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Monday, May 14, 2012

low unemployment


Introduction
Jobless
Jobs created in the economy
What is unemployment and how is it measured
People of the working agge who are without work. available for work and activly seeking owrk
Labor force- economiucaly active population
Different ways to measure- exp(people claiming benefits.
Hidden unemployment
People given up on looking
Part time jobs, who dont want part time
Working a job they are greatly over qualified for
Distribution of unemployment
Inequalities inside the economy, disparities
- geographical disparities: some parts of the country are more prosperous
- age disparities: unemployment rates in the under- 25 age group are hiugher thn the national average
- ethnic differences: Ethinic minorities ofton suffer from higher unemployment, (may be from prejudice)
- gender disparities: unemplyment among woman hhas been higher due to prejudice
Costs of unemployment
Important because of the high costs
- costs to the unemployed: receive less income, lower standard of living, dejected, stress and erosion of mental health
- areas of unemployyment there are poverty, homlessness, higher rates of crime and gang activity
Connectted not solely
-Costs of unemployment to the economy as a whole: less output, government spening
what are the main factos affecting the level of unemployment
Inflows and out flows dor unemplyment
Inflows- people beoming unemployed
·         peopl;e who have lost their jobs
·         people who have resigned
·         people who hav left school and not found work
·         people who are trying to return to work after having left it
·         people who have immigrated into the country but have not yet found work

outflows- no longer unemployed

·         people who find jobs
·         people who retire
·         people who go back into education
·         people who choose to stay at home
·         people who emigrate
·         people who give up search for jobs
·         people who die

Causes of unemployment
- the labour market

Real wage W/P will be equal to the equilibrium real wage in the classical model
 

Without government intervention and trade unions, the labor market will always be in equilibrium in the classical model. This means that the real wage will be equal to the equilibrium real wage - the level of real wage which will equilibrate the labor demand and the labor supply.
 

http://www.expertsmind.com/macroeconomics-assignment-help/images/equilibrium-in-labor-market.PNG
Shows demand and supply for all labour


It is also clear from the graph that the total amount of labor L is determined in the labor market. When the real wage is equal to the equilibrium real wage, the supply of labor is equal to the demand for labor and this is the amount that will be used in the production.


If real wages are higher than the equilibrium real wage, the demand for labor will be less than the supply. The difference is the amount of unemployment beyond the natural rate of unemployment. In equilibrium, there is therefore no "involuntary" unemployment in the classical model. 

http://i391.photobucket.com/albums/oo354/jordan1_010/disequilibriumgraphwiki3.jpg
Disequilibrium unemployment












Real wage unemmplyment
Trade unions and government are interferein g with the market thus the wages are set abnove equilbrium, preventing market from clearing

Solution to real wage unemployment
Reduce trade unions ability to negotiate higher wages
Lower minimum wage
Effect poor workers, greater inequity
Demand deficent- unemployment or cyvlical unemployment
https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEicG0uRgtbupqV8HnG3mac2_1mQ18XtIumxrWc5C_o7bKE7flh8wTp4uhg1ugd_3oBrS_ACDLP_p88ZG7Nxb3F1bfsG0Zm6OnNsfaWtnojf2tAidiMJ13O7wI4PtOcIwGLdgHiTliE8Cyc/s1600/AD-increase.jpg

http://www.colorado.edu/Economics/courses/econ2020/section6/gifs/fig61.gif

Solution to demand defecient unemployment
Due to a low level of eggregate demand. use keynesian demand managment policies
Lower taxes. decrease interest rates, increasing market supply

Equilibirum unemployment
People are unwilling or unable to take the jobs that are available
Lack education, or unwilling
Gap becomes smaller as higher wages are offered
·         frictional
·         seasonal
·         structural
Frictional unemployment
In between jobs, left education waiting.
Not considered bad
-solutions: lower unemployment benefits
Improbving flow of information
Seasonal unemployment
Unemployed on a seasonal basis
Tourisms works in seasons
Fix:take different jobs during off season- information
Structural unemployment
Worst type
Structural unemployment is a form of unemployment resulting from a mismatch between demand in the labour market and the skills and locations of the workers seeking employment. Even though the number of vacancies may be equal to, or greater than, the number of the unemployed, the unemployed workers may lack the skills needed for the jobs, or they may not live in the part of the country or world where the jobs are available.
·         autaumation-reduces need for labour
·         lower cost of labour in foreing contries
·         changes in consumer taste (coal)
Solutions
·         A change in the education system-
·         adult retraining programs
·         give subsidies to firms to higher more people
·         ecourage people to move to an area
·         apprenticeship programs
Solutions to structural unemplyment/ marketbased
·         reduce unemployment benfits
·         deregualtion of labor market
burden- people lose their benefits and now have even worse standards of living
worst conditions for labour
inequity


Are demand sife policies or supply side policies more effective in reducing unemployment
Both good
Crowding out
Problem with running a deficient
Lowers incentive for businesses to invest
Gov got opposite of what they wanted



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