i 96 97 94 93 91 88
Germany i 95 94 84 84 79 72
Greece i 105 99 89 87 86
Hungary i 61 72 75 76 77 8
Ireland i 45 43 44 44 42 4
Italy i 8 77 68 66 65
Japan i 47 44 41 41 41 4
Korea i 37 37 35 34 34 32
Luxembourg i 51 45 48 47 48 49
Netherlands i 46 47 39 39 37 35
New Zealand i 39 37 38 38 37 38
Norway i 44 46 35 33 29 27
Poland i 19 177 138 134 126 118
Portugal i 67 76 77 76 8 81
Slovak Republic i 182 162 134 131 124 111
Spain i 106 92 85 83 84 82
Sweden i 63 73 7 69 65 65
Switzerland i 44 45 4 39 38 37
United Kingdomi 47 48 53 54 54
Why do some other major economies have persistently higher unemployment rates than the US
bull Government policies are a major culprit
Unemployment Theories - Costs of Unemployment - Who paysPerhaps the main cost of unemployment is a personal one to those who are unemployed
However if they suffer then the whole economy suffers Individuals may become dispirited by unemployment they may lose their self-esteem and confidence This may affect their
motivation to work The longer they are unemployed the more they may lose their skills and this has to be bad for the economy as well On top of that these problems (and financial ones)
often lead to the unemployed being less healthy and then the NHS picks up the bill The whole economy suffers from people being unemployed
As well as these microeconomic effects there will also be macro effects These will include
Loss of output to the economy - the unemployed could be producing goods and services and if they arent then GDP is lower than it could be
Loss of tax revenue - unemployed people arent earning and they therefore arent paying tax The government has lost out
Increase in government expenditure - the government has to pay out benefits to support the unemployed Along with the loss of tax this is a double whammy
Loss of profits - with higher employment firms are likely to do better and make better profits If they make less profit because of unemployment they may have less funds to invest
The answer then is - we all pay
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Top Paying College Majors for Top Paying College Majors for 20062006
EconEconEconEcon
Seasonal
Is it possible to have a 0 unemployment rate
bull Not likely At any one time the economy could not absorb ALL the people who wanted a job There is always some unemployment
ndash The best we could hope for is that there be no cyclical unemployment from the ups and downs of the economy
ndash There will always be some level of Frictional and Structural Unemployment
bull This is called The Natural Rate of Unemployment
GraphmdashNatural Rate of Unemployment
What is the natural rate of unemployment
bull The sum of frictional and structural unemployment
What is consideredFull Employment
bull An employment level at which the actual rate of unemployment is equal to the natural rate of unemploymentndash If the economy can get to this
definition of Full-employment it is doing the best that it can
copycopy1999 South-Western College Publishing
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Current Unemployment Rate
bull The current unemployment rate in the US is about 80 Is this good bad or just about right
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Frequency Annual Quarterly
Time2004 2005 2006 2006 2007
Q3-2006 Q4-2006 Q1-2007
Country
Australia i 55 51 49 48 46 45
Austria i 48 52 48 47 45 45
Belgium i 84 84 82 81 79 77
Canada i 72 68 63 64 62 61
Czech Republic i 83 79 72 71 66 63
Denmark i 55 48 39 37 36 34
Finland i 89 84 77 78 74 69
France i 96 97 94 93 91 88
Germany i 95 94 84 84 79 72
Greece i 105 99 89 87 86
Hungary i 61 72 75 76 77 8
Ireland i 45 43 44 44 42 4
Italy i 8 77 68 66 65
Japan i 47 44 41 41 41 4
Korea i 37 37 35 34 34 32
Luxembourg i 51 45 48 47 48 49
Netherlands i 46 47 39 39 37 35
New Zealand i 39 37 38 38 37 38
Norway i 44 46 35 33 29 27
Poland i 19 177 138 134 126 118
Portugal i 67 76 77 76 8 81
Slovak Republic i 182 162 134 131 124 111
Spain i 106 92 85 83 84 82
Sweden i 63 73 7 69 65 65
Switzerland i 44 45 4 39 38 37
United Kingdomi 47 48 53 54 54
Why do some other major economies have persistently higher unemployment rates than the US
bull Government policies are a major culprit
