Unemployment

Unemployment and Macroeconomics

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10 July , 2008

Employment is the state of having a paid work either on permanent or temporary basis . There can be various types of employment within an economy . Part time workers , full-time workers , self-employed workers are a few to name . The population may be divided into the following classes (McConnell Brue , 2006

Employed Force

Unemployed Labor Force

This together comes under the labor force

Not in Labor Force which are those

people who can work but are not actually looking for work

Under 16 and /or Institutionalized which may include people who are physically or mentally challenged

This together does not come under the labor force

There are various types of unemployment that are considered in the study of macro economics and so it is necessary that they are defined before hand (Locke , Kochan Piore , 1995

Frictional unemployment

It is basically when a person is looking for a job . People are said to be frictionally unemployed when they are changing job and are temporarily unemployed . People may like to be frictionally unemployed if they are not feeling satisfied with their present ones or are attracted by some other job benefit package . People who are expelled from their jobs may be treated in the same category . There might also be people who are only temporarily employed for example seasonally . Also fresh graduates looking for their first jobs will fall in this definition Many economists and Human Resource (HR ) Managers like Mr . Michael who is a Manager in one of the Pakistani branch of Citi Bank says that frictional unemployment is usually inevitable . When you have people leaving their jobs , you always have others filling in the vacuum . In an optimistic sense , this may be a good for the economy where people working on low pays strive to work for higher and bigger things . This means there is a better distribution of labor force , more spending and thus affecting our GDP . Frictional unemployment is usually short lived

Structural or Occupational unemployment

The economy , the demands and thus the requirements , skill levels and talent-need is changing with time . We are encountering more technology In fact we are moving more towards the service industry which requires more skill level pertinent to the said field . A suitable example might be that a person so perfect in using a typewriter may find him useless now with the introduction of computers and other sophisticated technology . Structural unemployment may come to happen if there is an economical over turn . Assuming a developing country suddenly hits a jackpot in the year and they plan to invest more on technology . People from that country may find it uncomfortable with using the new technology and will find themselves useless . With the introduction of World Trade Organization (WTO ) and advent of globalization , people in the other countries find their skill levels as still rudimentary and insufficient . With Multi National Companies shooting out all over the...