The Labour Force And Unemployment Economics Essay

The dig Force And Un use political economy EssayEvery market has buyers and sellers, and the repel market is no ejection the buyers argon employers, and the sellers are workers. Some of this participant whitethorn non be active at either given moment in the champion of seeking new employees or new jobs, but on any given day, thousands of firms and workers volition be in the market trying to transact.The Labour Force and UnemploymentThe term ride force refers to totally those over 16 days of age who are either apply, actively seeking work, or expecting recall from a layoff. Those in the prod force who are not employed for bemuse a bun in the oven are the sluggish.1People who are not employed and are neither looking for work nor waiting to be recalled from layoff by their employers are not counted as part of the trade union movement force. The total labour force thus consists of the employed and the unemployed.The number and identities of tidy sum in from each one la bour market category are always changing the f number ones of people from one category to an otherwise are considerable. There are cardinal major flows between labour market statesemployed workers become unemployed by quitting voluntarily or being laid off (being involuntarily sepa calculated from the firm, either temporarily or permanently),unemployed workers obtain employment by being newly hired or being recalled to a job from which they were temporarily laid off,those in the labour force, whether employed or unemployed, can leave the labour force by retiring or otherwise deciding against taking or seeking work for pay (dropping out),those who have never worked or looked for a job expand the labour force by entering it, while those who have dropped out do so by re-entering the labour force.The ratio of those unemployed to those in the labour force is the unemployment tempo. While this arrange is crude and has several imperfections, it is the most wide cited measure of labour m arket conditions.The relation among unemployment, employment, and labour forceAnalytically, to attack the unemployment crop we can use the following equalitywhere , , and designate respectively the working-age population, the level of employment, the number of unemployed, and the appointment enjoin at period t. delimit the unemployment as , we haveUsing this equation in logarithm term at beat t and t-1, we getAssuming that u is a small number, this relation allows us to express the volt-ampereiety of unemployment post as a function of the issue pass judgments of working-age population, employment, and meshingThis decomposition shows that the variation in the graze of unemployment come from variations in the employment rate, the size of the working-age population, and participation rate.Chapter 2 Some factsThe diametric unemployment experienceDuring the last 20 social classs, the industrialised countries have evolved in very different direction with respect to une mployment. In contradiction to japan, or the unify States, most of European countries showed a advanced proportion of unemployment. skirt 1.1 Rates of unemployment, participation, and employment in 20 OECD countries in 2011CountryUnemployment RateParticipation RateEmployment RateAustralia5,1078,872,70Austria4,1475,7972,13Belgium7,1468,8861,93Canada7,4580,2571,98Denmark7,5783,1973,15Finland7,7775,4369,03France9,2669,3463,80Germany5,9281,0472,53Greece17,6668,5755,55Ireland14,3970,9659,20Italy8,4063,0156,98japan4,5780,6171,20Luxembourg4,9070,5764,63Netherlands4,4480,1374,88Norway3,2180,2275,30Portugal12,7477,4264,20Spain21,6475,2857,68Sweden7,5431,0074,10Switzerland4,0486,6079,35 get together Kingdom8,0176,7569,48 get together States8,9564,2166,65Euro area (17 countries)10,0726,2064,25EU (27 countries)9,5964,30OECD essence7,9227,8064,85Source OECD DataTable 1.1 summarises the unemployment, participation and employment rates in 20 OECD countries for 2011. We see that unemployment is a phenomenon that touches all the countries, but in different proportions. There are some countries such as Austria, Japan, Luxemburg, the Netherlands, Norway, and Switzerland, have an unemployment rate below 5 per penny. But other countries, such