Unemployment Theories - Costs of Unemployment - Who paysPerhaps the main cost of unemployment is a personal one to those who are unemployed
However if they suffer then the whole economy suffers Individuals may become dispirited by unemployment they may lose their self-esteem and confidence This may affect their
motivation to work The longer they are unemployed the more they may lose their skills and this has to be bad for the economy as well On top of that these problems (and financial ones)
often lead to the unemployed being less healthy and then the NHS picks up the bill The whole economy suffers from people being unemployed
As well as these microeconomic effects there will also be macro effects These will include
Loss of output to the economy - the unemployed could be producing goods and services and if they arent then GDP is lower than it could be
Loss of tax revenue - unemployed people arent earning and they therefore arent paying tax The government has lost out
Increase in government expenditure - the government has to pay out benefits to support the unemployed Along with the loss of tax this is a double whammy
Loss of profits - with higher employment firms are likely to do better and make better profits If they make less profit because of unemployment they may have less funds to invest
The answer then is - we all pay
Seasonal
Is it possible to have a 0 unemployment rate
bull Not likely At any one time the economy could not absorb ALL the people who wanted a job There is always some unemployment
ndash The best we could hope for is that there be no cyclical unemployment from the ups and downs of the economy
ndash There will always be some level of Frictional and Structural Unemployment
bull This is called The Natural Rate of Unemployment
GraphmdashNatural Rate of Unemployment
What is the natural rate of unemployment
bull The sum of frictional and structural unemployment
What is consideredFull Employment
bull An employment level at which the actual rate of unemployment is equal to the natural rate of unemploymentndash If the economy can get to this
definition of Full-employment it is doing the best that it can
copycopy1999 South-Western College Publishing
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Current Unemployment Rate
bull The current unemployment rate in the US is about 80 Is this good bad or just about right
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Frequency Annual Quarterly
Time2004 2005 2006 2006 2007
Q3-2006 Q4-2006 Q1-2007
Country
Australia i 55 51 49 48 46 45
Austria i 48 52 48 47 45 45
Belgium i 84 84 82 81 79 77
Canada i 72 68 63 64 62 61
Czech Republic i 83 79 72 71 66 63
Denmark i 55 48 39 37 36 34
Finland i 89 84 77 78 74 69
France i 96 97 94 93 91 88
Germany i 95 94 84 84 79 72
Greece i 105 99 89 87 86
Hungary i 61 72 75 76 77 8
Ireland i 45 43 44 44 42 4
Italy i 8 77 68 66 65
Japan i 47 44 41 41 41 4
Korea i 37 37 35 34 34 32
Luxembourg i 51 45 48 47 48 49
Netherlands i 46 47 39 39 37 35
New Zealand i 39 37 38 38 37 38
Norway i 44 46 35 33 29 27
Poland i 19 177 138 134 126 118
Portugal i 67 76 77 76 8 81
Slovak Republic i 182 162 134 131 124 111
Spain i 106 92 85 83 84 82
Sweden i 63 73 7 69 65 65
Switzerland i 44 45 4 39 38 37
United Kingdomi 47 48 53 54 54
Why do some other major economies have persistently higher unemployment rates than the US
bull Government policies are a major culprit
Unemployment Theories - Costs of Unemployment - Who paysPerhaps the main cost of unemployment is a personal one to those who are unemployed
However if they suffer then the whole economy suffers Individuals may become dispirited by unemployment they may lose their self-esteem and confidence This may affect their
motivation to work The longer they are unemployed the more they may lose their skills and this has to be bad for the economy as well On top of that these problems (and financial ones)
often lead to the unemployed being less healthy and then the NHS picks up the bill The whole economy suffers from people being unemployed
As well as these microeconomic effects there will also be macro effects These will include
Loss of output to the economy - the unemployed could be producing goods and services and if they arent then GDP is lower than it could be
