Unemployment

BASIC CONCEPTS AND

DEFINITIONS
Frictional Unemployment

Temporary unemployment caused by the normal workings of the

labor market (i.e. time involved in looking for a work)
Includes:

people entering the market for first time

people reentering after an absence
people who have quit jobs in search for new ones

Structural Unemployment

Unemployment caused by structural changes in the economy that

eliminate certain jobs
Changes occur due to

technological progress
shifts in demand for goods and services

problem: mismatch between the skills of prospective workers and

skills needed in vacant jobs
solution: training or additional education
long-term (policy-makers regard this kind as a more serious
problem)

 Cyclical Unemployment
Unemployment caused by the drop in economic
activity that occurs during the contraction phase of
the business cycle
Unemployment rate
Percentage of the total labor force that is
unemployed
UR = (U/LF)*100
Labor force (in the Philippines)
include all people 15 years old and over as of their
last birthday who are either employed or
unemployed
Labor force participation rate (LFPR)
% of total number of persons in labor force to total
population 15 years old and over
LFPR = (LF/P)*100

Unemployed (in the

Philippines)
The unemployed include all persons who are 15 years

old and over as of their last birthday and are reported as:

without work, i.e., had no job or business during the basic

survey reference period; AND
currently available for work, i.e., were available and willing to
take up work in paid employment or self employment during
the basic survey reference period, and/or would be available
and willing to take up work in paid employment or self
employment within two weeks after the interview date;
AND seeking work, i.e., had taken specific steps to look for a
job or establish a business during the basic survey reference
period; OR not seeking work due to the following reasons: (a)
tired/believe no work available, i.e., the discouraged workers
who looked for work within the last six months prior to the
interview date; (b) awaiting results of previous job application;
temporary illness/disability; (d) bad weather; and (e) waiting
for rehire/job recall.

Kinds of Unemployment
Open Unemployment

Voluntary unemployed those unwilling to accept jobs for which

they could qualify
Involuntary unemployed situation in w/c job seekers are willing to
work but there are no available jobs

Underemployment

Persons are working less than they would like to work (i.e. part-time
jobs)

Disguised Unemployment

People who are required to work more hours work less hours (tasks
are split among resources typically labor)

Hidden Unemployment

People who in engage in second-choice nonemployment activities

Impaired

People who are sick; malnutrition

Unproductive

People who are employed who get caught in long hrs. of traffic

MODELS OF
UNEMPLOYMENT
Traditional Competitive Market Model
Assumption: flexible wages & full employment
Limitations:
assumption of fully flexible wages
unemployment persistent in LDCs esp. due to urban migration
Keynesian Model
Increase govt spending to reach full employment
As ouput increases, employment also increases
Limitations:
Increase in G may result in crowding-out of private investment
w/c may lead to decrease in output & employment levels
Factor, commodity, money markets in LDCs not well developed
Unemplymnt persists in LDCs due to urban migration

 Output-employment Macro Model

Conflict argument
K-intensive T => Y increases but at expense of N
Congruence argument
L-intensive T => more N is generated, Y increases

Price-incentive model

Deals with factor price distortions

Price of capital is distorted bec:
Capital subsidies
Overvalued ER
Tax incentives
Interest rate ceilings
Price of labor is distorted bec:
Minimum wage
Unions collective bargaining
Multinational hiring practices

POLICIES (Based on the MediumTerm Development Plan 2004-2010)

The last chapter of Part 1 addresses the problems of the labor

sector, particularly the high unemployment rate among the youth

(48.7% unemployed) and in the urban areas (2/3 of the
unemployed) and cites the jobs-skills mismatch as one of the major
causes. To address these problems, the Labor and Employment
Action Plan provides for the following:

Improving workers competency, productivity and work values, and

in particular, providing opportunities for the youth to acquire skills
and competencies required by the market
Enhancing worker-employer relationship and improving labor
welfare both here and abroad
Facilitating access of Filipino workers to both the local and overseas
labor markets
Advocating flexible work and employment arrangements in tune with
the requirements of the globalizing labor market which now widely
practice subcontracting and outsourcing
Quick action on labor cases and the promotion of alternative dispute

10-point Agenda
The creation of six million jobs in six years
via more opportunities given to
entrepreneurs, tripling of the amount of
loans for lending to small and medium
enterprises and the development of one
to two million hectares of land for
agricultural business.

Employment Status of Household Population 15 years old

and over of 1st Quarter: 1995-2005
Unemployed

Underemployed

Unemployment
Rate

Underemployment
Rate

1995

2,425

4,686

8.8

18.6

1996

2,397

5,561

8.3

21

1997

2,203

5,424

7.8

20.9

1998

2,488

5,657

8.6

21.4

1999

2,741

5,945

9.2

21.9

2000

2,899

5,818

9.5

21

2001

3,597

4,744

11.3

16.9

2002

3,393

4,724

10.3

15.9

2003

3,559

4,849

10.6

16.1

2004

3,900

5,522

11

17.5

2005

4,030

5,098

11.3

16.1

Year

Source: National Statistics Office

Underemployed Household

Unemployed Household

Success in the workplace

(Outliers, Gladwell 2008)
When you were born
Microsoft: Bill Gates Oct. 1955, Paul Allen Jan. 1953, Steve
Ballmer March 1956
Apple Computer: Steve Jobs Feb. 1955
Novell (software firm): Eric Schmidt April 1955
Computer legend: Bill Joy Nov. 1954
Sun Microsystems: Scott McNealy Nov. 1954, Vinod Khosla
Jan. 1955, Andy Bechtolsheim Sept 1955
Where you were born
What parents did for a living
Circumstances of upbringing
Tradition and attitude we inherited