as Greece, Ireland, Portugal, and Spain, have an unemployment rate naughtyer than 10 per cent. For the European Union as a whole (27 countries), the average unemployment rate is the neighbourhood of 10 per cent, 2 points great than the overall OECD unemployment rate.The third column reports the employment rate, i.e. the ratio of the number of persons employed to the number of person in the population (working-age from 15 to 64 years old). This indicator is very important for the analysis since it can be use as a complement to the data of unemployment, given that the definition of unemployment is unavoidably objective. As we can see from table 1.1 countries with gamy employment rate are also the ones who have low rates of unemployment . So in that respect is a negative relationship among them.The second column also shows that participation rates are highly dispersed, since they vary from 63.01 per cent in Italy to 86.60 per cent in Switzerland. Moreover, countries that face high unemployment rate generally have relatively a weak participation rate.This rapid overview of the rates of unemployment, participation, and employment in different OECD countries suggest that certain countries face a relatively high unemployment rate because of insufficient job creation. Examination of changes over time since the get of 1950s in unemployment and employment rate in the United States and selected OECD countries will throw further lights on the origins of unemployment.The US unemployment experience in comparative degree perspectiveTable 1.2 summarises the unemployment experience of the United States, selected other countries, and the OECD as a whole from 1950 to 2011. The OECD unemployment rate averaged about 3 per cent du ring the 1950s and sixties unemployment throughout the OECD increased sharply in the by and bymath of the oil shocks of the seventies and continued rising the worldwide recession of the early 1980s. The overall OECD unemployment rate more than doubled from 2.8 per cent in the 1960s to 7.0 per cent in the 1980s, and has remained at an even high rate in the 1990s. Last year the overall OECD unemployment rate was 8.2 per cent.Table 1.2 Unemployment rates in selected OECD countriesCountry1950196019701980199020002011Australia1,502,003,907,509,106,285,20Canada3,804,706,609,309,906,827,50France1,501,703,809,0011,109,49,30Germany4,900,601,905,706,507,766,00Italy7,203,804,707,5010,2010,598,50Japan2,101,301,702,502.74,724,80Netherlands1,500,904,009,606,902,954,40Norway1,701,701,602,805,303,333,30New Zeland0,900,901,504,108,109,006,70Portugal2,202,401,607,305,804,0413,40Spain2,102,304,2017,5020,3013,9221,80Sweden1,701,501,802,207,005,47,60United Kingdom1,702,004,4010,108,705,588,00United St ates4,404,706,107,206,004,009,10OECD3,502,804,307,007,306,18,2Source OECD DataTable 1.2 indicates that major OECD nations shared a pattern of rising unemployment from the 1960s to the mid-seventies to the 1980s, but the magnitude of the increases vary widely across countries, with the largest increase in Spain. In the 1990s the unemployment experience diverge somewhat, with continued increases from the 1980s in most European countries and Australia, but decline in the United States, United Kingdom, and Portugal. In the 2000s there is a general decrease of unemployment rate among all the countries, except in Italy and Japan. From 2000 to 2011 unemployment is a phenomenon that touches all the countries but in different proportion, with the largest increase in Spain and Portugal.The table highlights the distinctive aspects of the evolution of US unemployment. The United States has moved from having a consistently higher unemployment rate than the OECD as a whole in the 1950s, 1960s an d 1970s to having a much set out rate in the 1990s and 2000s, but again a higher unemployment in 2011. The United States is the only major OECD economy with a start average unemployment rate in 2000s than in 1980s 4.0 per cent in the 2000s versus 7.2 per cent in 1980s. But the on-going US unemployment rate of 9.1 per cent is the highest experienced since 1980.The composition of US unemployment also differs substantially from many other OECD nations. The United States has much larger month-to-month