Loss of tax revenue - unemployed people arent earning and they therefore arent paying tax The government has lost out
Increase in government expenditure - the government has to pay out benefits to support the unemployed Along with the loss of tax this is a double whammy
Loss of profits - with higher employment firms are likely to do better and make better profits If they make less profit because of unemployment they may have less funds to invest
The answer then is - we all pay
Is it possible to have a 0 unemployment rate
bull Not likely At any one time the economy could not absorb ALL the people who wanted a job There is always some unemployment
ndash The best we could hope for is that there be no cyclical unemployment from the ups and downs of the economy
ndash There will always be some level of Frictional and Structural Unemployment
bull This is called The Natural Rate of Unemployment
GraphmdashNatural Rate of Unemployment
What is the natural rate of unemployment
bull The sum of frictional and structural unemployment
What is consideredFull Employment
bull An employment level at which the actual rate of unemployment is equal to the natural rate of unemploymentndash If the economy can get to this
definition of Full-employment it is doing the best that it can
copycopy1999 South-Western College Publishing
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Current Unemployment Rate
bull The current unemployment rate in the US is about 80 Is this good bad or just about right
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Frequency Annual Quarterly
Time2004 2005 2006 2006 2007
Q3-2006 Q4-2006 Q1-2007
Country
Australia i 55 51 49 48 46 45
Austria i 48 52 48 47 45 45
Belgium i 84 84 82 81 79 77
Canada i 72 68 63 64 62 61
Czech Republic i 83 79 72 71 66 63
Denmark i 55 48 39 37 36 34
Finland i 89 84 77 78 74 69
France i 96 97 94 93 91 88
Germany i 95 94 84 84 79 72
Greece i 105 99 89 87 86
Hungary i 61 72 75 76 77 8
Ireland i 45 43 44 44 42 4
Italy i 8 77 68 66 65
Japan i 47 44 41 41 41 4
Korea i 37 37 35 34 34 32
Luxembourg i 51 45 48 47 48 49
Netherlands i 46 47 39 39 37 35
New Zealand i 39 37 38 38 37 38
Norway i 44 46 35 33 29 27
Poland i 19 177 138 134 126 118
Portugal i 67 76 77 76 8 81
Slovak Republic i 182 162 134 131 124 111
Spain i 106 92 85 83 84 82
Sweden i 63 73 7 69 65 65
Switzerland i 44 45 4 39 38 37
United Kingdomi 47 48 53 54 54
Why do some other major economies have persistently higher unemployment rates than the US
bull Government policies are a major culprit
Unemployment Theories - Costs of Unemployment - Who paysPerhaps the main cost of unemployment is a personal one to those who are unemployed
However if they suffer then the whole economy suffers Individuals may become dispirited by unemployment they may lose their self-esteem and confidence This may affect their
motivation to work The longer they are unemployed the more they may lose their skills and this has to be bad for the economy as well On top of that these problems (and financial ones)
often lead to the unemployed being less healthy and then the NHS picks up the bill The whole economy suffers from people being unemployed
As well as these microeconomic effects there will also be macro effects These will include
Loss of output to the economy - the unemployed could be producing goods and services and if they arent then GDP is lower than it could be
Loss of tax revenue - unemployed people arent earning and they therefore arent paying tax The government has lost out
Increase in government expenditure - the government has to pay out benefits to support the unemployed Along with the loss of tax this is a double whammy
Loss of profits - with higher employment firms are likely to do better and make better profits If they make less profit because of unemployment they may have less funds to invest
The answer then is - we all pay
GraphmdashNatural Rate of Unemployment
What is the natural rate of unemployment
bull The sum of frictional and structural unemployment
What is consideredFull Employment
bull An employment level at which the actual rate of unemployment is equal to the natural rate of unemploymentndash If the economy can get to this
