Matakuliah
Tahun
: <<EKONOMI PEMBANGUNAN>>
: <<2009>>
Unemployment and Urbanization
Pertemuan 4
The current employment situation represents an
enormous waste of resources and an unacceptable
level of human suffering. It has led to growing social
exclusion, rising inequality ….. and a host of social ills.
(ILO, World Employment Report, 1995).
In the early 1990’s, approximately half the
governments of the world, mostly those of developing
countries, considered the patterns of population
distribution to be unsatisfactory. A key issue was the
rapid growth of urban areas.
(Program of action, 1994 International Conference on Population and
3
Development)
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Material Outline
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The employment problem
Dimensions of LDC unemployment
Economic Models of Employment Determination
Migration and Urbanization
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The Employment Problem
• Open unemployment
• Underemployment
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Dimensions of LCD Unemployment
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The educated unemployment
Self-employment
Women and employment
Youth unemployment and child labor
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Economic Models of Employment
Determination
1. The traditional competitive Free-Market Model
- Forms the substance of the traditional theory of
employment
2. The output-employment macro model
- Focuses on the relationship among capital accumulation,
industrial output growth, and employment generation
3. Price-incentive micro model
Considers the impact of distorted factor prices on resource
(especially labor) utilization
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The Traditional Competitive
Free-Market Model
• Forms the substance of the traditional theory of
employment
• Characterized by consumer sovereignty, individual
utility and profit maximization, perfect competition,
and economic efficiency with many “atomistic”
producers and consumers, non of whom is large
enough to influence prices or wages
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Migration and Urbanization
• The migration and urbanization Dilemma
- Urbanization: trends and projections
- The urban informal sector
- Women-the informal sector
• Urban unemployment
• Migration and Development
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The Todaro Migration Model
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Basic Characteristics Todaro’s Migration Model
1. Migration is stimulated primarily by rational economic considerations of
relative benefits and costs, mostly financial but also psychological
2. The decision of migrate depends on expected rather than actual urban-rural
real wage differentials where the expected differential is determined by
the interaction of two variables: the actual urban-rural wage differential
and the probalility of successfully obtaining employment in the urban
sector.
3. The probability of obtaining an urban job is directly related to the urban
employment rate and thus inversely related to the urban unemployment
rate
4. Migration rates in excess of urban job opportunity growth rates are not only
possible but also rational and even likely in the face of wide urban-rural
expected income differentials.
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Five Policy Implications
1. Imbalances in urban-rural employment opportunities caused
by the urban bias of the development strategies must be
reduced
2. Urban job creation is an insufficient solution for the urban
unemployment problem
3. Indiscriminate educational expansion will lead to further
migration and unemployment
4. Wage subsidies and traditional scarcity factor pricing can be
counter productive
5. Programs of integrated rural development should be
encouraged
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The Shape of Comprehensive Migration and
Employment Strategy
1.
2.
3.
4.
Creative an appropriate rural-urban economic balance
Expansion of small-scale, labor-intensive industries
Elimination of factor-price distortions
Choosing appropriate labor-intensive technologies of
production
5. Modifying the direct linkage between education and
employment
6. Reducing population growth
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