UNEMPLOYMENT

Charina C. Famero
UNEMPLOYMENT

▪ People who are available for and willing to work but do not
have paid employment.
▪ Total number of adults (aged 16 years or older) willing and
able to work and who are actively looking for work and
have not found a job
▪ Workers that are actively looking for a job but aren’t
working

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How is Unemployment Measured?

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How is Unemployment Measured?

To identify or measure unemployment, we will consider first the labor

force. What does the labor force consist of?
Civilian Labor Force - Individuals aged 16 years or older who either
have jobs or who are looking and available for jobs; the number of
employed plus the number of unemployed
▪ The employed people: these are people with jobs. Employed
people are people who perform any paid work as well as those with
jobs but absent from work because of illness or vacation.
▪ People without jobs but looking for work and those are called the
unemployed people.
▪ Those together constitute the components of the labor force.

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How is Unemployment Measured?

▪ The Unemployment Rate - The percent of people in the

labor force who want a job but are not working.
▪ Labor Force = number of employed + Number of
Unemployed where as people without jobs who are not
looking for work are outside the labor force.
▪ The Unemployment Rate = No. of Unemployed
x 100
Total No. of Labor Force
▪ And it has nothing to do with those who are not working
and not looking for jobs.

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How is Unemployment Measured?

▪ The labor force participation rate measures the

percentage of the total adult population of the country that
is in the labor force

Labor-Force Participation Rate = Labor Force

x 100
Adult Population

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How is Unemployment Measured?

Example: Consider the figures of the USA economy is 1998:

▪ No. of employed people = 131.5 million
▪ No. of Unemployed people = 6.2 million
▪ US Adult population = 205.2 million

Calculate the Labor Force and the Unemployment Rate, and

the Labor force participation rate.

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How is Unemployment Measured?

Answer:
▪ Total Labor Force in the USA = 131.5 + 6.2 = 137.7
million
▪ Unemployment Rate = 6.2 / 137.7 x 100 = 4.5%
▪ Labor – Force Participation Rate = 137.7 / 205.2 x 100 =
67.1%
▪ Hence in 1998, 2/3 of the US adult population were
participating in the labor market, and 4.5% is the
unemployment rate.

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Adult Population

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Labor force = The employed + The unemployed

152.7* = 145.4 + 7.3

Unemployed
Unemployment rate = x 100
Labor force

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 More Than a Century
of Unemployment

Source: U.S. Department of Labor,

Bureau of Labor Statistics

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TOTAL LABOR FORCE
IN THE PHILIPPINES

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UNEMPLOYMENT RATE IN
THE PHILIPPINES

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Starting April 2005, the new unemployment definition was
adopted per NSCB Resolution Number 15 dated October 20,
2004. the unemployed include all persons who are 15 years
and over as of their last birthday and are reported as: (1)
without work and currently available for work and
looking for work; or (2) without work and currently
available for work but not looking for work due to the
following reasons:
1. Tired/believed no work available
2. Awaiting results of previous job application
3. Temporary illness/disability
4. Bad weather
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5. Waiting for rehire/job recall
▪ RA No. 10625, also known as the Philippine Statistical Act of 2013, which

was approved on September 12, 2013, states that “the PSA shall be

primarily responsible for all national censuses and surveys, sectoral

statistics, consolidation of administrative recording system, and

compilation of national accounts.”  Specifically, Section 6(b) of this Act

mandates the PSA “to prepare and conduct periodic censuses on population,

housing, agriculture, fisheries, business, industry, and other sectors of the

economy.”   18
The Philippine Statistics Authority (PSA) carries out nationwide
regular household-based surveys such as the following: Labor
Force Survey (LFS) at a quarterly basis; Family Income
and Expenditure Survey (FIES) every three years; Survey on
Overseas Filipinos (SOF) on an annual basis; Annual Poverty
Indicators Survey (APIS) conducted during non-FIES years;
Functional Literacy, Education and Mass Media Survey
(FLEMMS) every five years; and other donor-supported surveys
such as: Family Health Survey (FHS); National Demographic
and Health Survey (NDHS);  Survey of Children (SOC); Multiple
Indicator Cluster Survey (MICS); Household Energy
Consumption Survey (HECS); Household Survey on Domestic
Visitors (HSDV); Global Adult Tobacco Survey (GATS), and 19
▪ Starting January 2017 round, Computer Aided Personal
Interviewing (CAPI) using Tablet was utilized in the LFS
enumeration.
▪ The survey involved the collection of data on demographic
and socio-economic characteristics of the population in
general. 

