Unemployment Basics

1. Unemployment Basics Professor Jermaine Whirl Information to use by students of East Georgia College

2. So what, if we have Unemployment? Unemployment is a big concern for the economy, because if resources (human capital) are not being use to it's potential, then Potential GDP (productivity) cannot be reached! This is the only way that our economy can grow over time. If people aren't earning wages they can't purchase final goods and services (C-consumption GDP). If they aren't working then goods and services can't be made.

3. Unemployment Effects When people are unemployed the following occurs: Unemployment Insurance benefits increase (If they've been working) Increase the needs for public goods and services. Crime (if they can't find any work at all and need resources to live). Decreases in living standards. Emotional stress or depression. In fact emotional stress for a period of time can cause a worker to become discouraged: Discouraged Worker defined is: Workers who have left the labor force, because they have not been able to find employment.

4. The Labor Force The Labor Force is defined as: The total number of people employed or actively seeking employment. It is calculated By: Number Employed + Number Unemployed (but are looking for work)

5. Who is counted? To even be considered in the labor force you must be 16 years of age. You must be actively seeking work. This data is collected by local state employment offices, through a survey known as the CPS (current population survey)

6. Who do we count as being in the labor force? Who is not counted? Workers who are under 16. Volunteer Workers Military Soldiers People who are in prison People who are in hospitals or nursing homes Full-Time Students Retirees Who is counted as working: Those who are working full-time for pay. Part-time workers Temp workers Self-Employed workers Family workers who work at least 15hrs a week at a family enterprise. (paid or unpaid)

7. Calculating Unemployment Rate The Unemployment Rate is what you always hear given on the news: Its calculated by:

8. Labor Force Participation Rate

9. Labor Force Participation Rate Calculation The labor force participation rate is calculated as Labor Force / Civilian Population * 100 Civilian Population excludes: military workers, people in prison, nursing homes etc..

10. 3 Types of Unemployment Cyclical Unemployment ( Attempt to Correct) Frictional Unemployment (Cannot Correct) Structural Unemployment (Cannot Correct)

11. Cyclical Unemployment Cyclical Unemployment is defined as: The increase in unemployment that occurs as the economy goes into a slowdown or recession. This is the one that is preventable & the Government and the Federal Reserve tries to fight it as much as possible. If this is zero then we can reach Potential GDP & Real GDP can exceed potential as well if resources are use efficiently and effectively.

12. Frictional Unemployment Frictional Unemployment: Unemployment associated with people moving from one job to another or moving into the labor force. Read the Story of Mike "the Like" Layers: http://www.ega.edu/facweb/jwhirl/there_are_no_jobs_available.htm

13. Structural Unemployment Structural Unemployment: Long term unemployment that results from structural factors in the economy, such as a mismatch between the skills required by newly created jobs and the skills possessed by those who have lost their jobs in declining industries. So either they lack the skills necessary or the job is to far away: Therefore, we would consider them unemployed. Read Materials from the World is Flat PowerPoint: Found on my home page: www.ega.edu/facweb/jwhirl