Unemployment: reasons and main forms

Ministry of education and science of Republic Kazakhstan

University of International Business

Management Department

TERM PAPER

THEME: Unemployment: reasons and main forms

prepared by: Kulusheva Anar 117 group

scientific Adviser: Tulegenov S. V.

Almaty, 2008

Plan:

Introduction

Chapter 1. All about Unemployment

1.1 What is unemployment?

1.2 How is unemployment measured?

1.3 Why are there always some people unemployed?

1.4 Working resources and its classification

Chapter 2. Unemployment in practical

2.1 Unemployment Insurance

2.2 Types of unemployment

2.3 Distribution of manpower

Conclusion

List of used literature

Introduction

Why I choose this theme?

We all are living in globalization epoch. So, slight changing in economy some countries in the one side of earth, are prove a big influence for economy all countries in the entire world.

Due to , that economy all world’s countries connected with each other and measures undertaken by this countries about getting down this problem must be coordination.

Nowadays mortgage crisis in USA influenced for many countries economy and for Kazakhstan’s economy too. And afterwards of any economy crisis is unemployment. Today this theme is very topical.

All countries need to find measure for saving economy in their country from crisis and find method to limit quantity of unemployed, because increase quantity of unemployed is aggravate crisis in all country’s economical branches.

Losing a job can be the most distressing economic event in a person’s life. Most people rely on their standard of living, and many people get from their work not only income but also a sense of personal accomplishment. A job loss means a lower living standard in the present, anxiety about the future and reduced self-esteem. It is not surprising, therefore, that politicians campaigning for office often speak about how their proposed policies will help create jobs.

A country that saves and invests a high fraction of its income, for instance, enjoys more rapid growth in its capital stock and its GDP than similar country that saves and invests less. An even more obvious determinant of a country’s standard of living is the amount of unemployment it typically experiences. People who would like to work but cannot find a job are not contributing to the economy’s production of goods and services. Although some degree of unemployment is inevitable in a complex economy with thousands of firms and millions of workers, the amount of unemployment varies substantially over time and across countries. When a country keeps its workers as fully employed as possible, it achieves a higher level of GDP than it would if it left many of its workers standing idle.

The problem of unemployment is usefully divided into two categories – the long-run problem and the short-run problem. The economy’s natural rate of unemployment refers to the amount of unemployment that the economy normally experience.

Chapter 1. All about unemployment

1.1  What is unemployment?

The answer to this question may seem obvious: an unemployed person is someone who does not have a job. But as economists we need to be precise and careful in our definition of economic categories. If you are in full-time education, for example, you do not have a full-time job in the usual sense of the word – i.e. you are not in full-time paid employment. And there is good reason: you are studying. Hence you are not available for work. What if you were not a student but were suffering from some long-term illness that meant that you were unfit for work. Again, although you would not have a job, we would not say that you were unemployed because you would not be available for work. From these two examples, it seems clear that we need to qualify our original definition of an unemployed person as ‘someone who does not have a job’ to ‘someone who does not have a job and who is available for work’.

But we still need to be clear as to what we mean by ‘available for work’. Suppose you were not in full-time employment and were looking for a job and I offered you a job as my research assistant for 50 pence a day. Would you take it? If we ignore for a moment the complication that economic research is so interesting that it is its own reward, you would probably not take the job because the wage rate offered is so low. At another extreme, suppose you won so much money on the National Lottery that you decided you would leave university and live off your winnings for the rest of your life. Would you be unemployed? No, because you would still be unavailable for work, no matter what wage rate you were offered. Thus, being unemployed also depends upon whether you are willing to work (whether you are ‘available for work’) at going wage rates.

We are now in a position to give a more precise definition of what it means to be unemployed: the number unemployed in an economy is the number of people of working age who are able and available for work at current wage rates and who do not have a job.

Normally, economists find it more convenient to speak of the unemployment rate. This expresses the number unemployed as a percentage of the labor force, which in turn can be defined as the total number of people who could possibly be employed in the economy at any given point in time. If you think about it, this must be equal to the total number of people who are employed plus the total number of people who are unemployed.

1.2  How Is unemployment Measured?

The claimant Count. One simple way is to count the number of people who, on any given day, are claiming unemployment benefit payments from the government – the so-called claimant count. Since a government agency is paying out the benefits, it will be easy to gather data on the number of claimants. The government also has a good idea of the total labour force in employment, since it is receiving income tax payments from them. Adding to this the number of unemployment benefit claimants is a measure of the total labour force, and expressing the claimant count as a proportion of the labour force is a measure of the unemployment rate.

Since the government already has all the data necessary to compute the unemployment rate based on the claimant count, is it is relatively cheap and easy to do. Unfortunately, there are a number of important drawbacks with the claimant count method.

