‫الجزء الخامس‬
‫البطالة و التضخم‬
‫‪Unemployment and Inflation‬‬
‫د‪.‬إقبال الرحما‬
‫‪2001‬‬
‫‪1‬‬
Unemployment
Real GDP growth
Boom
Recovery
Recession
Depression
Time
Recall that unemployment is
an economic and social
phenomenon that occurs and
increases mainly during
periods of recessions and
depressions of the business
cycle.
Q: What causes the fluctuations in the business cycle?
2
Types of unemployment:
1- Seasonal unemployment: A product of regular and
recurring changes in hiring of certain fields on a
seasonal basis . ( ‫)بطالة موسمية‬
2- Frictional unemployment: A product of the shortterm movement of workers between jobs & of first
time job seekers. (‫)بطالة إحتكاكية‬
3
3-Structural unemployment: A product of
technological changes and other changes in the
structure of the economy. ( ‫)بطالة هيكلية‬
4- Cyclical unemployment: A product of the down side
of the business cycle. (‫)بطالة دورية‬
Q-1: What is disguised unemployment, behavioral
unemployment, and imported unemployment?
4
Q-2: What are the main types of unemployment exit in
the Kuwait?
Note: Frictional unemployment is short term; while
structural unemployment can be long term.
Note: Full-employment in economics does not mean zero
unemployment. That is why some economist use the term
Natural rate of unemployment.
Natural rate of unemployment: the unemployment rate that
would exist when cyclical unemployment = zero
Q: Who is more likely be unemployed among the different
educational levels, age groups, sex and race?
5
Q: What are the costs of unemployment?
1- lower standards of living and status (social
unrest).
2- Lower GDP.
GDP Gap = Potential GDP - Actual GDP
Okun’s Law: For each 1% which the actual unemployment exceeds
the natural rate of unemployment, a GDP gap of 2% occurs.
Q: What is the effect of increasing unemployment on the
government budget ?
6
Lines of unemployed Americans
waiting to receive subsidies
(unemployment benefit) during the
time of the Great depression.
7
Measure of Unemployment:
Unemployment rate = number of unemployed
X 100
number of the labor force
Q-1: Who are the unemployed ?
A: those who are actively seeking work and can not find any job
at the average wage.
Note : unemployment rate does not include discouraged workers.
8
Q-2: What is meant by the labor force (‫?)قوة العمل‬
A: The labor force includes those who are working and
those who are unemployed and seeking employment
Note: Total population :
Population under
age 16
House care
takers + students
+ retired +
disabled
Employed
Outside the Labor force
Total population
9
Unemployed
Labor force
Example: according to 1998 statistics of Kuwait, calculate
the unemployment rate
Unemployed
force
Employed +
unemployed
435695
206190
2209
Outside the labor
then
Unemployment rate =
2209
206190
10
X 100
= 1.1%
‫مالحظة‪ :‬معدل البطالة في الكويت مازال يعد‬
‫منخفضا ولكن المشكلة األساسية تتعلق بإختالالت‬
‫في قوة العمل وسوق العمل وفي التركيبة‬
‫السكانية ‪.‬‬
‫المجتمع السكاني الكويتى فتي ‪Young Population‬‬
‫) السكان < ‪ 15‬سنة يمثلون حوالي ‪ % 42‬من مجمل‬
‫السكان) ‪ .‬باإلضافة الى ارتفاع معدل‬
‫‪ Fertility rate‬مما يؤدي الى‬
‫الخصوبة‬
‫ارتفاع معدل اإلعالة‪Dependency Ratio.‬‬
‫)‪Note: Dependency ratio = population < 15 years + population > 60(5‬‬
‫)‪Population at age 15 - 60 (5‬‬
‫‪11‬‬
‫اختالل سوق العمل في الكويت‬
‫نسبة الكويتيين الى اجمالى قوة العمل‬
‫قوة العمل‬
‫الوافدة‬
‫‪81.15‬‬
‫قوة العمل‬
‫الكويتية‬
‫‪18.85‬‬
‫‪12‬‬
‫اختالل سوق العمل (قوة العمل الكويتية)‬
‫حسب النشاط االقتصادى‬
‫خدمات‬
‫إنتاجية‬
‫‪5.62‬‬
‫تجارة‬
‫‪1.30‬‬
‫أنشطة‬
‫سلعية‬
‫‪7.67‬‬
‫خدمات اجتماعية وشخصية ‪85.40‬‬
‫‪13‬‬
‫اختالل سوق العمل (قوة العمل الكويتية)‬
‫حسب قطاع العمل‬
‫خاص ومشترك‬
‫‪6.80‬‬
‫حكومي‬
‫‪93.20‬‬
‫‪14‬‬
‫اختالل سوق العمل (قوة العمل الكويتية)‬
‫التوزيع املنهى‬
‫علمية وفنية‬
‫‪8.44‬‬
‫مدرسون‬
‫‪13.48‬‬
‫أخرى‬
‫‪24.60‬‬
‫مديرون‬
‫ومشرفون‬
‫كتبة‬
‫‪15‬‬
‫‪22.9%‬‬
‫‪33.7%‬‬
‫‪5%‬‬
‫‪38.4%‬‬
‫مالحظة‪ :‬نسبة حملة المؤهالت العليا من الذكور= ‪ %15.2‬من‬
‫مجمل الذكور بقوة العمل ‪ ،‬و اإلناث ‪ %36.9‬من مجمل اإلناث‬
‫‪16‬‬
Inflation
Recall that keeping a stable
general price level is one of the
main macroeconomic goals.
