Unemployment

Unemployment

BASIC CONCEPTS AND DEFINITIONS

Frictional Unemployment Temporary unemployment caused by the normal workings of the

labor market (i.e. time involved in looking for a work) Includes:

people entering the market for first time people reentering after an absence people who have quit jobs in search for new ones

Structural Unemployment Unemployment caused by structural changes in the economy that

eliminate certain jobs Changes occur due to

technological progress shifts in demand for goods and services

problem: mismatch between the skills of prospective workers and skills needed in vacant jobs

solution: training or additional education long-term (policy-makers regard this kind as a more serious

problem)

Cyclical Unemployment Unemployment caused by the drop in economic

activity that occurs during the contraction phase of the business cycle

Unemployment rate Percentage of the total labor force that is

unemployed UR = (U/LF)*100

Labor force (in the Philippines) include all people 15 years old and over as of their

last birthday who are either employed or unemployed

Labor force participation rate (LFPR) % of total number of persons in labor force to total

population 15 years old and over LFPR = (LF/P)*100

Unemployed (in the Philippines)

The unemployed include all persons who are 15 years old and over as of their last birthday and are reported as: without work, i.e., had no job or business during the basic

survey reference period; AND currently available for work, i.e., were available and willing to

take up work in paid employment or self employment during the basic survey reference period, and/or would be available and willing to take up work in paid employment or self employment within two weeks after the interview date;

AND seeking work, i.e., had taken specific steps to look for a job or establish a business during the basic survey reference period; OR not seeking work due to the following reasons: (a) tired/believe no work available, i.e., the discouraged workers who looked for work within the last six months prior to the interview date; (b) awaiting results of previous job application; © temporary illness/disability; (d) bad weather; and (e) waiting for rehire/job recall.

Kinds of Unemployment Open Unemployment

Voluntary unemployed – those unwilling to accept jobs for which they could qualify

Involuntary unemployed – situation in w/c job seekers are willing to work but there are no available jobs

Underemployment Persons are working less than they would like to work (i.e. part-time

jobs) Disguised Unemployment

People who are required to work more hours work less hours (tasks are split among resources –typically labor)

Hidden Unemployment People who in engage in second-choice nonemployment activities

Impaired People who are sick; malnutrition

Unproductive People who are employed who get caught in long hrs. of traffic

MODELS OF UNEMPLOYMENT

Traditional Competitive Market Model Assumption: flexible wages & full employment Limitations: assumption of fully flexible wages unemployment persistent in LDCs esp. due to urban

migration Keynesian Model

Increase gov’t spending to reach full employment As ouput increases, employment also increases Limitations: Increase in G may result in crowding-out of private

investment w/c may lead to decrease in output & employment levels

Factor, commodity, money markets in LDCs not well developed

Unemplymnt persists in LDCs due to urban migration

Output-employment Macro Model Conflict argument K-intensive T => Y increases but at expense of N Congruence argument L-intensive T => more N is generated, Y increases

Price-incentive model Deals with factor price distortions Price of capital is distorted bec: Capital subsidies Overvalued ER Tax incentives Interest rate ceilings Price of labor is distorted bec: Minimum wage Unions collective bargaining Multinational hiring practices

POLICIES (Based on the Medium-Term Development Plan 2004-2010)

The last chapter of Part 1 addresses the problems of the labor sector, particularly the high unemployment rate among the youth (48.7% unemployed) and in the urban areas (2/3 of the unemployed) and cites the jobs-skills mismatch as one of the major causes. To address these problems, the Labor and Employment Action Plan provides for the following: Improving workers’ competency, productivity and work values, and

in particular, providing opportunities for the youth to acquire skills and competencies required by the market

Enhancing worker-employer relationship and improving labor welfare both here and abroad

Facilitating access of Filipino workers to both the local and overseas labor markets

Advocating flexible work and employment arrangements in tune with the requirements of the globalizing labor market which now widely practice subcontracting and outsourcing

Quick action on labor cases and the promotion of alternative dispute settlement in the workplace.

10-point Agenda

The creation of six million jobs in six years via more opportunities given to entrepreneurs, tripling of the amount of loans for lending to small and medium enterprises and the development of one to two million hectares of land for agricultural business.

Employment Status of Household Population 15 years old and over of 1st Quarter: 1995-2005

Year Unemployed UnderemployedUnemployment

RateUnderemployment

Rate

1995 2,425 4,686 8.8 18.6

1996 2,397 5,561 8.3 21

1997 2,203 5,424 7.8 20.9

1998 2,488 5,657 8.6 21.4

1999 2,741 5,945 9.2 21.9

2000 2,899 5,818 9.5 21

2001 3,597 4,744 11.3 16.9

2002 3,393 4,724 10.3 15.9

2003 3,559 4,849 10.6 16.1

2004 3,900 5,522 11 17.5

2005 4,030 5,098 11.3 16.1

Source: National Statistics Office

Underemployed HouseholdUnderemployed Household

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Year

Valu

e

Underemployed

Unemployed HouseholdUnemployed Household

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Year

Valu

e

Unemployed

Success in the workplace (Outliers, Gladwell 2008)

When you were born Microsoft: Bill Gates Oct. 1955, Paul Allen Jan. 1953, Steve

Ballmer March 1956 Apple Computer: Steve Jobs Feb. 1955 Novell (software firm): Eric Schmidt April 1955 Computer legend: Bill Joy Nov. 1954 Sun Microsystems: Scott McNealy Nov. 1954, Vinod Khosla

Jan. 1955, Andy Bechtolsheim Sept 1955 Where you were born What parents did for a living Circumstances of upbringing Tradition and attitude we inherited