Employment Introduction

EMPLOYMENT OBJECTIVES:

How employment is defined.

The concept of full employment.

The differing causes of unemployment.

An economic model which illustrates the degree of unemployment of any resource.

Working age population - the resident population who are 15 years and older.
The labour force- the part of the total population willing and able to work; most will have jobs, but some will not.
Full time labour force � those working over 30 hours a week or those who are unemployed and seeking full time work.
Part time labour force � those working 1 -29 hours per working or who are unemployed and seeking part time work.
The participation rate - is defined as the labor force divided by the size of the civilian non-institutional population (people in places such as prisons). Individuals who are out of the labour force fall into one of a number of categories. They include

those who go to school beyond the compulsory school age,
retired people whether or not they are of retirement age, and people who are not willing
to work in the marketplace because, for instance, they are raising a family.

Labour Supply
When the real wage increases, it affects the supply of labor in two ways.

It becomes more expensive not to work. The cost ofnot working is the wage you would have earned if you had of worked. An increase in real wages makes leisure more expensive and leads to an increase in the supply of labor. This is called the substitution effect - as the price of a good increases (in this case leisure), people substitute something for it (in this case work).
People become wealthier and want to consume more of most goods, including leisure. This income effect leads people to consume more leisure and supply less labour as real wages rise. What happens to the supply of labour when wages increase depends on whether the income or substitution effects dominate.

Natural Rate of Unemployment.

Full employment in the past has been 1-2% of unemployment.
Some would argue in more recent times that this rate should be higher. Between 1961 and 1971 the natural unemployment rate was less than one per cent of the labour force.
It is now suggested to be 3 to 5%. It is an acceptable rate of unemployment because there will always be a number of workers between jobs or temporarily between jobs or temporarily unemployed.
What is a natural rate of unemployment? This is the rate considered to be impossible to go below.

UNEMPLOYMENT AND THE PPF AND AD/AS MODEL

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