The price level is the average level of
all prices in the economy.
Inflation is a sustained rise in the average level of
prices (general price level).
Note: inflation is generally classified into two
types: Hyper inflation & creeping inflation
17
Measure of inflation:
Recall that the price index(PI) is a measure of changes in the
average price level.
Q|: How is the price index measured ?
Inflation rate =
PI for a certain year - PI for a comparative year
PI for a comparative year
18
X 100
Example :
1) Inflation rate (1995-97)
Year
Price
index
1995
100
1996
110
1997
120
2000
123
= (120 - 100)
100
X 100 = 20 %
2) Inflation rate (1997-2000)
= (123 - 120) X 100 = 2.5 %
120
Calculate inflation rate between (1995-97) and (1997-2000)
19
Real historical example, Germany 1914-1924:
20
Year
Price
index
1914
100
1918
204
1920
1260
1922
3670
1923
278500
1924
117,320,000,000,000
Effects of inflation:
1- Impact on income: if nominal income does not
increase, it means a lower purchasing power. Hence,
real income will be lower.
2- Impact on income distribution: redistribution of
income from fixed income groups to unfixed income
groups.
Note 1: Recall, Real income = (nominal income / PI) X 100
Note 2: purchasing power = real value of one unit of money
( $1) = ( $1 / price index) X 100
21
Effects of inflation:
3- Impact on creditors & debtors: if inflation rate is
higher than nominal interest rate; then there will be a
redistribution of income from creditors to debtors.
4- Impact on balance of trade: if inflation rate in the
economy is higher than rates in other countries; this
will increase imports and reduce exports, leading to a
deficit in the balance of trade.
Note : Real interest rate = nominal interest rate - inflation rate
22
Types of inflation: (according to the source of
inflationary pressure)
1- Demand-pull inflation: inflation caused by
increasing aggregate demand for output. “Too many
dollars chasing too few goods”. More likely to occur
when the economy is operating near its potential
output.
23
Recall!
When the economy is
operating near full employment,
any increase in AD will lead
only to an increase in prices.
AS (LR)
P
AS(SR)
p3
AD3
p2
p1
AD2
AD
Y
24
e
Y
f
Q
Types of inflation:
2- Cost-push inflation: inflation caused by rising costs
of production. “profit -push” vs. “wages- push”!.
Could occur at different levels of output.
Q-1: What is meant by imported inflation?
Q-2: What is meant by stagflation?
25
Phillips Curve
In 1958, A.W. Phillips , a New Zealand economist, found that there
is an inverse relationship between the unemployment rate and the rate
of change in wages in England during the period 1826 to 1957.
Inflation rate
(wage rate)
Later early studies confirmed an
inverse relationship between
unemployment and inflation rate.
This relation became known as
Phillips Curve.
F1
F2
U1
26
U2
Unemployment rate
Q: Is there a trade off between unemployment and inflation rate?
LR Phillips Curve
Inflation rate
Most economists believe that the
inverse relationship between inflation
and unemployment rate is just a
short-term phenomena.
SR3
SR2
SR1
Unemployment rate
27