flows into and out of employment than most of OECD economies and a much lower incidence of unyielding-term unemployment than any advanced OECD economy. long-run unemployment (six months and less than one year) as a percentage of total unemployment in 2011 stood at 12.43 per cent in the United States as compared with 9.8 per cent in Canada, 13.48 per cent in Australia, 18.65 per cent in France, 14.71 in Germany, 15.03 in Italy, 17.68 in Greece and 18.66 in Spain. US unemployment rates for the working-age population are particularly low (and employment/population ratios are particularly high) for young workers (those aged to 15 to 24), women and older workers (those aged 55 to 64). Overall, the US labour market does a relatively good job of moving new entrants and women into employment. European labour market institutions (especially employment protection laws) seem geared to keeping conjoin anthropoids in work, but appear to make it tougher for new entrants to gain stabilise employment.Cyclical versus Structural unemploymentThe analytical discussion of unemployment since Friedman (1968) and Phelps (1968) start with the hypothesis that at any given time, a national economy is characterized by a natural rate of unemployment. Aggregate demand expansions can (at least temporarily) press the economy below this rate of unemployment, but at the cost of accelerating ostentatiousness. Similarly, shocks that bear unemployment above the natural rate lead to decelerati on inflation. As long as the policy-maker avoids explosive inflation or deflation, the economy cannot remain persistently above or below the natural rate of unemployment, but it may fluctuate about it.This hypothesis suggests separating changes in unemployment into alternating(prenominal) fluctuation around the natural rate and structural movement in the natural rate itself.Figure 1 Unemployment in the US, Australia, Europe and OECDFigure 1 illustrates the time patterns of the unemployment rates for the United States, Australia, Europe, and OECD countries from 1970 to 2011. The figure suggests cyclical unemployment fluctuation around a relatively stalls natural rate in the United States until 2008, and a possible upward drift in the natural rate in Europe and Australia. The acceleration in inflation in most European economies in late 1980s, despite much higher unemployment rate than in the 1960s and 1970s, indicates a large rise in natural rate of unemployment. The deceleration o f inflation in the 1990s and early 2000s suggests that some cyclical component has played a role in recent high European unemployment.2 Data and Descriptive statisticsI next look for in a more depth, the extent to which a relatively stable natural rate of unemployment since 1970 or so is consistent with the experience of the flexile US labour market. The data for this analysis are taken from way of Labour Statistics from 1970 to 2012 (monthly data).3 Empirical regularityology and ResultsFor estimating the natural rate of unemployment (un) I am going to use the expectations-augmented (or accelerationist) Phillips Curve (EAPC) in which the rate of growth of scathe inflation (or more generally the difference between current inflation and anticipate inflation) depends on the deviation of the unemployment rate from the natural ratewhere p is the log of the price level, u is the unemployment rate, is a positive coefficient, equals, and is an defect term. Expected inflation is ass umed to equal the lagged inflation rate (). A regression of the change in the inflation rate on the unemployment rate yields estimates of the natural rate of unemployment ( = -. The basic idea behind this equation is that price inflation increases when unemployment is below the natural rate and decreases when it is above.Table 2.1 Price inflation and unemployment in the United States, Europe and OECD countriesUnited StatesEuropeOECD(1)(2)(3)(4)(5)Constant0.3975620.5191190.14205211.8702712.001316.1631988.5684301.9103307.5033195.137325D80-0.3480370.929960D90-0.3553820.950040D00-0.3695120.986341Unemployment rate (u)-0.006995-0.0262070.032498-0.596646-0.9064320.6697812.8359752.9183813.1296602.544017Observations (n)5115115114141Durbin-Watson