CAPSULE 2

UNEMPLOYMENT

Direction for Computer Assisted lesson

Direction for Computer Assisted lesson

Follow the Instruction given below:

Follow the Instruction given below:
This lesson is about the topic-UNEMPLOYMENT
This lesson is about the topic-UNEMPLOYMENT
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Brain Teasers are provided for developing concepts
Brain Teasers are provided for developing concepts
Brain relaxers are provided for self checking with necessary
Brain relaxers are provided for self checking with necessary
explanation.
explanation.
After completing the lesson the learners can recapitulate the lesson
After completing the lesson the learners can recapitulate the lesson
through Test Your knowledge session.
through Test Your knowledge session.

Unemployment occurs when people are without

work
and
actively
seeking
work.
The
unemployment rate is a measure of the prevalence
of unemployment and it is calculated as a
percentage by dividing the number of unemployed
individuals by all individuals currently in the labor
force. During periods of recession, an economy
usually
experiences
a
relatively
high
unemployment rate. According to International
Labor Organization report, more than 200 million
people globally or 6% of the world's workforce were
without a job in 2012.

Pictures of Unemployement
Fig.1

There remains considerable theoretical debate regarding the

causes, consequences and solutions for unemployment. Classical
economics, New classical economics, and the Austrian Schoolof
economics argue that market mechanisms are reliable means of
resolving
unemployment.
These
theories
argue
against
interventions imposed on the labor market from the outside, such
as unionization, bureaucratic work rules, minimum wage laws,
taxes, and other regulations that they claim discourage the hiring
of workers

DEFINING THE TERM UNEMPLOYMENT

D4

There remains considerable theoretical debate regarding

the
causes,
consequences
and
solutions
for
unemployment. Classical economics, New classical
economics, and the Austrian School of economics argue
that market mechanisms are reliable means of resolving
unemployment.
These
theories
argue
against
interventions imposed on the labor market from the
outside, such as unionization, bureaucratic work rules,
minimum wage laws, taxes, and other regulations that
they claim discourage the hiring of workers.

Okun's Law interprets unemployment as a function of the rate

of growth in GDP.
.

Brain Teaser 2.1

Unemployment occurs when people are without
work and actively seeking work..

No

Refer Brain Relaxer

2.1

Yes

Click here

The main types of unemployment include structural unemployment which focuses

on structural problems in the economy and inefficiencies inherent in labor markets,
including a mismatch between the supply and demand of laborers with necessary
skill sets. Structural arguments emphasize causes and solutions related to
disruptive technologies and globalization. Discussions of frictional unemployment
focus on voluntary decisions to work based on each individuals' valuation of their
own work and how that compares to current wage rates plus the time and effort
required to find a job. Causes and solutions for frictional unemployment often
address job entry threshold and wage rates. Behavioral economists highlight
individual biases in decision making, and often involve problems and solutions
concerning sticky wages and efficiency wages

Find out the different reasons of

unemployment.
Here are some pictures of
Unemployment. Observe the
picture and identify the different
types of UnemplOyment

Here are some pictures of unemployement. Observe the picture and

identify
Fig.2

TYPES OF
EMPLOYMENT

DEFINITION

Classical
unemployment

Classical or real-wage unemployment occurs

when real wages for a job are set above the
market-clearing level, causing the number of
job-seekers to exceed the number of vacancies

Cyclical
unemployment

Cyclical,
deficient-demand,
or
Keynesian
unemployment, occurs when there is not enough
aggregate demand in the economy to provide
jobs for everyone who wants to work.

Marxian theory of It is in the very nature of the capitalist mode of

unemployment
production to overwork some workers while
keeping the rest as a reserve army of
unemployed paupers.
Structural

unemployment

Structural unemployment occurs when a labor

market is unable to provide jobs for everyone
who wants one because there is a mismatch
between the skills of the unemployed workers
and the skills needed for the available jobs

ENLARGING THE DEFINITION

D5

There are also different ways national statistical agencies measure

unemployment. These differences may limit the validity of
international comparisons of unemployment data.[ To some degree
these differences remain despite national statistical agencies
increasingly adopting the definition of unemployment by the
International Labour Organization.[ To facilitate international
comparisons, some organizations, such as the OECD, Eurostat,
and International Labor Comparisons Program, adjust data on
unemployment for comparability across countries.

Though many people care about the number of unemployed

individuals, economists typically focus on the unemployment
rate. This corrects for the normal increase in the number of
people employed due to increases in population and increases in
the labour force relative to the population. .

 Brain Teaser 2.2

The unemployment ratio calculates the share of
unemployed for the whole population

No

Refer Brain Relaxer

2.2

Yes

Click here

High and persistent unemployment, in

which economic inequality increases, has a
negative effect on subsequent long-run
economic growth.
).

DEFINITION

D6

Unemployment can harm growth not only because it is

a waste of resources, but also because it generates
redistributive pressures and subsequent distortions,
drives people to poverty, constrains liquidity limiting
labor mobility, and erodes self-esteem promoting
social dislocation, unrest and conflict.2013 Economics
Nobel prize winner Robert J. Shiller said that rising
inequality in the United States and elsewhere is the
most important problem.

CONCEPT
FORMATION

Unemployment
increases
susceptibility
to
cardiovascular disease, somatization, anxiety,
depression, and suicide. In addition, unemployed
people have higher rates of medication use, poor
diet, physician visits, tobacco smoking, alcoholic
beverage consumption, drug use, and lower rates
of exercise. According to a study published in Social
Indicator Research, even those who tend to be
optimistic find it difficult to look on the bright side
of things when unemployed

UNIT 2
UNEWMPLOYMENT

THINKING SESSION

Brain Relaxer 2.1

Not everyone suffers equally from unemployment. In a

prospective study of 9570 individuals over four years, highly
conscientious people suffered more than twice as much if they
became unemployed. This may be due to conscientious people
making different attributions about why they became
unemployed, or through experiencing stronger reactions
following failure. There is also possibility of reverse causality from
poor health to unemployment

Another cost for the unemployed is that the

combination of unemployment, lack of
financial resources, and social responsibilities
may push unemployed workers to take jobs
that do not fit their skills or allow them to use
their talents. Unemployment can cause
underemployment, and fear of job loss can
spur psychological anxiety. As well as anxiety,
it can cause depression, lack of confidence,
and huge amounts of stress. They will begin to
lose social contacts, and good social skills

Brain Relaxer 2.2

Look at the Fig. 3

Fig.3

PROTEST AGAINST
UNEMPLOYMENT

Say True or False

Test your knowledge

1-About 25 million people in the world's 30 richest countries will have

lost their jobs between the end of 2007 and the end of 2010 as the
economic downturn pushes most countries into recession

False

True

2-The primary benefit of unemployment is that people are available

for hire, without being headhunted away from their existing
employers. This permits new and old businesses to take on staff.

False

True