unemployment

Examples of unemployment in the following topics:

• Reasons for Unemployment

  • There are three reasons for unemployment which are categorizes as frictional, structural, and cyclical unemployment.
  • There are four types of unemployment.
  • The natural level of unemployment is the unemployment rate when an economy is operating at full capacity.
  • There is always at least some frictional unemployment in an economy, so the level of involuntary unemployment is properly the unemployment rate minus the rate of frictional unemployment.
  • Over time, unemployment has returned to about 5%, which is the approximate natural rate of unemployment.

• Types of Unemployment: Frictional, Structural, Cyclical

  • Structural unemployment is one of the main types of unemployment within an economic system.
  • It is often impacted by persistent cyclical unemployment.
  • Frictional unemployment is another type of unemployment within an economy.
  • The natural unemployment rate, sometimes called the structural unemployment rate, was developed by Friedman and Phelps in the 1960s.
  • The natural rate of unemployment is a combination of structural and frictional unemployment.

• Defining Full Employment

  • Full employment is defined as an acceptable level of unemployment somewhere above 0%; there is no cyclical or deficient-demand unemployment.
  • Ideal unemployment excludes types of unemployment where labor-market inefficiency is reflected.
  • Ideal unemployment promotes the efficiency of the economy.
  • The full employment unemployment rate is also referred to as "natural" unemployment.
  • Full employment is defined as "ideal" unemployment.

• Typical Lengths of Unemployment

  • Long-term unemployment lasts 27 or more weeks.
  • Generally, unemployment is high during recessions.
  • Short-term unemployment is considered any unemployment period that lasts less than 27 weeks.
  • Long-term unemployment is classified as unemployment that lasts for 27 weeks or longer.
  • Short-term unemployment is considered less than 27 weeks, while long-term unemployment is joblessness that lasts 27 weeks or longer.

• Defining Unemployment

  • It differs from frictional unemployment because it lasts longer.
  • Hidden: the unemployment of potential workers that is not taken into account in official unemployment statistics because of how the data is collected.
  • The final measurement is called the rate of unemployment .
  • The effects of unemployment can be broken down into three types:
  • Unemployment can lead to homelessness, illness, and mental stress.

• Measuring the Unemployment Rate

  • Unemployment occurs when people are without work and are actively seeking employment.
  • The unemployment rate is measured using two different labor force surveys.
  • The survey measures the unemployment rate based on the ILO definition.
  • The unemployment rate is updated on a monthly basis.
  • They calculate different aspects of unemployment.

• Employment Levels

  • Unemployment above 0% is advocated as necessary to control inflation, which has brought about the concept of the Non-Accelerating Inflation Rate of Unemployment (NAIRU).
  • An alternative, more normative, definition describes full employment as the attainment of the ideal unemployment rate, where the types of unemployment that reflect labor-market inefficiency (such as structural unemployment) do not exist.
  • There are three important categories of unemployment levels that should be understood in order to evaluate the effect of employment levels on overall economic performance: cyclical unemployment, structural unemployment, and frictional unemployment.
  • Seasonal unemployment may be seen as a kind of structural unemployment, since it is a type of unemployment that is linked to certain kinds of jobs (construction work or migratory farm work).
  • Frictional unemployment is always present in an economy, so the level of involuntary unemployment is properly the unemployment rate minus the rate of frictional unemployment.

• Shortcomings of the Measurement

  • Unemployment is measured in order to determine the unemployment rate.
  • In order to find the rate of unemployment, four methods are used:
  • Calculates unemployment by different categories such as race and gender.
  • This method is the least effective for measuring unemployment.
  • The unemployment rate is the percentage of unemployment calculated by dividing the number of unemployed individuals by the number of individuals currently employed in the labor force.

• The Short-Run Phillips Curve

  • The Phillips curve depicts the relationship between inflation and unemployment rates.
  • As unemployment rates increase, inflation decreases; as unemployment rates decrease, inflation increases.
  • When the unemployment rate is 2%, the corresponding inflation rate is 10%.
  • As unemployment decreases to 1%, the inflation rate increases to 15%.
  • As output increases, unemployment decreases.

• The Phillips Curve

  • The Phillips curve shows the inverse relationship between inflation and unemployment: as unemployment decreases, inflation increases.
  • The Phillips curve relates the rate of inflation with the rate of unemployment.
  • The Phillips curve argues that unemployment and inflation are inversely related: as levels of unemployment decrease, inflation increases.
  • In his original paper, Phillips tracked wage changes and unemployment changes in Great Britain from 1861 to 1957, and found that there was a stable, inverse relationship between wages and unemployment.
  • In this image, an economy can either experience 3% unemployment at the cost of 6% of inflation, or increase unemployment to 5% to bring down the inflation levels to 2%.