definition of Full-employment it is doing the best that it can
copycopy1999 South-Western College Publishing
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Current Unemployment Rate
bull The current unemployment rate in the US is about 80 Is this good bad or just about right
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Frequency Annual Quarterly
Time2004 2005 2006 2006 2007
Q3-2006 Q4-2006 Q1-2007
Country
Australia i 55 51 49 48 46 45
Austria i 48 52 48 47 45 45
Belgium i 84 84 82 81 79 77
Canada i 72 68 63 64 62 61
Czech Republic i 83 79 72 71 66 63
Denmark i 55 48 39 37 36 34
Finland i 89 84 77 78 74 69
France i 96 97 94 93 91 88
Germany i 95 94 84 84 79 72
Greece i 105 99 89 87 86
Hungary i 61 72 75 76 77 8
Ireland i 45 43 44 44 42 4
Italy i 8 77 68 66 65
Japan i 47 44 41 41 41 4
Korea i 37 37 35 34 34 32
Luxembourg i 51 45 48 47 48 49
Netherlands i 46 47 39 39 37 35
New Zealand i 39 37 38 38 37 38
Norway i 44 46 35 33 29 27
Poland i 19 177 138 134 126 118
Portugal i 67 76 77 76 8 81
Slovak Republic i 182 162 134 131 124 111
Spain i 106 92 85 83 84 82
Sweden i 63 73 7 69 65 65
Switzerland i 44 45 4 39 38 37
United Kingdomi 47 48 53 54 54
Why do some other major economies have persistently higher unemployment rates than the US
bull Government policies are a major culprit
Unemployment Theories - Costs of Unemployment - Who paysPerhaps the main cost of unemployment is a personal one to those who are unemployed
However if they suffer then the whole economy suffers Individuals may become dispirited by unemployment they may lose their self-esteem and confidence This may affect their
motivation to work The longer they are unemployed the more they may lose their skills and this has to be bad for the economy as well On top of that these problems (and financial ones)
often lead to the unemployed being less healthy and then the NHS picks up the bill The whole economy suffers from people being unemployed
As well as these microeconomic effects there will also be macro effects These will include
Loss of output to the economy - the unemployed could be producing goods and services and if they arent then GDP is lower than it could be
Loss of tax revenue - unemployed people arent earning and they therefore arent paying tax The government has lost out
Increase in government expenditure - the government has to pay out benefits to support the unemployed Along with the loss of tax this is a double whammy
Loss of profits - with higher employment firms are likely to do better and make better profits If they make less profit because of unemployment they may have less funds to invest
The answer then is - we all pay
What is the natural rate of unemployment
bull The sum of frictional and structural unemployment
What is consideredFull Employment
bull An employment level at which the actual rate of unemployment is equal to the natural rate of unemploymentndash If the economy can get to this
definition of Full-employment it is doing the best that it can
copycopy1999 South-Western College Publishing
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Current Unemployment Rate
bull The current unemployment rate in the US is about 80 Is this good bad or just about right
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Frequency Annual Quarterly
Time2004 2005 2006 2006 2007
Q3-2006 Q4-2006 Q1-2007
Country
Australia i 55 51 49 48 46 45
Austria i 48 52 48 47 45 45
Belgium i 84 84 82 81 79 77
Canada i 72 68 63 64 62 61
Czech Republic i 83 79 72 71 66 63
Denmark i 55 48 39 37 36 34
Finland i 89 84 77 78 74 69
France i 96 97 94 93 91 88
Germany i 95 94 84 84 79 72
Greece i 105 99 89 87 86
Hungary i 61 72 75 76 77 8
Ireland i 45 43 44 44 42 4
Italy i 8 77 68 66 65
Japan i 47 44 41 41 41 4
Korea i 37 37 35 34 34 32
Luxembourg i 51 45 48 47 48 49
Netherlands i 46 47 39 39 37 35
New Zealand i 39 37 38 38 37 38
Norway i 44 46 35 33 29 27
Poland i 19 177 138 134 126 118
Portugal i 67 76 77 76 8 81
Slovak Republic i 182 162 134 131 124 111
Spain i 106 92 85 83 84 82
Sweden i 63 73 7 69 65 65
Switzerland i 44 45 4 39 38 37
United Kingdomi 47 48 53 54 54
Why do some other major economies have persistently higher unemployment rates than the US
