ECON1102 Lecture Notes - Lecture 2: Discouraged Worker, Employment-To-Population Ratio, Underemployment
18 May 2018
School
Department
Course
Professor
Week 2 – Employment & Labour Markets
Definitions:
• Employed – person worked for at least one hour in past week for some form of
compensation
• Unemployed – person did not work during past week, but:
Looked for work in previous month, and
Was available to begin work, or
Was waiting to start a new job
• Labour force – equals the total number of people employed or unemployed
LF = L + U
• Not in labour force – does not meet requirements to be employed or unemployed
E.g. unpaid homeworkers, volunteers, unable to work due to disability or illness,
voluntarily inactive
• Working-age population – Australians who are civilians, usually resident and who are
15 years or older
• Full-time – working at least 35 hours per week
• Casual worker – absence of paid leave entitlements (holiday or sick leave)
• Underemployment – person willing to work more than current hours or have skills
and experience that are not required in current job
• Discouraged worker – person has given up active job search, despite being willing to
work, because they believe no suitable jobs are available
Important Ratios:
• Unemployment rate (u):
• Participation rate:
Where pop = working-age population
find more resources at oneclass.com
find more resources at oneclass.com
2
• Employment rate:
Where pop = working-age population
Economic Types of Unemployment:
• Frictional (search) unemployment
Short-term unemployment associated with people searching for a suitable job
Feature of any dynamic economy
Beneficial rather than costly to economy, as it leads to more efficient matching
between workers and jobs
Long-Run Frictional Unemployment:
(a) In any month,
i. Some people find a new job (move from U to L)
ii. Some people separate from their job (move from L to U)
(b) Define:
i. s = rate of job separation
ii. f = rate of job finding
(c) ∆U = (s x L) – (f x U)
i. L = LF + U
ii. ∆U = [s x (LF – U)] – (f x U)
iii. ∆U = (s x LF) – U*(s + f)
iv. I the log ru, ∆U = 0, therefore s x LF = U*s + f
(d) The long-run rate of frictional unemployment, depends on separation rate
and job finding rate
• Structural unemployment
Longer-term unemployment that can arise when the distribution of skills of some
workers does not match the available jobs in the economy
Structural change in the economy may results in a loss of jobs for certain types of
specialized workers
Workers may have a lack of skills or be subject to discrimination and this
prevents them from finding stable long-term employment
• Cyclical unemployment
Associated with fluctuations in economic activity
Rises in recessions
Falls during booms
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Definitions: employed person worked for at least one hour in past week for some form of compensation, unemployed person did not work during past week, but: Looked for work in previous month, and. Was waiting to start a new job: labour force equals the total number of people employed or unemployed. Lf = l + u: not in labour force does not meet requirements to be employed or unemployed. E. g. unpaid homeworkers, volunteers, unable to work due to disability or illness, voluntarily inactive: working-age population australians who are civilians, usually resident and who are. Important ratios: unemployment rate (u), participation rate: Where pop = working-age population: employment rate: Economic types of unemployment: frictional (search) unemployment. Short-term unemployment associated with people searching for a suitable job. Beneficial rather than costly to economy, as it leads to more efficient matching between workers and jobs.
