馃攳
Unemployment and Full Employment - Unemployment and Inflation (2/3) | Principles of Macroeconomics - YouTube
Channel: Inspirare
[0]
Now let's move on and talk about unemployment
and full employment, and see the relationship
[4]
between these two different concepts.
[5]
There are a couple different types of unemployment
and the first one that I want to mention is
[9]
called frictional unemployment.
[12]
Frictional unemployment is just the unemployment
that arises from regular labour turnover.
[17]
From people entering and leaving the labour
force and from ongoing creation and destruction
[21]
of jobs.
[22]
Or people who are just in between jobs.
[24]
It is a permanent and healthy phenomenon in
a growing economy.
[28]
Let's put it this way; illustrate it visually.
[30]
We have three groups of people here: we have
those who are employed, those who are not
[35]
in the labour force, and we have a pool of
people that are unemployed.
[38]
And this we're going to say is specifically
people who are frictionally unemployed.
[41]
When we get people not in the labour force
entering the labour force, generally we can
[46]
say that they're unemployed.
[48]
They're still looking for jobs.
[49]
They haven't found one yet and so the unemployment
rate goes up when people enter the labour
[53]
force.
[54]
But when you have unemployed people leaving
the labour force, not working of course, then
[60]
you have a decrease in frictional unemployment.
[63]
At the same time, if you have people who are
employed who lose their jobs then they enter
[68]
this pool of frictional unemployment.
[70]
And the people who are unemployed who find
jobs, then you have people who are no longer
[76]
unemployed - frictionally unemployed - they
are rather employed.
[80]
An example for this employed and unemployed
(frictionally unemployed) would be someone
[85]
who doesn't like their job maybe; who leaves
their job, looks for a new one, and finds
[89]
another one.
[90]
So they are employed, they lose, leave their
job.
[93]
They are unemployed, then they find a job
and they are employed.
[96]
So the frictional unemployment rate changes
in this way.
[100]
We also have structural unemployment.
[102]
There are three different things that can
cause this.
[104]
The first thing is changes in technology.
[106]
They change the skills needed to actually
perform jobs.
[109]
For example, a secretary back in the day would've
had to have really really good bookkeeping
[114]
skills.
[115]
But a secretary nowadays would need to have
extremely good computer and communication
[119]
skills, things like that.
[121]
There's also changes in the location of jobs.
[124]
An example of this could be if we have a factory
that's located on one side of the country
[128]
which then closes down and moves to another
side of the country.
[131]
This is another example of structural unemployment
because the jobs have gone from one location
[135]
to another geographical location.
[138]
We also have these things known as sunset
industries.
[140]
And the best example of this is if you think
of VHS tapes.
[143]
Nobody uses them anymore, so basically anybody
who was in the industry of making VHS tapes
[148]
is now no longer employed because the demand
for these goods and services, for example
[154]
VHS tapes has now decreased.
[156]
So the industry is kind of "setting" like
a sunset.
[160]
It's diminishing slowly.
[163]
The third type of unemployment that I want
to talk about is cyclical unemployment.
[167]
This is simply just the higher than normal
unemployment at a business cycle trough and
[171]
the lower than normal unemployment and a business
cycle peak.
[174]
If we take a look, during a business cycle
expansion we have an increase in real GDP
[180]
so cyclical unemployment goes down because
real GDP increases, firms produce more, they
[184]
need more labour.
[186]
But on the other hand, during a contraction,
cyclical unemployment actually increases because
[190]
as real GDP decreases, we have firms that
can't sell as much goods and services so they
[196]
fire some people.
[198]
Now we're going to put this all together.
[199]
We're going to talk about natural unemployment.
[202]
Natural unemployment is just equal to the
structural unemployment plus the frictional
[207]
unemployment.
[208]
The assumption here is that there is no cyclical
unemployment.
[210]
The effects of the business cycle are completely
null.
[215]
Natural unemployment is also known as the
position where unemployment is at full employment.
[221]
Let's take a look at this in an example.
[223]
So we have a working age population of 30
million.18 million of these people are employed,
[229]
2 million are unemployed, and 2 million of
the employed are working part-time, half of
[234]
whom wish to work full time.
[237]
If 1 million of those unemployed are cyclically
unemployed, what is the natural unemployment
[242]
rate?
[243]
Let's just take a second to highlight the
important parts of this question.
[247]
We have 18 million that are employed, 2 million
that are unemployed, and 1 million of those
[254]
unemployed are cyclically unemployed.
[257]
So let's just remember this: when we say - when
we try to find the number of people who are
[261]
naturally unemployed we want to take the total
amount and we want to subtract the cyclically
[267]
unemployed - people who are cyclically unemployed
because they don't actually count as part
[270]
of the natural unemployment rate.
[272]
So we take the total, which is 2 million and
we take away 1 million which is those who
[276]
are cyclically unemployed and we get a total
of 1 million people who are naturally unemployed.
[282]
And then we just put it into the same formula
as the unemployment rate.
[285]
We take the number of naturally unemployed
and we divide it by the total labour force
[290]
which is 18 million plus 2 million, because
that is the number of people employed plus
[295]
the number of people unemployed.
[297]
We divide that and then we multiply it by
100 and we get a natural unemployment rate
[302]
of 5%.
Most Recent Videos:
You can go back to the homepage right here: Homepage