Unemployment

A quick look into

Group Members• Hamza Abdul Jabbar Qureshi – Section Gr 1 –

14k-2116• Hamza Farukh– Section Gr 1 – 14k-2186• Muhammad Kumail– Section Gr 1 – 14k-2227• Muhammad Junaid Shakeel– Section Gr 1 –

14k-2288

INTRODUCTION AND CAUSES

UNEMPLOYMENT

Definition:

Total number of skilled men and women actively seeking for paid work is called as unemployment.

UNEMPLOYMENT

During periods of recession, an economy usually experiences a relatively high unemployment rate.

Calculation:Unemployment rate is calculated as percentage by dividing the no. of unemployed individuals by total individuals currently in the labor force

UNEMPLOYMENT

CONTROLLING OR REDUCING UNEMPLOYMENT

• Many societies have been able to have almost full employment for a significant period of time.

• UK in 1950's-60's had averaged 1.6% unemployment.

• Studies suggest that since 1970, attempts to achieve full employment rather natural unemployment will fail; resulting in less output with more inflation.

TYPES OF UNEMPLOYMENT

Types of Unemployment

UNEMPLOYMENT2) SUPPLY-SIDE SOLUTIONS:

• Disadvantage of demand-side is a minimum wage law will increase the cost of low-skilled worker, resulting in his unemployment.

• Make labor market more flexible by reducing the minimum wage and reducing the power of unions.

• Supply side advocates believe that reducing business taxes, decreasing labor's share of national income, reducing regulations will increase jobs.

UNEMPLOYMENT

1) DEMAND-SIDE SOLUTIONS:

• If the demand for goods and services in the economy increase, demand for labor will increase, increasing employment and wages.

• One theory is to increase wages of working class, so they spend more on goods and services rather than saving.

UNEMPLOYMENT AND OTHER MACROECONOMICS FACTORS

Unemployment financial cost

• In many countries the government has to pay the unemployed some benefits. The greater the number of unemployed or the longer they are without work, the more money the government has to shell out.

• Therefore, the nation not only deals with lost income and decreased production but also additional cost.

Spending power

• The spending power of an unemployed person and his family decreases drastically and he prefers to save rather than spend which in turn affects the economy.

Reduced spending power of the employed

• Increased taxes and insecurity about their own job may affect the spending power of working people as they may start to spend less than before, therefore affecting the society and economy in a negative manner.

Recession

• With the increase in unemployment rate, other economy factors are affected, such as: income per person, health costs, quality of healthcare, standard of living and poverty

Effects of unemployment on society

Crime rate

• Studies have shown that unemployment often results in higher crime rate. This makes sense because people may turn to crime to fulfill their needs.

Psychological effects

• Unemployment can have an overall effect on a person mental health. Studies have shown that people experiencing long periods of unemployment might become anxious or depressed, and may have trouble sleeping

Employment gaps

• The longer a person is unemployed, the more difficult it becomes to find a job. Employers find employment gaps as negative aspect. No one wants to hire a person who has been out of work for sometime even when there is no fault of the individual.

Loss of skills

• The unemployed person is not able to use his skills. And if he remain unemployed for a long time, it may result in loss of some skills.

MEASURING UNEMPLOYMENT

Why does the government collect statistics on the unemployed?

• Unemployment results in lower purchasing parity which results in lower sale.

• Lower sale means closure of industries, thus again causing unemployment.

• Thus, government is coerced to collect statistics. This helps in determining adequate measures for a better economy.

Some Important Definitions • • The number of people in the labor force.

This measure is the sum of the employed and the unemployed. In other words, the labor force level is the number of people who are either working or actively seeking work.

• • The national unemployment rate. This statistic reflects the number of unemployed people as a percentage of the labor force.

Some Important Definitions • • The labor force participation rate. This

measure is the number of people in the labor force as a percentage of the civilian population (16 years old and over).

• The population that is either working or actively seeking work.

Some Important Definitions • • The employment-population ratio. This

measure is the number of employed as a percentage of the civilian noninstitutional population (16 years old and over).

• In other words, it is the percentage of the population that is currently working.

Gathering Statistics• Labour Force Sample Surveys are the most preferred method of unemployment

rate calculation since they give the most comprehensive results and enables calculation of unemployment by different group categories such as race and gender.

• Official Estimates are determined by a combination of information from one or more of the other three methods. The use of this method has been declining in favor of Labour Surveys.

• Social Insurance Statistics such as unemployment benefits, are computed base on the number of persons insured representing the total labour force and the number of persons who are insured that are collecting benefits. This method has been heavily criticized due to the expiration of benefits before the person finds work.

• Employment Office Statistics are the least effective being that they only include a monthly tally of unemployed persons who enter employment offices.

European Union (Eurostat)

• unemployed persons - age 15 to 74 who are not working and are willing to work in 2 weeks

• The main source used is the European Union Labour Force Survey (EU-LFS). The EU-LFS collects data on all member states each quarter.

United States Bureau of Labor statistics

• Stats gathered by 2 surveys- Current Employment Statistics survey (CES) & Current Population Survey (CPS).

Limitations of the unemployment definition-Alternates methods

• Current methods are inaccurate-they donot consider working population incarcerated in prisons, who have lost hope for jobs etc

• Labor force participation rate: The ratio between the labor force and the overall size of their cohort (national population of the same age range).

Unemployment Rate

How are seasonal fluctuations taken into account?