Professional Documents
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IDENTIFYING UNEMPLOYMENT
General definition: the unemployed refers to person who is available to work and currently seeking work, but the person is without work Categories of Unemployment
Natural unemployment Cyclical or Keynesian unemployment Frictional unemployment Classical unemployment Structural unemployment
IDENTIFYING UNEMPLOYMENT
Natural Rate of Unemployment
The natural rate of unemployment is unemployment that does not go away on its own even in the long run. It is the amount of unemployment that the economy normally experiences.
IDENTIFYING UNEMPLOYMENT
Cyclical Unemployment
Cyclical unemployment refers to the year-to-year fluctuations in unemployment around its natural rate. It is associated with with short-term ups and downs of the business cycle.
IDENTIFYING UNEMPLOYMENT
Frictional Unemployment
Frictional unemployment occurs when a worker moves from one job to another. While he searches for a job he is experiencing frictional unemployment. This applies for fresh graduates looking for employment as well. This is a productive part of the economy, increasing both the worker's long term welfare and economic efficiency. It is a result of imperfect information in the labour market, because if job seekers knew that they would be employed for a particular job vacancy, almost no time would be lost in getting a new job, eliminating this form of unemployment.
IDENTIFYING UNEMPLOYMENT
Classical Unemployment
Classical or real-wage unemployment occurs when real wages for a job are set above the marketclearing level. This is often ascribed to government intervention, as with the minimum wage; or trade unions
IDENTIFYING UNEMPLOYMENT
Structural Unemployment
This unemployment is caused by a mismatch between jobs offered by employers and potential workers. This may pertain to geographical location, skills, and many other factors. If such a mismatch exists, frictional unemployment is likely to be more significant as well
IDENTIFYING UNEMPLOYMENT
Describing Unemployment
Two Basic Questions:
How does government measure the economys rate of unemployment? What problems arise in interpreting the unemployment data?
How Is Unemployment Measured in Vietnam? Unemployment is measured by the GSO and MOLISA
It surveys around 70-80,000 randomly selected households every year. The survey is called the Labour Force Survey. Information collected at the time of July 01;
How Is Unemployment Measured? US and some other OECD considers a person an adult in working age if he or she is over 16 years old and less than the retirement ages In Vietnam, working age is defined from 15 to 55 (for females) and 60 (for males) as regulated by the Labour Code
How Is Unemployment Measured? A person in the labour force that is considered employed if he or she has spent most of the previous months working at a paid job.
How Is Unemployment Measured? A person in the labour force is unemployed if he or she is on temporary layoff, is looking for a job, or is waiting for the start date of a new job.
Population
In working ages (15-55/60) Out of working ages
Economically active
Labour force Not in labour force
Employed
Unemployed
How Is Unemployment Measured? The unemployment rate is calculated as the percentage of the labor force that is unemployed.
Unemployment rate = Number unemployed 100 Labor force
How Is Unemployment Measured? The labor force participation rate is the percentage of the economically active population that is in the labor force.
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Underemployment in Vietnam Underemployment is an issue related to the employed who have work for less than 35 hours/weeks. In this regard, underemployment could be large (but difficult to estimate) in urban areas. In rural areas, as most of the people work in agriculture, underemployment is very high
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Does the Unemployment Rate Measure What We Want It To? It is difficult to distinguish between a person who is unemployed and a person who is not in the labor force. Discouraged workers, people who would like to work but have given up looking for jobs after an unsuccessful search, dont show up in unemployment statistics. Other people may claim to be unemployed in order to receive financial assistance, even though they arent looking for work.
How Long Are the Unemployed without Work? Varies from country to country. In developed countries, with flexible labour market but strong unions: could be short In developing countries, with labour market regidities but a lot of job opportunities: could be short.
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Why Are There Always Some People Unemployed? In an ideal labor market, wages would adjust to balance the supply and demand for labor, ensuring that all workers would be fully employed.
JOB SEARCH
Job search
the process by which workers find appropriate jobs given their tastes and skills. results from the fact that it takes time for qualified individuals to be matched with appropriate jobs.
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JOB SEARCH
This unemployment is different from the other types of unemployment.
It is not caused by a wage rate higher than equilibrium. It is caused by the time spent searching for the right job.
Why Some Frictional Unemployment is Inevitable Search unemployment is inevitable because the economy is always changing. Changes in the composition of demand among industries or regions are called sectoral shifts. It takes time for workers to search for and find jobs in new sectors.
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Public Policy and Job Search Government programs can affect the time it takes unemployed workers to find new jobs. These programs include the following:
Government-run employment agencies Public training programs Unemployment insurance
Public Policy and Job Search Government-run employment agencies give out information about job vacancies in order to match workers and jobs more quickly.
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Public Policy and Job Search Public training programs aim to ease the transition of workers from declining to growing industries and to help disadvantaged groups escape poverty.
Public Policy and Job Search Unemployment insurance is a government program that partially protects workers incomes when they become unemployed.
Offers workers partial protection against job losses. Offers partial payment of former wages for a limited time to those who are laid off.
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Problems with unemployment in Vietnam Only applied for those with work contracts It largely related to the wage-employed in Vietnam
Refer back to structure of employment in Vietnam; Pham and Reilly (2008): the wage employed accounted for only one third of the labour force Self employment in rural areas are largely left out Even for the wage employed, the rate of contract worker was around 70% (Pham et al. 2008)
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MINIMUM-WAGE LAWS
When the minimum wage is set above the level that balances supply and demand, it creates unemployment.
Labor demand
LD
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Quantity of Labor
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Minimum wages in Vietnam (updated for 2006) Most recently, the minimum salary, according to the Decree No 03/ND-CP in January 2003, rose to VND 290 thousand per month (or nearly US$ 18.7) for workers in domestic enterprises. Minimum wages in public sector is higher than in the other sectors (currently regulated at 540 thousand/month, and will be increased to 620 thousand VND)
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Are Unions Good or Bad for the Economy? Critics argue that unions cause the allocation of labor to be inefficient and inequitable.
Wages above the competitive level reduce the quantity of labor demanded and cause unemployment. Some workers benefit at the expense of other workers.
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Are Unions Good or Bad for the Economy? Advocates of unions contend that unions are a necessary antidote to the market power of firms that hire workers. They claim that unions are important for helping firms respond efficiently to workers concerns.
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Summary
The unemployment rate is the percentage of those who would like to work but dont have jobs. The GSO calculates this statistic yearly for urban areas. The unemployment rate is an imperfect measure of joblessness.
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Summary
One reason for unemployment is the time it takes for workers to search for jobs that best suit their tastes and skills. A second reason why our economy always has some unemployment is minimum-wage laws. Minimum-wage laws raise the quantity of labor supplied and reduce the quantity demanded.
Summary
A third reason for unemployment is the market power of unions. A fourth reason for unemployment is suggested by the theory of efficiency wages. High wages can improve worker health, lower worker turnover, increase worker effort, and raise worker quality.
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