Unemployment (Chp 16)

Unemployment refers to the percentage of the civilian labor force who want to work but are unemployed. The civilian work force is the total number of people who are 16 years or older who are employed or are seeking work. Those who are not seeking employment or are too young or old are not part of the civilian work force. The term unemployment itself represents the condition of those who are will and able to work and are actively seeking work but who do not currently work.

. Number Unemployed .

Unemployment Rate = Number in Civilian Work Force

Hidden unemployment includes those who still want a job but have given up looking for a job. These who may have given up being hired are called chronically unemployed. The younger work force bears the brunt of unemployment. Those between ages 16-19 have three times the rate of unemployment. Non-whites have two times the rate of unemployment and females have higher rates than males.

Unemployment hurts the entire economy and society not just the unemployed. Society suffers because the unemployed reduces the GDP meaning that fewer goods and services are available in society. Families without employment stop consuming leading to surplus in goods which in turn lead to reduction in production… and so forth leading to a Recession. A recession is the condition in which unemployment is high and the GDP falls for two or more consecutive quarters. Governmental services are called upon to aid the unemployed. The Employment Act of 1946 states that the federal government is responsible for full employment, price stability and economic growth.

Structural unemployment results from skills that do not match what employers require or from being geographically separated from job opportunities. Schools and training are called upon to alleviate structural unemployment related to skills. Cyclical unemployment results from too low a level of aggregate demand, that is, a low demand for goods will result in a lower derived demand of labor. If fewer goods are demanded, less labor is needed. Frictional unemployment results from people who are temporarily between jobs. About 3-5% of all unemployment is frictional. Seasonal unemployment results from people who are out of work because of factors that vary with the time of year. Thus fruit pickers and ski instructors suffer from seasonal unemployment annually.

Full employment is 95% employment of the civilian work force. Why not 100%? Why is more than 95% employment not necessarily a good thing? (hint: supply/demand).

Reducing unemployment: (1) educate and train those lacking in skills (structural unemployment) (2) match skills to job requirements, (3) lower minimum wage creating greater demand for labor