Macroeconomics and Microeconomics Labor supply It is the number of workers willing and able to work in a particular job or industry
he number of workers willing and able to work in a particular job or industry for a
Macroeconomics is focused on the movement and trends in the economy as a whole. It is the field
of economics that studies the behavior of the entire economy. Microeconomics deals with
individual economic units like a household, a firm or an industry. On the contrary Macroeconomics
deals with the whole economic system like national income, total savings and investment, total
employment, total demand, total supply, general price level etc.
Inflation
Economic disorder characterized by a skyrocketing of prices and commodities. In such case, prices
generally rise from month to month and year to year and thus with this burden of inflation the
economy does not attain its stability goal. Inflation leads to an average increase in prices. Here,
some prices rise more than the average, some rising less, and some even declining. Inflation is a
problem because:
Since there is rise in the price of goods and services, the purchasing power of money declines. This
in turn reduces financial wealth and lowers living standards.
Greater uncertainty surrounds long-run planning.
Income and wealth tend to be haphazardly distributed among various sectors of the economy and
amongst the resource owners.
Interest RatesInterest rates are the charges which are levied by the banks for lending a loan. As
businesses borrow money from the banks from time to time, increase in Interest rates will directly
influence the business. With the increase in interest rates will lead to increase in interest expense.
In such a case businesses will have to incur higher costs to repay the loan. Along with the
businesses, interest rate changes also affect customers who in turn will affect the
business. Individuals in such cases have to pay higher amount to borrow the money, ultimately
declining the demand for large products.
The Trade Cycle:It refers to periodic fluctuations in the levels of economic or business activities, i.e.,
the tendency for output (GNP) and employment to fluctuate over time in a recurring sequence of ups
and downs. The periods of good trade alternate with periods of bad trade, or, boom periods of high
output and high employment alternate with slump periods of low output and low employment.
In boom periods, employment is low but the rate of inflation is high. In periods of depression (or reces-
sion) unemployment is high and the rate of inflation is moderate. In macroeconomics we study the
causes of business cycles and suggest remedial measures.
Stagflation:Most modern mixed economics suffer from the disease of stagflation which implies the co-
existence of inflation and unemployment in a stagnant economy. The trade-off between inflation and
unemployment is perhaps the most complex macroeconomic issue of the day. Every country in the
world is now struggling hard to fight the disease of stagflation.
Economic GrowthIt refers to an expansion of societys production capacity such as bringing new land
under cultivation or setting up new factories. Growth is measured by the annual rate of increase of per
capita income and is illustrated by a rightward shift of the production possibility curve.
There are three major sources of growth,
(1) The growth of the labour force,
(2) Capital formation and
(3) Technological progress.
A country seeks to achieve economic growth mainly for improving the standards of living of its people. If
the rate of economic growth exceeds the rate of population growth, there is likely to be an improvement
in the standard of living for the average person.
Labor force is the number of people in a country who are employed plus the unemployed. The people
who are willing and able to work . the labor participation rates is calculated as the labor force divided by
the total working age population. The working age population refers to people aged 15-64.
given wage . The labour supply curve for any industry or occupation will be upward sloping. This is
because, as wages rise, other workers enter this industry attracted by the incentive of higher rewards.
They may have moved from other industries or they may not have previously held a job, such as
housewives or the unemployed
Employment rate
Employment rates are defined as a measure of the extent to which available labour resources (people
available to work) are being used. They are calculated as the ratio of the employed to the working age
population. Employment rates are sensitive to the economic cycle, but in the longer term they are
significantly affected by governments' higher education and income support policies and by policies that
facilitate employment of women and disadvantaged groups.
Labor conflict conflict may arise when an employer refuses to recognize a union as representative of its
employees; in the U.S., these disputes are usually resolved by an employee election supervised by a
government agency. More common are contract disputes and grievances. Contract disputes occur when
a union contract covering a group of employees is about to expire and the parties disagree about the
terms of a new one. Usually wages, health insurance, and other economic issues are at the center of
these conflicts, but sometimes they are about other issues, such as seniority, hours, sick leave, overtime,
etc.