Statistic0.7983940.8289860.8335140.2336270.304103R20.0061910.0155550.0164570.2007340.142330Notes The US regressions cover 1970 to 2012. The open variable in all regressions is the inflation rate (Dp).The numbers in parenthesis are standard errors. p =100*log(CPI), using the Consumer Price Index for the United States and Europe u is the unemployment rate measured in percentage, D80=1 for the 1980- and 0 otherwise D90=1 for the 1990- and 0 otherwise D00=1 for the 2000- and 0 otherwise.approximation for US unemployment subject protean PMethod Least Squares date stamp 10/04/12 Time 1704 try on (adjusted) 1970M02 2012M08Included observations 511 after adjustmentsVariableCoefficientStd. errort-StatisticProb.C0.3975620.0645066.1631980.0000UNEMP-0.0069950.010444-0.6697810.5033D80-0.3480370.374250-0.9299600.3528D90-0.3553820.374071-0.9500400.3425D00-0.3695120.374629-0.9863410.3244R-square0.006191 miserly dependent var0.353720 adjusted R-squared-0.001665S.D. dependent var0.373392S.E. of regression0.373702Akaike info bill0.879023 sum of money squared residual oil70.66469Schwarz criterion0.920475Log likelihood-219.5904F-statistic0.788056Durbin-Watson stat0.798394Prob(F-statistic)0.533265Estimation for US male unemploymentDependent Var iable PMethod Least Squares fight 10/04/12 Time 1705Sample (adjusted) 1970M02 2012M08Included observations 511 after adjustmentsVariableCoefficientStd. Errort-StatisticProb.C0.5191190.0605858.5684300.0000UNEMPMALE-0.0262070.009241-2.8359750.0048R-squared0.015555Mean dependent var0.353720Adjusted R-squared0.013621S.D. dependent var0.373392S.E. of regression0.370840Akaike info criterion0.857814Sum squared resid69.99885Schwarz criterion0.874395Log likelihood-217.1715F-statistic8.042753Durbin-Watson stat0.828986Prob(F-statistic)0.004751Estimation for US female unemploymentDependent Variable PMethod Least SquaresDate 10/04/12 Time 1707Sample (adjusted) 1970M02 2012M08Included observations 511 after adjustmentsVariableCoefficientStd. Errort-StatisticProb.C0.1420520.0743601.9103300.0567UNEMPFEMALE0.0324980.0111362.9183810.0037R-squared0.016457Mean dependent var0.353720Adjusted R-squared0.014525S.D. dependent var0.373392S.E. of regression0.370670Akaike info criterion0.856897Sum squared resi d69.93471Schwarz criterion0.873478Log likelihood-216.9373F-statistic8.516946Durbin-Watson stat0.833514Prob(F-statistic)0.003674Estimation for Europe unemploymentDependent Variable P2Method Least SquaresDate 10/04/12 Time 1708Sample (adjusted) 1970M02 1973M06Included observations 41 after adjustmentsVariableCoefficientStd. Errort-StatisticProb.C11.870271.5820027.5033190.0000UNEMPEURO-0.5966460.190642-3.1296600.0033R-squared0.200734Mean dependent var7.164938Adjusted R-squared0.180240S.D. dependent var3.481375S.E. of regression3.152057Akaike info criterion5.181538Sum squared resid387.4831Schwarz criterion5.265127Log likelihood-104.2215F-statistic9.794774Durbin-Watson stat0.233627Prob(F-statistic)0.003308Estimation for Europe unemploymentDependent Variable P3Method Least SquaresDate 10/04/12 Time 1709Sample (adjusted) 1970M02 1973M06Included observations 41 after adjustmentsVariableCoefficientStd. Errort-StatisticProb.C12.001312.3361025.1373250.0000UNEMPOECD-0.9064320.356299-2.5440170.0 150R-squared0.142330Mean dependent var6.186970Adjusted R-squared0.120338S.D. dependent var3.301618S.E. of regression3.096597Akaike info criterion5.146035Sum squared resid373.9676Schwarz criterion5.229624Log likelihood-103.4937F-statistic6.472025Durbin-Watson stat0.304103Prob(F-statistic)0.015033ConclusionReferences publicationsRonald G. Ehrenberg, Robert S. Smith Modern Labour Economics. Theory and Public Policy Pearson foreign Edition, 2009, Tenth EditionInternet Sourceshttp//www.tradingeconomics.comhttp//www.indexmundi.com/http//www.statcan.gc.ca/daily-quotidien/120907/dq120907a-eng.htmEurostat Website http//ec.europa.eu/eurostatI have a puzzle with the regression of this modelI have monthly data. But when I estimate it on Eviews, the results I get are not that expected R-squared is very small (near to zero), the standard errors are all smaller than 1.In order to estimate the model first I have make this P=100*log(CPI), but Im not sure if is right or not.I can send the data af ter if this description is not enough.