Unemployment (types & causes) Video Lecture | Business Economics for CA Foundation

hey hey everybody I hope you're doing
well today let's take a look at the
types and causes of unemployment and
understanding how they are different ok
so take a look at this next slide one of
the first things you need to understand
is that the two things I guess the labor
market diagram which is expressed right
here and this concept the natural rate
of unemployment which is that the level
of unemployment that prevails in an
economy that is producing at it's at
full employment level of output okay so
if you haven't seen the labor market
diagram video I would suggest that you
watch that video first cuz I'm gonna go
through this really quickly as a
reminder remember the aggregate or
rather the labor market diagram is an
expression of the supply and demand of
Labor and workers in the market place
I'm sorry the demanders for labor and
the suppliers of Labor in the market
place what does that mean well this
aggregate demand for labor curve
represents firms businesses interest in
consuming other people's labor ok and
the aggregate supply of Labor curve
represents workers willingness and
ability to accept a certain wage rate so
this is a collection of aggregate supply
of Labor who is that those are workers a
nagger demand for labor who demands
labor at firms ok and this yellow curve
here is the labor force curve which
represents the total amount of adults
are working age people in the in a
society and the magic thing to know here
of course right is that the gap here
between a and B right here this
represents the natural rate of
unemployment and that deserves a big old
green star right there look at that
okay so the natural rate of unemployment
can be expressed in a diagram of the
labor market
if the gap between the the difference
between that that the equilibrium
aggregate supply the equilibrium wage
and quantity of number Whorton quantity
of workers
Wow in the marketplace where the
aggregate supply of Labor meets the
aggregate demand of Labor as opposed to
the total labor force all right so you
should have that idea in your head now
let's look at it a few types of the four
different types of unemployment and
their causes here we go
okay so we are there are four types of
unemployment and one of them has two
names okay
so let's first look at cyclical or
demand efficient unemployment and this
is the unemployment that you would
expect in an economy that is not working
well right during a recession cyclical
unemployment or demand efficient
unemployment is caused by the recession
phase of the business cycle it could be
caused by a fall in demand for the
nation's output which results in a loss
of jobs in the economy we'd call this
demand deficient unemployment or it
could result from a negative supply
shock to the economy it was an example
of that that's a drop and aggregate
supply in the economy which could be as
a result of the cost of factors of
production suddenly increasing which
would lead to fewer workers hired an
example this be like really fast like
increase in the price of energy oil
gasoline okay so this demand efficient
or cyclical unemployment this is the
kind of unemployment that you're gonna
express on your three using the using
the labor force diagram and in further
videos you'll see also you could express
this using the aggregate demand and
aggregate supply video okay so that's
number one
cyclical demand efficient unemployment
now here's the key piece look underneath
look down here natural rate of
unemployment is comprised of three
different kinds of unemployment
frictional seasonal and structural so
the natural rate of unemployment is the
level of unemployment that prevails an
economy that is producing at its full
employment level of output and it
includes frictional seasonal and
structural unemployment so natural rate
of unemployment is that is what is
natural in a growing
driving economy how is that possible you
might add well you have to look at the
different components of the natural rate
of unemployment to understand it so
let's first look at frictional
unemployment frictional unemployment is
the short term unemployment that occurs
when people are between jobs or they
have left education and waiting to take
their first job it is regarded as
somewhat desirable because it indicates
flexibility in the labor market look if
I quit my job teaching at the
International School needed a Aguila
right now is Santiago Chile to take
another job in Chile then what does it
say well it's actually quite desirable
actually says hey the Chilean labor
market is good there are jobs available
I can quit one job and go start another
job okay so frictional unemployment is
always going to be happening in a
thriving economy and that's why it's
part of this natural rate of
unemployment second component of the
natural rate of unemployment seasonal
unemployment seasonal unemployment is
the short-term unemployment caused by a
change in the you guessed it folks
seasons what does that example of
farmers ski instructors surf schools
tourism related industries right and I
live in Santiago and it you know when it
when it's winter there's a bunch of
people working up at the ski resorts and
as soon as the winter is over where do
all those people go well that's seasonal
unemployment they don't have a job
anymore many of them go off and be surf
instructors don't at the beach but that
but there is still a period of seasonal
unemployment as the as the winter ends
but the summer hasn't started and those
people are not working but that's
natural that is not a cause for concern
in the invite the in the environment in
the unemployment sector and then lastly
there's structural unemployment
structural unemployment occurs when
there is a permanent fall in the demand
for a particular type of labor and this
is natural in a growing economy and
examples of this would be new
technologies might make some jobs
obsolete the lower cost of foreign labor
may be a company take some business
there was an entire city and I in
Indiana in the United States that called
its economy collapsed because of
structural unemployment because the the
main industry there was a with producing
socks
and the Haines company took their
factory that was in that this small town
in Indiana and moved it to Mexico and
guess what there's a massive amount of
structural unemployment in that town and
that's because of the lower cost of
foreign labor because because this firm
could pay workers less in Mexico than
they had to in the United States but
that's considered part of the natural
flow of things as an economy grows these
things are going to happen right change
in consumer tastes so frictional
unemployment seasonal frictional
unemployment seasonal unemployment
structural unemployment all part of the
natural rate of unemployment which means
that this these three aspects should
make up in a in an industrialized
society roughly five percent of the
workforce is going to be unemployed at
any one time and that seen as natural
it's seen as okay because that means
that there's there's a flexibility of
the labor market it's just a simple
change in seasons or some things become
obsolete and that's just the way that it
goes that doesn't mean that there's an
economic downturn okay however the
cyclical or demand efficient
unemployment which is why I made this
box yellow right is can be seen as
harmful to the economy and this is the
acog of unemployment that you see in the
news right demand efficient people are
losing their jobs which means that
they're buying less which means that
there's less demand which means there's
there's more people laid off and it
becomes a cycle okay or there's some
sort of negative supply shock as the
united states are you know in 2008/9
when all of a sudden gas prices went up
through you know four or five dollars a
gallon okay but that is not part of the
normal natural rate of unemployment okay
so make sure you have a good
understanding of these four types of
unemployment and let's take a look at
the next slide expressing cyclical or
demand efficient unemployment I would
suggest there's a whole video on this
you take a look at and all I'm going to
say very quickly in this is that you can
see as aggregate demand drops in the
marketplace there's a Keynesian view a
drop in aggregate demand is going to
result in an inward shift of the
demand of labor because as people buy
fewer things then there is going to be
less with suppliers are gonna be less
willing to supply something in the
marketplace at any time
suppliers are less willing to supply
something guess what there is going to
be less demand aggregate demand for
labour remember ADL represents the
firm's interest in hiring people and you
can see an inward shift of the aggregate
demand for labour curve as a result of a
drop in aggregate demand in the economy
okay if that doesn't make complete sense
do you take a look at the other video
expressing cyclical or demand efficient
unemployment in the marketplace alright
I hope you found this video to be
helpful and we'll talk to you in a bit