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Computer-assisted personal interviewing

▪ is an interviewing technique in which the respondent or

interviewer uses an electronic device to answer the
questions. It is similar to
computer-assisted telephone interviewing, except that the
interview takes place in person instead of over the
telephone. This method is usually preferred over a
telephone interview when the questionnaire is long and
complex. It has been classified as a personal
interviewing technique because an interviewer is
usually present to serve as a host and to guide the
respondent. If no interviewer is present, the term
Computer-Assisted Self Interviewing (CASI) may be
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used.
▪ Starting July 1987, the LFS used a new questionnaire
design and adopted modifications in the concepts and
definitions for measuring labor force and employment
characteristics. The design was based on a past week
reference period and the new concept on “availability and
looking for work” was adopted. 

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Determination of Employment Status
▪ The employment status of persons 15 years and over is
determined on the basis of answers to a series of inter-
related questions which are described below:
▪ a. “Did____ do any work at all even for only one hour during
the past week?”  This question is asked to identify the
employed persons.  “Work at all” for purposes of this
survey means that a person reported to his or her place of
work and performed duties or activities for at least one
hour during the reference week.  If a person reported that
he or she did some work, not counting chores around the
house, the person is still considered in the employed
category although most of his or her time was devoted to
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household chores.  
Determination of Employment Status

▪ b. “Although ____ did not work, did ____ have a job or

business during the past week?”  Some persons may not
have worked at all during the past week but may actually
have jobs or businesses on which they are temporarily not
reporting to, as in the following cases: an employee on
strike; a person temporarily laid off due to non-economic
reasons like machine breakdown; a person with a new job
to begin within two weeks from the date of interview; and
regular and temporary teachers during summer vacation,
excluding substitutes, who still receive pay and are
expected to go back to their jobs in the next school year. 
These persons are considered employed even
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though they are not actually at work.
Determination of Employment Status

▪ c. “Did ____ look for work or try to establish a business

during the past week?”  This question is asked to
determine who among those who had no job or business
had really done something to look for work.  If a person
looked for work and is reported as currently available for
work, he or she is classified as unemployed. 

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Determination of Employment Status

▪ d. “Why did ____ not look for work?”  This question seeks to
determine if the main reason for not looking for work of a
person who is reported as currently available for work is
valid (see definition of unemployed), in which case, he or
she is considered unemployed.

▪ If the answer to this question is schooling,

housekeeping, too young or too old or retired,
permanent disability, or reasons other than those
considered as valid, then the person is excluded
from the labor force.
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UNEMPLOYMENT RATE
IN THE PHILIPPINES

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UNEMPLOYMENT RATE IN
THE PHILIPPINES

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Categories of individuals without work

▪ Job Loser Reentrant

▫ An individual who has
▫ An individual whose
worked a full-time job
employment was
before but left the labor
involuntarily force and has now
terminated or who reentered it looking for a
was laid off job
▫ 40–60% of the ▫ 20–30% of the
unemployed unemployed

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Categories of individuals without work

▪ Job Leaver ▪ New Entrant

▫ An individual who ▫ An individual who has
voluntarily quit never worked a full-time
▫ 10 to 15% of the job for two weeks or
unemployed longer
▫ 10 to 15% of the
unemployed

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Kinds or Types of
Unemployment

Unemployment is classified
into 4 kinds:
▪ Frictional
Unemployment
▪ Structural
Unemployment
▪ Cyclical
Unemployment
▪ Seasonal
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Unemployment
Frictional Unemployment

Arises because of the continuous movement of people between

different regions and jobs or through different stage of the life
cycle,

So Frictional unemployment arises of workers who:

▫ Newly enter the labor force (such as new graduated)
▫ Or those who Re-enter labor force at a late stage of
their life. (such as women after having children)
▫ Or those who move between different jobs or cities.