Cause of unemployment Structural Unemployment
Structural unemployment exists where there is a mismatch between their skills and the requirements of
the new job opportunities. This problem is due to occupational and geographical immobility of labour
and requires investment to improve skills, give the unemployed suitable and effective training and work
experience and make them able to move location if needed to take a new job.
Cyclical Unemployment:Cyclical unemployment is involuntary unemployment due to a lack of demand
for goods and services. This is also known as Keynesian unemployment or demand-deficient
unemployment . When there is a recession or a steep slowdown in growth, we see a rising
unemployment because of plant closures, business failures and an increase in worker lay-offs and
redundancies. This is due to a fall in demand leading to a contraction in output across many industries.
Overpopulation Philippines has a high population growth rate at an average of 1.7% for the past few
years, consistently higher than the world's population growth rate at an average of 1.2%. The high
population growth rate which translates to a steady supply of graduates outstrips the rate at which jobs
are created, leaving these graduates finding themselves unemployed.
EconomicRecession Economic recession is one of the main causes of unemployment. During a recession,
firms experience a decrease in revenue. As profit equals to revenue minus cost, firms would want to cut
as much cost as possible. One of the ways to do so is through the retrenchment of employees, where
employees deemed to be not productive enough lose their jobs. As this happens, unemployment rates
go up.
Endo
End of contract or endo refers to the scheme that corrupt companies exercise to abuse their workers. In
the Philippines, the law requires companies to regularize their workers after six months. Unfortunately,
some corporations terminate their workers a month or two before their sixth month of employment.
Why? Because this means that they do not have to regularize those workers. Instead, they just hire then
terminate their contracts within this five-month period and continually repeat this process to create a
vicious cycle of end of contract or endo. This has two results: one, it will prevent these laborers from
enjoying the full benefits of regular employment such as 13th month pay. Two, it will allow companies to
utilize the skills and talents of these workers without properly compensating them for their efforts.
Endo has a huge negative impact on Filipinos lives. Through this unjust practice, companies refrain from
regularizing their workers who have been employed for six months or longer. Aside from not receiving
due compensation, they are deprived of the benefits enjoyed by full-time employees such as paid leaves,
13th month pay, and government mandated SSS, Philhealth, and Pag-IBIG coverage, among other
mandatory requirements.
Minimum wage earners and student workers are the ones who are often victimized by this unfair labor
practice.
Age discrimination
in the workplace is the practice of letting a person's age unfairly become a factor when deciding who
receives a new job, promotion, or other job benefits. Decisions about terminating employees also cannot
be solely based on their age. Age discrimination commonly affects older workers who feel they have
been discriminated against in favor of younger workers, but there have also been cases involving
younger workers being displaced by older workers.
Age Discrimination & Work Situations
The law prohibits discrimination in any aspect of employment, including hiring, firing, pay, job
assignments, promotions, layoff, training, benefits, and any other term or condition of employment.
Keynesian economics Keynes advocated increased government expenditures and lower taxes to
stimulate demand and pull the global economy out of the depression. Subsequently, Keynesian
economics was used to refer to the concept that optimal economic performance could be achieved --
and economic slumps prevented -- by influencing aggregate demandthrough activist stabilization and
economic intervention policies by the government. Keynesian economics is considered a "demand-side"
theory that focuses on changes in the economy over the short run.
Malthusian theory explained the relationship between the growth in food supply and in population . it
states that population increases faster than food supply and if unchecked leads to misery .
Food is necessary to the life of man and, therefore, exercises a strong check on population.
Population increases faster than food production. Whereas population increases in geometric
progression, food production increases in arithmetic progression.
Malthus recommended the use of preventive checks if mankind was to escape from the impending
misery. If preventive checks were not effectively used, positive checks like diseases, wars and famines
would come into operation. As a result, the population would be reduced to the level which can be
sustained by the available quantity of food supply.
Political economy
Political economy is the study of production and trade and their links with custom, government and law.