bull Government policies are a major culprit
Unemployment Theories - Costs of Unemployment - Who paysPerhaps the main cost of unemployment is a personal one to those who are unemployed
However if they suffer then the whole economy suffers Individuals may become dispirited by unemployment they may lose their self-esteem and confidence This may affect their
motivation to work The longer they are unemployed the more they may lose their skills and this has to be bad for the economy as well On top of that these problems (and financial ones)
often lead to the unemployed being less healthy and then the NHS picks up the bill The whole economy suffers from people being unemployed
As well as these microeconomic effects there will also be macro effects These will include
Loss of output to the economy - the unemployed could be producing goods and services and if they arent then GDP is lower than it could be
Loss of tax revenue - unemployed people arent earning and they therefore arent paying tax The government has lost out
Increase in government expenditure - the government has to pay out benefits to support the unemployed Along with the loss of tax this is a double whammy
Loss of profits - with higher employment firms are likely to do better and make better profits If they make less profit because of unemployment they may have less funds to invest
The answer then is - we all pay
What is consideredFull Employment
bull An employment level at which the actual rate of unemployment is equal to the natural rate of unemploymentndash If the economy can get to this
definition of Full-employment it is doing the best that it can
copycopy1999 South-Western College Publishing
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Current Unemployment Rate
bull The current unemployment rate in the US is about 80 Is this good bad or just about right
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Frequency Annual Quarterly
Time2004 2005 2006 2006 2007
Q3-2006 Q4-2006 Q1-2007
Country
Australia i 55 51 49 48 46 45
Austria i 48 52 48 47 45 45
Belgium i 84 84 82 81 79 77
Canada i 72 68 63 64 62 61
Czech Republic i 83 79 72 71 66 63
Denmark i 55 48 39 37 36 34
Finland i 89 84 77 78 74 69
France i 96 97 94 93 91 88
Germany i 95 94 84 84 79 72
Greece i 105 99 89 87 86
Hungary i 61 72 75 76 77 8
Ireland i 45 43 44 44 42 4
Italy i 8 77 68 66 65
Japan i 47 44 41 41 41 4
Korea i 37 37 35 34 34 32
Luxembourg i 51 45 48 47 48 49
Netherlands i 46 47 39 39 37 35
New Zealand i 39 37 38 38 37 38
Norway i 44 46 35 33 29 27
Poland i 19 177 138 134 126 118
Portugal i 67 76 77 76 8 81
Slovak Republic i 182 162 134 131 124 111
Spain i 106 92 85 83 84 82
Sweden i 63 73 7 69 65 65
Switzerland i 44 45 4 39 38 37
United Kingdomi 47 48 53 54 54
Why do some other major economies have persistently higher unemployment rates than the US
bull Government policies are a major culprit
Unemployment Theories - Costs of Unemployment - Who paysPerhaps the main cost of unemployment is a personal one to those who are unemployed
However if they suffer then the whole economy suffers Individuals may become dispirited by unemployment they may lose their self-esteem and confidence This may affect their
motivation to work The longer they are unemployed the more they may lose their skills and this has to be bad for the economy as well On top of that these problems (and financial ones)
often lead to the unemployed being less healthy and then the NHS picks up the bill The whole economy suffers from people being unemployed
As well as these microeconomic effects there will also be macro effects These will include
Loss of output to the economy - the unemployed could be producing goods and services and if they arent then GDP is lower than it could be
Loss of tax revenue - unemployed people arent earning and they therefore arent paying tax The government has lost out
Increase in government expenditure - the government has to pay out benefits to support the unemployed Along with the loss of tax this is a double whammy
Loss of profits - with higher employment firms are likely to do better and make better profits If they make less profit because of unemployment they may have less funds to invest
The answer then is - we all pay
