Unemployment Economics Mrs. Huff Fall Semester
Map! Current Rate of Unemployment is. . . . 9.6% But, is that good or bad??
Who “counts” as unemployed? • Unemployment = • The percentage of the labor force that is seeking work. • BLS surveys 60,000 people each month. • Excludes: • Those who under 16 years of age • Military – Active Duty • Institutionalized – Prison, Nursing home, etc. • Three Categories: • Employed • Unemployed • Not in the labor force • Students, retired, disabled, choose not to work
Unemployment Rate = • Number Unemployed/Number in labor force x 100 • October 2010: • Employed: 139.1 million • Unemployed: 14.8 million • Not in labor force: 82.6 million • = Unemployment rate of 9.6% USA Today’s Projections for Growth Google Unemployment Data
Reasons for Unemployment Job Loser Job Leaver • ~ 61% • Person who was employed and was fired or laid off. • ~ 5.7% • Person who is employed and quits his/her job. • Good way to avoid this? Like your job!
Re-entrant New Entrant • ~ 24.6% • Person who was previously employed, hasn’t worked for some time and is now re-entering the work force. • ~ 8.1% • Person who has never held a full-time job (for 2 wks. or longer) and is now looking for a job.
Data Types of Unemployment • Un = Natural Rate of Unemployment • 4-6% • “Expected” rate of unemployment. • 1. Frictional • 2. Structural • 3. Seasonal • 4. Cyclical • Ut = F + St + Se • If Ut > Un, then Uc + • If Ut < Un, then Uc -
Frictional vs. Structural Unemployment • 1. Those searching for jobs or waiting to take jobs in the near future. • 2. Can be those “in between” jobs. • 3. Uf may be • Voluntary • Temporary lay-off • Looking for 1st “real” job • This type of un. Is inevitable and “desirable.” (Usually people moving to a better job.) • 1. Those who have lost jobs because the demand for certain skills declines or vanishes. (Typewriter repairman) • 2. Changes in consumer demand and in technology have altered the work force. • 3. This kind of un. Is more long term and serious as workers need to attain a new skill or acquire new education or training.
Seasonal vs. Cyclical Unemployment • 1. Caused by seasonal changes in demand for certain kinds of labor. • Winter (-) Lifeguards, landscapers, construction workers. • “Holiday” (+) Sales clerks, Santas, postal workers. • 2. Usually known about in advance and expected. • 3. Unemployment stats. are “seasonally adjusted to account for these workers. • 1. Caused by the business cycle. • 2. Occurs during the contraction & trough stages. • 3. Demand for goods and services drops, while unemployment goes up. • 1933 – 25 – 30% • 1982 – 9.7% • 1991 – 6.7% • 2010 – 10.6% • * Most serious type of unemployment. Economic downturns are indeterminate and cyclical. This causes further drops in GDP and becomes problematic.
Business Cycle ~ Irregular and unpredictable fluctuations in economic activity as measured by unemployment and/or GDP.
Discouraged Workers? • Worker who has been actively looking for a job, gets discouraged that he/she can’t find one and stops looking. • Oh, boy. . . Very bad! • October 2010 = 1.2 million • Are they employed or unemployed? • Neither – they are not counted as “Unemployed” because an unemployed worker must be actively looking. • “Not in the labor force”
Unequal Burdens of Unemployment • OCCUPATION • Lower skilled occupations have higher unemployment rates than higher skilled occupations. • Lower skilled occupations bear the brunt of recessions. • AGE • Teens have a higher unemployment rate than adults. • WHY? • 1. Lower skill levels. • 2. Quit jobs more frequently. • 3. More frequently fired. • 4. Less geographic mobility. • 5. Less flexibility in hours/shifts.
Unequal Burdens of Unemployment • Race • Blacks and Hispanics tend to have higher unemployment rates than whites. • Gender • There appears to be no obvious differences in unemployment rates between males and females.
Unequal Burdens of Unemployment • Education • Less educated people have higher unemployment rates. • Why? • 1. Tend to have lower-skilled jobs. • 2. Less job permanence. • 3. More time in between jobs. • 4. Vulnerable to cyclical unemployment. • Duration • Many (40% ish) people are unemployed less than 15 weeks. (3-4 months) • 42% have now been unemployed over 27 weeks • Financial planners urge all people to have an emergency account that would last for 3-6 months in case of job loss.
What about Unemployment Insurance? • Unemployment insurance provides workers, whose jobs who have been terminated through no fault of their own, monetary payments for a given period of time or until they find a new job. • Unemployment payments (compensation) are intended to provide an unemployed worker time to find a new job that is equivalent to the one that was lost, without financial distress. • W/O unemployment compensation, many workers would be forced to take jobs for which they were overqualified or end up on welfare. • Compensation is also justified in sustaining consumer spending during periods of economic adjustment. (Contraction/trough on business cycle.)
Who qualifies for unemployment benefits? • 1. Unemployed through NO FAULT of your own. • 2. Have earned wages through an “insured” employer. • 3. Be available to work. • 4. Be actively seeking work.
Who is DISQUALIFIED for unemployment benefits? • 1. Those who quit their job. • 2. Those fired for misconduct. • 3. Those who refuse suitable new employment. • 4. Those involved in a labor dispute. (STRIKE) • 5. Those in school or a training program that is full-time.
What are the maximum weekly benefit amounts? • Weekly benefits are determined by: • Your prior wages • Whether or not your spouse works • If you have children • If you received the maximum benefit = $531/week • If you received unemployment for a year ~ $27,612 – poverty line is $18,310 • Benefits have improved over the past few years.
How are weekly benefits determined? • 1. Depends on the wages you received at your “insured” job. • 2. Based on the 2 calendar quarters that in which your base pay was the highest. • 3. Cannot exceed the maximum amount set by IL law.
More details: • Individuals can only receive unemployment benefits for 26 weeks. • Once you are qualified, you must: • 1. Be actively seeking work. • 2. Be willing to accept ANY suitable job offered. • 3. Keep a log of your job search activities for each week that you claim benefits. You are required to show evidence of this.
Tax Implications: • Benefits MAY be taxable depending on your total income for that year. • Social Security Number • You must have a valid Social Security # to receive benefits. This is needed for tax purposes. • This means that to receive benefits, you must either be a citizen or legal alien.