It is the study and use of how economic theory and methods influence and develop different social and
economic systems, such as capitalism, socialism and communism, and it analyzes how public policy is
created and implemented.
Trade unions
Labour unions or trade unions are organizations formed by workers from related fields that work for the
common interest of its members. They help workers in issues like fairness of pay, good working
environment, hours of work and benefits. They represent a cluster of workers and provide a link
between the management and workers.
The purpose of these unions is to look into the grievances of wagers and present a collective voice in
front of the management. Hence, it acts as the medium of communication between the workers and
management.
nominal wage, which is simply the amount of money that you earn per hour of labor
Your real wage, on the other hand, takes inflation into account. An increase in real wages occurs when
wages rise more quickly than inflation. On the other hand, if real wages rise more slowly than inflation,
then your real wages - your purchasing power - has declined. It's important for you to know your real
wage to determine if an increase in your wage is actually increasing your wealth, simply keeping pace
with rising costs, or worse, falling behind rising prices.
Collective bargaining is the process of negotiating the terms of employment between an employer and a
group of workers. The terms of employment are likely to include items such as conditions of
employment, working conditions and other workplace rules, base pay, overtime pay, work hours, shift
length, work holidays, sick leave, vacation time, retirement benefits and health care benefits.
labor organization :an organization, agency, committee, group, or plan in which employees
take part that deals with employers about such matters as wages and grievances
The labor problem
It encompasses the difficulties faced by wage-earners and employers who began to cut wages for various
reasons including increased technology, desire for lower costs or to stay in business. The wage-earning
classes responded with strikes, by unionizing and by committing acts of outright violence. It was a
nationwide problem that spanned nearly all industries and helped contribute to modern business
conditions still seen today. Possible causes include the failure to account for the negative externality of
reproduction in the face of finite natural resources which results in over-supply of labor and falling living
standards for wage-laborers, depersonalization by machines and poor working conditions.
Labour law
mediates the relationship between workers, employing entities, trade unions and the government.
Collective labour law relates to the tripartite relationship between employee, employer and union.
Individual labour law concerns employees' rights at work and through the contract for work.
The basic feature of labour law in almost every country is that the rights and obligations of
the worker and the employer are mediated through a contract of employmentbetween the
two.
Many jurisdictions define the minimum amount that a worker can be paid per hour.
The maximum number of hours worked per day or other time interval are set by law in many
countries.
Composition of the Monetary Board. The powers and functions of the Bangko Sentral shall
be exercised by the Bangko Sentral Monetary Board, hereafter referred to as the Monetary
Board, composed of seven (7) members appointed by the President of the Philippines for a
term of six (6) years.
The seven (7) members are:
(a) the Governor of the Bangko Sentral, who shall be the Chairman of the Monetary Board.
The Governor of the Bangko Sentral shall be head of a department and his appointment shall
be subject to confirmation by the Commission on Appointments. Whenever the Governor is
unable to attend a meeting of the Board, he shall designate a Deputy Governor to act as his
alternate: Provided, That in such event, the Monetary Board shall designate one of its
members as acting Chairman;
(b) a member of the Cabinet to be designated by the President of the Philippines. Whenever
the designated Cabinet Member is unable to attend a meeting of the Board, he shall
designate an Undersecretary in his Department to attend as his alternate; and
(c) five (5) members who shall come from the private sector, all of whom shall serve full-time:
Provided, however, That of the members first appointed under the provisions of this
subsection, three (3) shall have a term of six (6) years, and the other two (2), three (3) years.
No member of the Monetary Board may be reappointed more than once.
Policies to reduce unemployment
Policies for Reducing Unemployment Key Themes
Boosting human capital - education and training - a long run strategy to make the workforce
more employable and to raise the level of labour productivity
Lower employment taxes to increase labour demand - for example, a reduction in national
insurance contributions
Stimulus to demand from both the public and private sector - keeping aggregate demand high
to drive the creation of new jobs
Improved export competitiveness to provide an injection of demand into the circular flow of
income
Improving work incentives - making work pay to reduce benefit dependency and expand the
size of the labour supply