One obvious problem is that it is subject to changes in the rules the government applies for eligibility to unemployment benefit. Suppose the government gets tougher and changes the rules so that few people are now entitled to unemployment benefit. The claimant count will go down and so will the measured unemployment rate, even though there has been no change in the number of people with or without work! The opposite would happen if the government became more lenient and relaxed the rules so that more people became eligible.

As it happens, governments do often change the rules on unemployment benefit eligibility. In the UK, for example, there have been about 30 changes to the eligibility rules over the past 25 years, all but one of which have reduced the claimant count and so reduced the measured unemployment rate based on this measure. The following are examples of categories of people who are excluded from the UK claimant count: people over the age of 55 who are without a job; those on government training programmes (largely school-leavers who have not find a job); anyone looking for part-time work; and people who have left the workforce for a while and now wish to return to employment (for example women who have raised a family). Many – if not all – of the people in these categories would be people who do not have a job, are of working age and are able and available for work at current wage rates; yet they would be excluded from measured unemployment in the UK using the claimant count method.

Labour Force Surveys. The second, and probably more reliable method of measuring unemployment is through the use of surveys – in other words, going out and asking people questions – based on an accepted definition of unemployment. Questions then arise as to whom to speak to, how often (since surveys use up resources and are costly) and what definition of unemployment to use. Although the definition of unemployment that we developed earlier seems reasonable enough, the term ’available for work at current wage rates’ may be too loose for this purpose. In the UK and many other countries, the government carries out Labour Force Surveys based on the standardized definition of unemployment from the International Labour Office, or ILO. The ILO definition of an unemployed person is someone who is without a job and who is willing to start work within the next two weeks and either has been looking for work within the past four weeks or was waiting to start a job.

The Labour Force Survey is carried out quarterly in the UK and is based on a sample of about 60,000 households. Based on the answer to survey questions, the government places each adult (aged 16 and older) in each surveyed household into one of three categories:

·  employed

·  unemployed

·  not in the labour force (or ’economically inactive’).

A person is considered employed if he or she spent some of the previous week working at a paid job. A person is unemployed if he or she fits the ILO definition of an unemployed person. A person who fits neither of the first two categories, such as a full-time student, homemaker or retiree, is not in the labour force (or, to use ILO terminology, economically inactive). Figure 1 shows this breakdown for the UK in the autumn of 2004.

Once the government has placed all the individuals covered by the survey in a category, it computes various statistics to summarize the state of the labour market. The labour force is defined as the sum of the employed and the unemployed:

Labour force = Number of employed + Number of unemployed

Then the unemployment rate can be measured as the percentage of the labour force that is unemployed:

Unemployment rate = (Number of unemployed/Labour force) х 100

The government computes unemployment rates for the entire adult population and for more narrowly defined groups – men, women, youths and so on.

The same survey results are used to produce data on labour force participation. The labour force participation rate measures the percentage of the total adult population of the country that is in the labour force:

Labour force participation rate = (Labour force/Adult population) х 100

This statistic tells us the fraction of the population that has chosen to participate in the labour market. The labour force participation rate, like the unemployment rate, is computed both for the entire adult population and for more specific groups.

To see how these data are computed, consider the UK figures for autumn 2004. According to the Labour Force Survey, 28.4 million people were employed and 1.4 million people were unemployed. The labour force was:

Labour force = 28.4 + 1.4 = 29.8 million

The unemployment rate was:

Unemployment rate = (1.4/29.8) х 100 = 4.7 per cent

Because the adult population (the number of people aged 16 and over) was 47.4 million, the labour force participation rate was:

Labour force participation rate = (29.8/47.4) х 100 = 62.9 per cent

Hence, in autumn 2004, nearly two-thirds of the UK adult population were participating in the labor market, and 4.7 per cent of those labour market participants were without work.

Figure 2 shows some statistics on UK unemployment for various groups within the population, broken down by ethnicity and sex, also collected by the ONS. A number of points are worth noting. First – and perhaps most striking – unemployment rates for people from non-white ethnic groups were higher than those for white people, for both men and women. Secondly, unemployment rates among ethnic groups vary widely. In 2001-02, among men, Bangladeshis had a highest unemployment rate in the UK at 20 per cent – four times that for white British men. The unemployment rate among Indian men was only slightly higher than that for white British men, 7 per cent compared with 5 per cent. Unemployment rates for all other non-white men were between two and three times higher than those for white British men.

The picture for women was similar to that for men, although the levels of unemployment were generally lower. Bangladeshi women had the highest unemployment rate of all at 24 per cent, six times greater than that for white British women (4 per cent). The rate for Indian women was slightly higher than for white women at 7 per cent.

