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04.01.unemployment - BUEC 280 Lecture 7 Unemployment Prof...

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  Prof. Simon D. Woodcock BUEC 280 Lecture 7 Unemployment
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  Prof. Simon D. Woodcock Last two days … Two lectures ago: LF = E + U Growing:  Growth of working age population Growth in participation (women + youth) Last day: E Growing – increased aggregate labour supply and  demand Sectoral shifts Occupational shifts Nonstandard employment, changes in hours. Today: U
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  Prof. Simon D. Woodcock Definitions LF = U + E LFPR = LF / (working age population) ERATE = E / (working age population) URATE = U / LF Why different denominators? Denominator is the “at risk population” i.e., all working age people are “at risk” of being  employed, but only labour market participants are “at  risk” of being unemployed The decision to participate is wrapped up in ERATE  and URATE – we’ll return to this
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  Prof. Simon D. Woodcock What does URATE measure? Recall only classified as U if available to work and  searching for work, but not actually working (LFS) Want a measure of the  underutilization of  labour i.e., measure of labour willing to work at prevailing  wages, but unable to find work THIS IS A HARD THING TO MEASURE!! Lots of reasons to think U is a noisy measure of  underutilization of labour
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  Prof. Simon D. Woodcock Some things included/excluded from U Inactive job seekers People who say they’re looking for work, but aren’t  looking very hard (e.g., answered 1 ad in past month) Counted as unemployed Leads to  overestimate  of underutilization of labour Underemployed workers People who are working, but would prefer to work more  hours Counted as employed Leads to  underestimate  of underutilization of labour
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  Prof. Simon D. Woodcock Excluded from U: Discouraged Workers People who are available and willing to work, but have given  up looking Counted as not in labour force Leads to  underestimate
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