Production Function

Q = f (K, L)

Demand for Labour : Derived

Demand
The substitution Effect of
Labour : if the wage rate falls,
employers will employ more
labour because it is cheaper
The Income Effect of Labour:
if the wage rate falls,
employers will employ more
labour because it leaves more
budget to spend

UNEMPLOYMENT :
ISSUES, DIMENSIONS, AND ANALYSES

UNEMPLOYMENT
An involuntary idleness on the part of those who
have failed to find unemployment or who have
lost their latest jobs, but are able to work, and are
looking for work

Types of Unemployment
1. Normal Unemployment- Unemployment due to
low or no demand for workers.
2. Frictional Unemployment- Unemployment due to
being temporarily between jobs or looking for a first
job. It is a permanent feature of labour markets,
represents about 3% of the labour force at all times.
3. Structural Unemployment- Unemployment due
to a mismatch between people and jobs. This type of
unemployment occurs because of gradual changes in
the economy. Long term adjustments in what, how,
and where products are produced cause such
unemployment.
4. Technological Unemployment- Unemployment
due to technology
5. Cyclical Unemployment- Unemployment due to
the ups and downs of economies and businesses,
causing unemployment to rise and fall.
6. Seasonal Unemployment- Unemployment due to
the seasonal nature of some occupations and
industries

 Effects of Unemployment
It creates depression and psychological effect on the

part of the male worker

Loss of wages and temporary or permanently lowered
plane of living
Women and children enter into the labor force in the
desire to help the family
In many instances it breeds discontent, radicalism
and general unrest of the existing economic order
Unemployment creates unemployment
It creates more social problems

 Full Employment
It is the highest reasonable expectation of employment for the

economy as a whole, as is defined in terms of the Natural Employment

Rate

Natural Employment Rate- which is the unemployment rate that

defines full employment. Includes frictional unemployment, but

traditionally excludes cyclical and seasonal unemployment.
Increases over the past few decades in both the actual and the natural
unemployment rates represent worrisome trends, which can be
explained by the following factors:
1. Structural Change
2. Changing Participation Rates
3. Minimum Wage

 Five Forms of Labor Underutilization

Open Unemployment - both voluntary & involuntary
Underemployment people working less than they would like to

work
Visibly Active but underutilized-people who would not normally be
classified as either employed or underemployed
Disguised underemployment
Hidden unemployment
Premature retirement
The impaired- people who may work full time but whose intensity of
effort is impaired by malnutrition
The unproductive

January 2010 Labor Force Survey (LFS)

Philippines
Population 15
years and over (in
'000)
Labor Force
Participation
Rate (%)
Employment Rate
(%)
Unemployment
Rate (%)
Underemployment
Rate (%)

January 2010 1/
60,208

January 2009
58,657

64.5

63.3

92.7

92.3

7.3

7.7

19.7

18.2

Notes: 1/ Estimates for January 2010 are preliminary and may change.
2/ Population 15 years and over is from the 2000 Census-based
population projections.

3
Rates of Labor Force, Employment, Unemployment and Underemployment, by Region: January 2010
(In percent)
=====================================================================================================
Labor Force |
|
|
UnderRegion
Participation | Employment | Unemployment | employment
Rate |
Rate |
Rate |
Rate
----------------------------------------------------------------------------------------------------Philippines
64.5
92.7
7.3
19.7
National Capital Region
62.8
89.2
10.8
10.9
Cordillera Administrative Region
68.0
95.0
5.0
17.3
I
-Ilocos Region
60.9
92.1
7.9
14.8
II
-Cagayan Valley
67.1
97.0
3.0
17.0
III
-Central Luzon
61.3
91.0
9.0
8.7
IVA
-CALABARZON
63.8
90.5
9.5
16.9
IVB
-MIMAROPA
68.7
95.8
4.2
22.4
V
-Bicol Region
64.6
94.9
5.1
36.8
VI
-Western Visayas
66.1
94.0
6.0
28.6
VII
-Central Visayas
64.9
91.9
8.1
18.1
VIII -Eastern Visayas
64.8
93.6
6.4
22.8
IX
-Zamboanga Peninsula
68.3
95.3
4.7
26.0
X
-Northern Mindanao
70.2
94.8
5.2
26.4
XI
-Davao Region
65.1
94.0
6.0
22.8
XII
-SOCCSKSARGEN
67.7
94.8
5.2
26.7
Caraga
64.9
91.9
8.1
28.0
Autonomous Region in Muslim Mindanao
59.2
96.0
4.0
16.6
----------------------------------------------------------------------------------------------------Notes:
Estimates for January 2010 are preliminary and may change.
Figures were estimated using the 2000 Census-based Population Projections.
Source:
National Statistics Office, January 2010 Labor Force Survey
Page last updated: March 16, 2010

A general increase in the price of goods

and services in an entire economy over
time.

TYPES OF INFLATION
1. DEMAND PULL INFLATION

2. COST PUSH INFLATION

3. STRUCTURAL INFLATION

formula for INFLATION RATE

Yearly = [ cpi current year/cpi previous year-1]100
Monthly=[ cpi current mo/cpi previous mo-1]100

Quarterly= [ cpi qtr of current yr /cpi previous of

same qtr of previous yr-1]100

EFFECTS OF INFLATION
1. It will result to hoarding or illegal storing of
product

2. It will aggravate poverty conditions

3. Investment is very risky
4. Lenders of Money or creditors lose during
inflation while debtors benefit from it because of
the decrease in the purchasing power of peso

 Inflations Effect.
If household but Inflation at a higher rate, then households

purchasing power .
If household and inflation rate proportionally, then
household maintains purchasing power.
Cost of living adjustment clauses (COLA) Provisions for
income adjustment to accommodate changes in price level,
which are included in wage contracts.
Fully Indexed Incomes Nominal incomes that automatically
increases by the rate of inflation.
Partially Indexed Incomes Nominal incomes that increases by
less than the rate if inflation.
Fixed Incomes Nominal incomes that remain fixed at some
dollar amount regardless of the rate of inflation.
Nominal Interest rate: The interest rate expressed in money
terms.
Real interest rate: The nominal interest rate minus the rate if
inflation.

ECONOMIC POLICY TOOLS

Monetary Policy
Fiscal Policy

Trade Policy