Unemployment
Unemployment
• Official Definition:
– The total number of adults who are
willing and able to work;
– Who are not working;
– And who have made a specific effort to
find work
Unemployment
• Adults are defined as anyone 16 and over.
• Actively seeking work means:
– Will have a job in 30 days.
– Waiting to be recalled.
– Have looked for work in the past 4 weeks.
Unemployment Rate
• Defined as:
NUMBER UNEMPLOYED
TOTAL CIVILIAN LABOR FORCE
How to Obtain the
Unemployment Rate
How to Obtain
Unemployment Rate
TOTAL POPULATION
Minus
INSTITUTIONALIZED POPULATION
Equals
NON-INSTITUTIONALIZED
POPULATION
How to Obtain Unemployment
Rate
NON-INSTITUTIONALIZED
POPULATION
Minus
NOT IN THE LABOR FORCE
Equals
LABOR FORCE
How to Obtain Unemployment
Rate
LABOR FORCE
Minus
ARMED FORCES
Equals
TOTAL CIVILIAN LABOR FORCE
How to Obtain
Unemployment Rate
TOTAL CIVILIAN LABOR FORCE
Minus
EMPLOYED
Equals
UNEMPLOYED
Categories for Finding the
Unemployment Rate
A. TOTAL POPULATION
–
The total population of the United States
Categories for Finding the
Unemployment Rate
B. INSTITUTIONALIZED POPULATION
–
–
–
–
Everyone under 16
Everyone in jails
Everyone in insane asylums
Everyone in nursing homes
Categories for Finding the
Unemployment Rate
C. NOT IN LABOR FORCE
–
–
–
–
Retirees not working
People unable to work
Full time students
Homemakers
Categories for Finding the
Unemployment Rate
D. ARMED FORCES
–
All active duty military personnel.
Problems with the
Unemployment Rate
Problems with the
Unemployment Rate
•
Numerous problems with how we count
leads to a serious undercount of the true
number of unemployed.
Problems with the
Unemployment Rate
A. DISCOURAGED WORKERS
–
–
People without jobs, who have given up
looking for work.
Usually recognized as the most serious
problem
Problems with the
Unemployment Rate
A. DISCOURAGED WORKERS
–
–
Officially, they cease to be counted as
unemployed.
Instead, they are dropped out of the labor
force.
Problems with the
Unemployment Rate
A. DISCOURAGED WORKERS
–
Depending on the state of the economy, they
can be as many as 2% of the labor force.
Problems with the
Unemployment Rate
A. DISCOURAGED WORKERS
–
Depending on the state of the economy, they
can be as many as 2% of the labor force.
Problems with the
Unemployment Rate
•
The number of discouraged workers
increases:
–
–
The longer a recession lasts.
The more severe a recession is.
Problems with the
Unemployment Rate
B. OLDER MALE WORKERS:
–
The percentage of men over 55 who work,
has fallen in the last 25 years.
Problems with the
Unemployment Rate
B. OLDER MALE WORKERS:
–
–
–
•
Some is due to voluntary early retirement.
Some is due to forced, early retirement.
Some is due to layoffs.
We don’t really know how much of
each!
Problems with the
Unemployment Rate
C. PART TIME WORKERS
–
–
Many part time workers only want part time
work.
But for many others, part time is not a
voluntary choice.
Problems with the
Unemployment Rate
C. PART TIME WORKERS
–
–
–
Some are virtually full time (35+hours).
Some have several part time jobs.
Some have been forced to take cuts in the
hours they work.
Problems with the
Unemployment Rate
C. PART TIME WORKERS
–
Similar to the problem with older male
workers, we don’t really know the
percentages in each category.
Problems with the
Unemployment Rate
D. WOMEN
–
There are a large number of women (up to 1
million), who would like to work, but can’t
because they are:
Problems with the
Unemployment Rate
D. WOMEN
–
–
–
Taking care of children
Taking care of elderly parents
Taking care of sick family members.
Problems with the
Unemployment Rate
D. WOMEN
–
Similar to the problem of part time
workers, we don’t know how many would
choose to work if they could afford child
care or home nursing care.
Problems with the
Unemployment Rate
E. BLURRING OF THE CATEGORIES.
– In today’s economy, many retirees and
homemakers work part time.
– Many students work full or part time.
Problems with the
Unemployment Rate
E. BLURRING OF THE CATEGORIES
- There are more than 2,000,000 people
in prison, making furniture, jewelry,
taking catalogue orders.
-
People in jail are working and competing
with free labor!
Problems with the
Unemployment Rate
E. BLURRING OF THE CATEGORIES
The consequence is to make it harder to
determine if a person is in or out of the
labor force.
Types of Unemployment
Types of Unemployment
A. Frictional
B. Seasonal
C. Structural
D. Cyclical
Types of Unemployment
A. Frictional
–
–
–
Includes first time job seekers.
Includes moving between jobs.
Entirely voluntary.
Types of Unemployment
B. Seasonal
–
–
Due to the nature of the job, work is only
available part of the year.
Examples include construction workers,
teachers.
Types of Unemployment
C. Structural
–
–
Due to changes in technology and the
structure of the economy.
Includes coal miners, farmers, bank tellers.
Types of Unemployment
D. Cyclical
• Due to business cycle:
–
–
•
In periods of economic growth, low
unemployment
In periods of recession, high unemployment
Increasingly includes white collar
workers.
Costs of Unemployment
Costs of Unemployment
A. Individual
B. Social
C. Economic
Costs of Unemployment
A. To the Individual
– Loss of income
– Loss of benefits and health insurance
– Loss of self esteem
Costs of Unemployment
B. To Society
–
–
–
–
Increase in suicides
Increase in murders
Increase in alcohol and drug abuse related
deaths and injuries
Increase in reported child and spouse abuse
Costs of Unemployment
B. To Society
–
–
–
–
Increase in criminal activity
Increase in drug trafficking
Increase in welfare payments
Increase in taxes to pay for welfare
Costs of Unemployment
C. To the Economy: The GDP Gap
– GDP gap is defined as:
• Potential GDP – Actual GDP
Costs of Unemployment
•
Potential GDP
- The size of the GDP if the economy were at
full employment.
•
Actual GDP
-Our best estimate of the current size of the
GDP.
Costs of Unemployment
•
The GDP Gap
–
Is an estimate of all the goods and services
NOT produced because the economy is not at
full employment.
–
The GDP gap is an estimate of the dollar cost
of a recession.
Costs of Unemployment
•
The GDP Gap
–
The more severe the recession is, the larger
the GDP gap.
–
The longer a recession lasts, the larger the
GDP gap.
Current Unemployment
May 2011
•
•
•
15.0 million unemployed
8.6 million underemployed
1 million marginally attached
•
= 24.6 million un or underemployed
Current Unemployment
May 2011
•
The official unemployment rate is 9.1%
•
The combined unemployment and
underemployment rate rose to 15.8%
•
* Source: Economic Policy Institute,
www.epi.org
Current Unemployment
August 2011
•
•
•
14.0 million unemployed
8.8 million underemployed
2.4 million marginally attached
•
= 25.2 million un or underemployed
Current Unemployment
August 2011
•
The official unemployment rate is 9.1%
•
The combined unemployment and
underemployment rate rose to 16.2%
•
* Source: Bureau of Labor Statistics
Current Unemployment
February 2012
•
•
•
12.8 million unemployed
8.1 million underemployed
2.6 million marginally attached
•
= 23.5 million un or underemployed