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Module 3 Lecture (Ch. 15): Jobs & Unemployment

WHAT IS ‘UNEMPLOYMENT’?

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At first glance this seems like a rather stupid question; yet, in reality, it’s a tough question to answer. We must have a fairly reliable method of measuring unemployment because of the tremendously adverse effect a high unemployment rate has upon the economy of a society as a whole. The Bureau of Labor Statistics’ official unemployment definition is “…the total of all unemployed as a percent of the entire civilian labor force”. Realizing that this is too simplistic a definition, the Bureau divides the unemployed into six different categories. Each of these categories represents the different variables that must be taken into account when measuring the number of unemployed in our society. The above definition represents the first three tiers of unemployment definitions starting with just that group of individuals unemployed for 15 weeks or longer. The last three tiers include:

· Discouraged Workers M

· The “semi-hidden” unemployed

· Marginally Attached Workers: Those not working nor are they actively looking for a job, but they are available to work and have looked for work recently.

IS SOME LEVEL UNEMPLOYMENT BENEFICIAL?

The intention of the classification of unemployment is an attempt to measure how an economy is doing at providing jobs for the people who want them, not just the percentage of people in an economy who are not employed.

Think about the unemployment of things rather than people. Look around the campus and notice all the unemployed automobiles in the parking lots/stations. Notice the unemployed classrooms early in the morning and late at night. Notice the unemployed seats in Starbucks. Look around the city and notice all the unemployed automobiles in the car sales lots. Try to make a reservation at any of the hotels in the city and notice that you can almost always get a room—hence, lots of unemployed hotel rooms.

Does all this unemployment bring benefits? Obviously, it would be very costly to organize rental markets in which cars don’t sit idle all day, classrooms utilized 24/7, hotel rooms booked 100% all of the time and so on. Do the same ideas apply to unemployed people? Certainly, unemployment causes misery and heartache to those who have been laid off or can’t find work. It is definitely quite costly both emotionally and economically; however, there are potential benefits to a certain level of unemployment.

As noted in the examples above (autos, hotel rooms, empty classrooms etc.) imagining an economy without any unemployment is nearly impossible. If consumers are free to change their decisions about what they want to buy, some goods and services must fall out of favor when others come into favor. The firms making the products falling from favor fall on hard times and often their workers are fired or laid off. Sure, these laid-off workers could start work right away, cleaning shoes, selling flowers at intersections, etc., but they are better off (in their own opinion) being frictionally unemployed and searching for new jobs. To eliminate this source of unemployment we would need to forbid consumers from changing their buying plans or insist that no one remain idle and get on with doing any job even if it doesn’t earn a wage. Note that if this is how we ran our economy we’d still be using coal-fired stoves and the pony express, and we’d be wearing coonskin caps. There would be no McDonald’s, Federal Express, or Nike shoes.

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