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 7.3 19.7

92.3 7.7 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