Data on the labour market also allow economists and policymakers to monitor changes in the economy over time. Figure 3 shows the unemployment rate in the UK since 1971, calculated using the claimant count. Claimant count figures are less reliable than the Labour Force Survey figures.

Nevertheless, the figure is useful in demonstrating that the economy always has some unemployment and that the amount changes – often considerably – from year to year.

1.3  Why Are There Always some people Unemployed?

The unemployment reasons. In the western economic literature of the reason of unemployment are investigated mainly on the basis of purely economic approach. Thus unemployment is considered as a macroeconomic problem of not enough full use of a cumulative labour. Often reasons of unemployment speak imbalance of a labour market or adverse changes this market.

The most known theory explaining the reasons of unemployment, the theory of J is. M. Keynes which has replaced in the mid-thirties the theory of classics-economists (A. Smit, A. Marshall), explaining the unemployment reason high level of wages. On Keynes, unemployment is inverse function of cumulative demand. « Employment volume, - Keynes wrote, - by absolutely certain image is connected with volume of effective demand ». The insufficient volume of effective demand causes slackness of investment process and, hence, impossibility of maintenance of employment that conducts to I grow unemployment. An exit from this situation Keynes saw in increase of a role of the state in formation of cumulative demand at the expense of increase in the State expenditure, first of all – on the investment goods. Keynes's critics, representatives of neoclassical school, see the unemployment reasons just in that state policy which the developed countries spent« under recipes» Keynes. So, for example, F. Hajek considered that unemployment « is direct result of a short-sighted full employment policy which you spent to a current of last twenty five years ». Growth of the State expenditure, on F. Hajeka's opinions, inevitably conducts to inflation which, having reached a critical point, itself becomes the reason of the increased unemployment. An exit from this closed circle one – to stop an inflationary full employment policy. Certainly, at the first stage it will lead to sharp jump of unemployment, but it, on Hayek's idea, will give the chance to reveal all defects in work placing, to develop and carry out not inflationary methods the program of maintenance of a high and stable occupation level. Monetarists led by M. Fridmenom have put forward the concept of "natural" unemployment. To which they carry so-called frictional unemployment. Frictional unemployment covers the workers changing for those or other reasons a place of work, for example, in search of higher earnings or work with большей by prestigious ness, more favorable working conditions, or migrating in connection with necessity of change of a residence. To natural unemployment carry also structural, caused by changes in structure of public manufacture under the influence of scientific and technical progress and perfection of the organization of productions. This type of unemployment also is time (though also more long, than frictional unemployment) as disappearances of one manufactures (branches) it is accompanied by rapid growth of others. Problem only in that, how fast the unemployed can adapt to the changed conditions on a labour market. The concept of "natural unemployment» is supported by almost all economists, including Neokeynesians. Disputes go only that causes growth of unemployment above natural level, - insufficiency of an aggregate demand or the regulating policy of the state infringing the "natural" mechanism of formation of employment and a wages in the market of work. Thus, the western economists recognize that unemployment – the integral attribute of market system of an economy, it is inevitable, and in the "natural" variant even is useful to maintenance of necessary flexibility of a labour market. But till now not one economic doctrine is not indisputable from a point of sight of an explanation of the reasons of unemployment and employment. All present sights at the unemployment reasons can be grouped in the next image.

First, rather redundant population, "superfluous" in comparison with the reached level of national production can become the unemployment reason. This factor of unemployment especially hardly affects in the developing countries.

Secondly, unemployment can be result of changes in economy structure, including – in technologies (structural unemployment). This unemployment is time as on change to old branches and productions (technologies) the new come.

Thirdly, unemployment can was temporary to increase because of natural desires of people to find work "to liking" and with the best working conditions and payments (frictional unemployment). Fourthly, especially strong increase in a rate of unemployment results from cyclic recession in economy (cyclical unemployment). This kind of unemployment is the most dangerous as there is a vicious circle: Production falling – unemployment – reduction of the general level of incomes – aggregate demand decrease – production falling – unemployment etc. Fifthly, in certain cases the unemployment generator can become active interference of the state and trade unions in relations between the hired worker and the employer that leads to market inflexibility of wages and forces businessmen to solve a problem of achievement of the maximum profit by employment reduction. All these reasons of unemployment represent without delay the factors influencing for the size and dynamics of unemployment. The basic sources of unemployment are not market proportions and the conditions developing on a labour market since a labour market only reflects proportions existing at present between demand and the labour offer, but direct sharing in their formation does not accept. These proportions depend on the processes which are outside of the market of work. The market only finds out them, shows unemployment, and does its visible for company.