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Current Unemployment Rate
bull The current unemployment rate in the US is about 80 Is this good bad or just about right
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Frequency Annual Quarterly
Time2004 2005 2006 2006 2007
Q3-2006 Q4-2006 Q1-2007
Country
Australia i 55 51 49 48 46 45
Austria i 48 52 48 47 45 45
Belgium i 84 84 82 81 79 77
Canada i 72 68 63 64 62 61
Czech Republic i 83 79 72 71 66 63
Denmark i 55 48 39 37 36 34
Finland i 89 84 77 78 74 69
France i 96 97 94 93 91 88
Germany i 95 94 84 84 79 72
Greece i 105 99 89 87 86
Hungary i 61 72 75 76 77 8
Ireland i 45 43 44 44 42 4
Italy i 8 77 68 66 65
Japan i 47 44 41 41 41 4
Korea i 37 37 35 34 34 32
Luxembourg i 51 45 48 47 48 49
Netherlands i 46 47 39 39 37 35
New Zealand i 39 37 38 38 37 38
Norway i 44 46 35 33 29 27
Poland i 19 177 138 134 126 118
Portugal i 67 76 77 76 8 81
Slovak Republic i 182 162 134 131 124 111
Spain i 106 92 85 83 84 82
Sweden i 63 73 7 69 65 65
Switzerland i 44 45 4 39 38 37
United Kingdomi 47 48 53 54 54
Why do some other major economies have persistently higher unemployment rates than the US
bull Government policies are a major culprit
Unemployment Theories - Costs of Unemployment - Who paysPerhaps the main cost of unemployment is a personal one to those who are unemployed
However if they suffer then the whole economy suffers Individuals may become dispirited by unemployment they may lose their self-esteem and confidence This may affect their
motivation to work The longer they are unemployed the more they may lose their skills and this has to be bad for the economy as well On top of that these problems (and financial ones)
often lead to the unemployed being less healthy and then the NHS picks up the bill The whole economy suffers from people being unemployed
As well as these microeconomic effects there will also be macro effects These will include
Loss of output to the economy - the unemployed could be producing goods and services and if they arent then GDP is lower than it could be
Loss of tax revenue - unemployed people arent earning and they therefore arent paying tax The government has lost out
Increase in government expenditure - the government has to pay out benefits to support the unemployed Along with the loss of tax this is a double whammy
Loss of profits - with higher employment firms are likely to do better and make better profits If they make less profit because of unemployment they may have less funds to invest
The answer then is - we all pay
Current Unemployment Rate
bull The current unemployment rate in the US is about 80 Is this good bad or just about right
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Frequency Annual Quarterly
Time2004 2005 2006 2006 2007
Q3-2006 Q4-2006 Q1-2007
Country
Australia i 55 51 49 48 46 45
Austria i 48 52 48 47 45 45
Belgium i 84 84 82 81 79 77
Canada i 72 68 63 64 62 61
Czech Republic i 83 79 72 71 66 63
Denmark i 55 48 39 37 36 34
Finland i 89 84 77 78 74 69
France i 96 97 94 93 91 88
Germany i 95 94 84 84 79 72
Greece i 105 99 89 87 86
Hungary i 61 72 75 76 77 8
Ireland i 45 43 44 44 42 4
Italy i 8 77 68 66 65
Japan i 47 44 41 41 41 4
Korea i 37 37 35 34 34 32
Luxembourg i 51 45 48 47 48 49
Netherlands i 46 47 39 39 37 35
New Zealand i 39 37 38 38 37 38
Norway i 44 46 35 33 29 27
Poland i 19 177 138 134 126 118
Portugal i 67 76 77 76 8 81
Slovak Republic i 182 162 134 131 124 111
Spain i 106 92 85 83 84 82
Sweden i 63 73 7 69 65 65
Switzerland i 44 45 4 39 38 37
United Kingdomi 47 48 53 54 54
Why do some other major economies have persistently higher unemployment rates than the US
bull Government policies are a major culprit
Unemployment Theories - Costs of Unemployment - Who paysPerhaps the main cost of unemployment is a personal one to those who are unemployed
However if they suffer then the whole economy suffers Individuals may become dispirited by unemployment they may lose their self-esteem and confidence This may affect their
motivation to work The longer they are unemployed the more they may lose their skills and this has to be bad for the economy as well On top of that these problems (and financial ones)
