The Labour Market
In economics, labour is a measure of the work done by human beings.
Categories of the Labour Market
- Spent some of the previous week working at a paid job
- Temporary layoff or looking for a job
Not in the labour force
- Person who does not fit into any of the above categories is not in the labour force
Labour Force = Number of employed + Number of Unemployed
Unemployment rate = (Number of unemployed/Labour Force)*100
Labour-force participation rate = (Labour force/adult population)*100
In 2005, 16.17 million people were employed, and 1.17 million people were unemployed. The total adult population is 25.81.
Labour force = 16.17+1.17 = 17.34 million
Unemployment rate = (1.17/17.34) * 100 = 6.8%
Labour Force Participation rate = (17.34/25.81) * 100 = 67.2%
What does unemployment not measure
Discouraged Job Searchers
- People who were looking for jobs and need a job but has become discouraged because they were unable to find any
- People who are forced to settle with a part time job when they really want a full time job
Reasons for Unemployment
- Job search
- Job turnover
- Generosity of Employment Insurance
- Mismatch of skill supplied and demanded
Happen because the quantities of jobs demanded is larger than the quality of jobs supplied
- Minimum Wage
- When minimum wage is increased, firms will fire people in order to lower production costs.
- Labour Unions
- Labour unions increase the wages for the members of the union therefore creating higher cost for firms. Firms will again have to lay off people and the people who are not part of an union will therefore be the first to leave.
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