Human Resource Economics

Front 1

Labour Force

Back 1

Unemployed and employed population

Front 2

Working Age Population

Back 2

Unemployed, employed and those not in the labour force

Front 3

Total Population

Back 3

Unemployed, employed, those not in the labour force and youth

Front 4

Unemployment Rate

Back 4

(unemployed/labour force) x 100

If unemployment rises relative to the labour force, the unemployment rate rises. If labour force rises, unemployment rate falls.

Front 5

Value of the Unemployment Rate

Back 5

Just a ratio of unemployed people to the labour force.

Front 6

Why does the unemployment rate fall?

Back 6

If it is falling it could be because people are leaving the labour force which is not a sign of a change in economic prosperity.

Front 7

Labour Force Participation Rate

Back 7

(labour force/working age population) x 100.

If the labour force participation rate falls it could mean discouraged workers and hidden unemployment.

Front 8

Raw Data

Back 8

These are the original numbers, as collected.

Front 9

Three Month Moving Average Data

Back 9

This data is the average of data in the subject month and the two previous months.

Front 10

De-seasonalized Data

Back 10

This data is run through a statistical procedure that takes out the changes caused by the time of year.

Front 11

Temporal data

Back 11

Information across a time period

Front 12

Cross-sectional data

Back 12

For a single point in time but runs across geographies or other variables

Front 13

Measuring Unemployment:
Labour Force Survey

Back 13

-Small sample conducted monthly
-Current and consistent
-Low detail
-Unemployment is defined as “not working but actively seeking work” in a paid job

Front 14

Measuring Unemployment:
Census of Canada

Back 14

-Large sample conducted every five years
-Not current but somewhat consistent
-High detail

Front 15

Measuring Unemployment:
Employment Insurance (EI) Claimants

Back 15

-Proxy variable for unemployment
-Some EI Claimants aren’t really looking for work
-Some unemployed people are not EI Claimants
-Generally underestimates the level of unemployment

Front 16

Discouraged Workers

Back 16

-Some workers believe there is no work out there for them, though they want to work
-This is often because there is negative reports about the state of the labour market.
-News about layoffs, high unemployment rates and business closings create labour market despair and job seekers stop looking

Front 17

Hidden Unemployment

Back 17

-Discouraged workers are not considered unemployed or part of the labour force
-Thus unemployment = (27,000 – 5,000) and labour force = (289,600 – 5,000)
-(22,000 / 284,600) x 100 = 7.7%
-So the unemployment rate is
actually lower than the true rate of 9.3%

Hidden, or covered, unemployment is the unemployment of potential workers that is not reflected in official unemployment statistics, due to the way the statistics are collected. In many countries only those who have no work but are actively looking for work (and/or qualifying for social security benefits) are counted as unemployed. Those who have given up looking for work (and sometimes those who are on Government "retraining" programs) are not officially counted among the unemployed, even though they are not employed. The same applies to those who have taken early retirement to avoid being laid off, but would prefer to be working. The statistic also does not count the "underemployed" - those with part time or seasonal jobs who would rather have full time jobs. In addition, those who are of working age but are currently in full-time education are usually not considered unemployed in government statistics. Because of hidden unemployment, official statistics often underestimate unemployment rates.

Front 18

Detecting Hidden Unemployment

Back 18

-If there is a drop in the labour force participation rate means relatively fewer people in the labour force
-But there other reasons for people leaving the labour force

Front 19

Other Reasons the LFPR Changes

Back 19

-Staying home to care for children or elders
-Returning to school
-Retirement
-Disability
-Joining the Armed Forces
-Imprisonment

Front 20

Detecting Hidden Unemployment

Back 20

-Other data such as increased enrolments or retirements indicate no discouraged workers
-Sometimes the LFS will ask if the person is discouraged by employment prospects
-If there are discouraged workers there will likely be other evidence such as negative news about economic performance

Front 21

Types of Unemployment

Back 21

Not all unemployment is the same
Understanding why some groups of people are unemployed can help to determine government policy to counteract unemployment

Front 22

Frictional Unemployment

Back 22

-Job seekers equal job vacancies
-Very short term – less than two months
-Job finders are replaced by new job seekers
-Imperfect information on the part of job seekers and employers
-Government policy would provide new and enhanced sources of information

Front 23

Structural Unemployment

Back 23

-Job seekers equal job vacancies
-Medium term, six months to a year
-Job seekers have a mismatch of skills or geography
-Government policy could be to offer training, skills upgrading, or mobility programs or information on any of these
-How does a structurally unemployed person know they are structurally unemployed and not frictionally unemployed?

Front 24

Seasonal Unemployment

Back 24

-Job seekers exceed job vacancies
-Short term, six months or less
Must be unemployed for the same period of time every year because of weather, market trends or government regulation
-Government policy could include information about counter-cyclical occupations or reducing EI Benefits for repeat users

Front 25

Demand Deficient (Cyclical) Unemployment

Back 25

-Job seekers exceed job vacancies
-Medium to longer term, six months to more than a year
-No regular pattern, often follows the business cycle (recession) or industrial downturn
-Fiscal or monetary policy is often used for recessions; retraining for employees in a dying industry

Front 26

Incidence and Duration of Unemployment

Back 26

The unemployment rate is approximately equal to the incidence or probability of being unemployed multiplied by the average duration in months of unemployment.

Front 27

Incidence and Duration of Youth

Back 27

Youth tend to have a high incidence but a low duration of unemployment.

They lose their jobs frequently but find a new one quickly.

The most effective policy is to more information on job vacancies.

Front 28

Incidence and Duration of Older Workers

Back 28

Low incidence but high duration of unemployment.

Best policy techniques are re-training and job search workshops.

Front 29

Wage Rigidity

Back 29

Generally nominal wages are sticky downwards while real wages are more flexible


Often employees prefer layoffs to wage cuts because the most recent and most expendable employees will be laid off


Wage cuts could make employees more likely to quit or to reduce their productivity

Front 30

Natural Rate of Unemployment

Back 30

-The rate at which wage and price inflation are stable
-The rate at which job seekers equal job vacancies (friction + structural)
-The rate at which all unemployment is voluntary