often lead to the unemployed being less healthy and then the NHS picks up the bill The whole economy suffers from people being unemployed
As well as these microeconomic effects there will also be macro effects These will include
Loss of output to the economy - the unemployed could be producing goods and services and if they arent then GDP is lower than it could be
Loss of tax revenue - unemployed people arent earning and they therefore arent paying tax The government has lost out
Increase in government expenditure - the government has to pay out benefits to support the unemployed Along with the loss of tax this is a double whammy
Loss of profits - with higher employment firms are likely to do better and make better profits If they make less profit because of unemployment they may have less funds to invest
The answer then is - we all pay
What is considered to be the natural rate of unemployment
bull The natural rate varies most estimates are from 4-6
copycopy1999 South-Western College Publishing
Frequency Annual Quarterly
Time2004 2005 2006 2006 2007
Q3-2006 Q4-2006 Q1-2007
Country
Australia i 55 51 49 48 46 45
Austria i 48 52 48 47 45 45
Belgium i 84 84 82 81 79 77
Canada i 72 68 63 64 62 61
Czech Republic i 83 79 72 71 66 63
Denmark i 55 48 39 37 36 34
Finland i 89 84 77 78 74 69
France i 96 97 94 93 91 88
Germany i 95 94 84 84 79 72
Greece i 105 99 89 87 86
Hungary i 61 72 75 76 77 8
Ireland i 45 43 44 44 42 4
Italy i 8 77 68 66 65
Japan i 47 44 41 41 41 4
Korea i 37 37 35 34 34 32
Luxembourg i 51 45 48 47 48 49
Netherlands i 46 47 39 39 37 35
New Zealand i 39 37 38 38 37 38
Norway i 44 46 35 33 29 27
Poland i 19 177 138 134 126 118
Portugal i 67 76 77 76 8 81
Slovak Republic i 182 162 134 131 124 111
Spain i 106 92 85 83 84 82
Sweden i 63 73 7 69 65 65
Switzerland i 44 45 4 39 38 37
United Kingdomi 47 48 53 54 54
Why do some other major economies have persistently higher unemployment rates than the US
bull Government policies are a major culprit
Unemployment Theories - Costs of Unemployment - Who paysPerhaps the main cost of unemployment is a personal one to those who are unemployed
However if they suffer then the whole economy suffers Individuals may become dispirited by unemployment they may lose their self-esteem and confidence This may affect their
motivation to work The longer they are unemployed the more they may lose their skills and this has to be bad for the economy as well On top of that these problems (and financial ones)
often lead to the unemployed being less healthy and then the NHS picks up the bill The whole economy suffers from people being unemployed
As well as these microeconomic effects there will also be macro effects These will include
Loss of output to the economy - the unemployed could be producing goods and services and if they arent then GDP is lower than it could be
Loss of tax revenue - unemployed people arent earning and they therefore arent paying tax The government has lost out
Increase in government expenditure - the government has to pay out benefits to support the unemployed Along with the loss of tax this is a double whammy
Loss of profits - with higher employment firms are likely to do better and make better profits If they make less profit because of unemployment they may have less funds to invest
The answer then is - we all pay
Frequency Annual Quarterly
Time2004 2005 2006 2006 2007
Q3-2006 Q4-2006 Q1-2007
Country
Australia i 55 51 49 48 46 45
Austria i 48 52 48 47 45 45
Belgium i 84 84 82 81 79 77
Canada i 72 68 63 64 62 61
Czech Republic i 83 79 72 71 66 63
Denmark i 55 48 39 37 36 34
Finland i 89 84 77 78 74 69
France i 96 97 94 93 91 88
Germany i 95 94 84 84 79 72
Greece i 105 99 89 87 86
Hungary i 61 72 75 76 77 8
Ireland i 45 43 44 44 42 4
Italy i 8 77 68 66 65
Japan i 47 44 41 41 41 4
Korea i 37 37 35 34 34 32
Luxembourg i 51 45 48 47 48 49
Netherlands i 46 47 39 39 37 35
New Zealand i 39 37 38 38 37 38
Norway i 44 46 35 33 29 27
Poland i 19 177 138 134 126 118
Portugal i 67 76 77 76 8 81
Slovak Republic i 182 162 134 131 124 111
Spain i 106 92 85 83 84 82
Sweden i 63 73 7 69 65 65
Switzerland i 44 45 4 39 38 37
United Kingdomi 47 48 53 54 54
Why do some other major economies have persistently higher unemployment rates than the US