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Structural Unemployment

▪ arises of workers who are in regions and industries that

experience persistent changes.
▫ For example, a sharp depression in the auto or steel
industry creates structural unemployment which shows
that whenever there is a mismatch between SS and DD
for labor, then structural unemployment arises.
▪ With a depression in one industry, DD is less than SS,
hence excess supply of labor and the result is what we call
Structural Unemployment.

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Cyclical Unemployment

▪ exists when the overall economy suffers downtown or a

recession.
▪ With a recession, the demand decreases, hence
consumption and GDP decrease.
▪ As GDP decreases, Unemployment arises, which is called
Cyclical Unemployment.

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Seasonal Unemployment

▫ Results from the seasonal pattern of work in specific

industries
▫ Adjustments are made to offset the effects of seasonal
unemployment so that meaning comparisons can be
made between different periods of the year. This
adjustment is needed in order to assess the affects of
the other types of unemployment.

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Natural Rate of Unemployment (NRU)

▪ One of the key concepts in modern macroeconomics is the

NRU.
▪ It is the level of unemployment that occurs even if the
nation’s labor market is said to be in equilibrium (fully
employment).
▪ This NRU means that even if at equilibrium in labor market,
a certain rate of unemployment exists which is the natural
rate of unemployment.
▪ The NRU represents the lowest sustainable level of
unemployment which occurs at the level of full-
employment or Potential GDP of the economy.
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Natural Rate of Unemployment (NRU)

Two important points should be known about this rate:

1- NRU is not ZERO but rather a number above it:
▫ So even if the economy is at its Potential GDP in a state
of long-run equilibrium, there will still exist a certain
rate of unemployment called the NRU which is higher
than zero.
▫ This is due to the fact that there is a constant change
in the DD and SS for goods and services and
consequently a change in the demand and supply of
labor which will cause some rate of unemployment to
exist and this represents the NRU.
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Natural Rate of Unemployment (NRU)

2- The NRU is related to inflation:

▫ There is always a tradeoff (opposite relationship)
between Unemployment and Inflation in an economy,
▫ so that if to decrease unemployment to zero, inflation
rises highly and a serious problem arises in the
economy.

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Public Policy to Reduce Unemployment

Facilitate Job Unemployment Minimum Wage

Search Insurance programs Laws

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Facilitate Job Search

▪ The more the government can facilitate job search, the

more it will be able to reduce frictional unemployment,
▪ So if policy can reduce the time it takes the unemployed
workers to find new jobs, it can reduce the economy’s rate
of unemployment.

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Facilitate Job Search

▪ Government programs try to facilitate job search in various

ways:

▫ One ways is through government-run employment

agencies, which give out information about the
available job vacancies in the market.
▫ Another way is through public training that aims at
improving labor qualifications to match requirements of
the modern labor market.

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Unemployment Insurance programs

▪ One government program that increases the amount of

frictional unemployment without intending to do so, is
unemployment insurance programs.
▪ Under this program, the unemployed who quit their jobs,
were fired for cause, or just entered the labor force are not
eligible.
▪ Benefits are paid only to the unemployed who were laid off
because their previous employers no longer needed their
skills.
▪ Under such programs, a typical worker will receive 50% of
his former wage for a period of 26 weeks.
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Minimum Wage Laws

Minimum Wage Laws : are government actions increasing

the labor wages above the equilibrium or market wage rates.
▪ When government sets minimum wage rates, the direct
effect is an increase in the number of unemployed people
in the economy, hence increasing unemployment rather
than decreasing it.
▪ This is due to the fact that as government sets minimum
wages, the quantity supplied of labor > quantity
demanded of labor resulting in excess labor, hence
unemployment occurs.
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THANKS!

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