bull Government policies are a major culprit
Unemployment Theories - Costs of Unemployment - Who paysPerhaps the main cost of unemployment is a personal one to those who are unemployed
However if they suffer then the whole economy suffers Individuals may become dispirited by unemployment they may lose their self-esteem and confidence This may affect their
motivation to work The longer they are unemployed the more they may lose their skills and this has to be bad for the economy as well On top of that these problems (and financial ones)
often lead to the unemployed being less healthy and then the NHS picks up the bill The whole economy suffers from people being unemployed
As well as these microeconomic effects there will also be macro effects These will include
Loss of output to the economy - the unemployed could be producing goods and services and if they arent then GDP is lower than it could be
Loss of tax revenue - unemployed people arent earning and they therefore arent paying tax The government has lost out
Increase in government expenditure - the government has to pay out benefits to support the unemployed Along with the loss of tax this is a double whammy
Loss of profits - with higher employment firms are likely to do better and make better profits If they make less profit because of unemployment they may have less funds to invest
The answer then is - we all pay
Why do some other major economies have persistently higher unemployment rates than the US
bull Government policies are a major culprit
Unemployment Theories - Costs of Unemployment - Who paysPerhaps the main cost of unemployment is a personal one to those who are unemployed
However if they suffer then the whole economy suffers Individuals may become dispirited by unemployment they may lose their self-esteem and confidence This may affect their
motivation to work The longer they are unemployed the more they may lose their skills and this has to be bad for the economy as well On top of that these problems (and financial ones)
often lead to the unemployed being less healthy and then the NHS picks up the bill The whole economy suffers from people being unemployed
As well as these microeconomic effects there will also be macro effects These will include
Loss of output to the economy - the unemployed could be producing goods and services and if they arent then GDP is lower than it could be
Loss of tax revenue - unemployed people arent earning and they therefore arent paying tax The government has lost out
Increase in government expenditure - the government has to pay out benefits to support the unemployed Along with the loss of tax this is a double whammy
Loss of profits - with higher employment firms are likely to do better and make better profits If they make less profit because of unemployment they may have less funds to invest
The answer then is - we all pay
Unemployment Theories - Costs of Unemployment - Who paysPerhaps the main cost of unemployment is a personal one to those who are unemployed
However if they suffer then the whole economy suffers Individuals may become dispirited by unemployment they may lose their self-esteem and confidence This may affect their
motivation to work The longer they are unemployed the more they may lose their skills and this has to be bad for the economy as well On top of that these problems (and financial ones)
often lead to the unemployed being less healthy and then the NHS picks up the bill The whole economy suffers from people being unemployed
As well as these microeconomic effects there will also be macro effects These will include
Loss of output to the economy - the unemployed could be producing goods and services and if they arent then GDP is lower than it could be
Loss of tax revenue - unemployed people arent earning and they therefore arent paying tax The government has lost out
Increase in government expenditure - the government has to pay out benefits to support the unemployed Along with the loss of tax this is a double whammy
Loss of profits - with higher employment firms are likely to do better and make better profits If they make less profit because of unemployment they may have less funds to invest
The answer then is - we all pay