Different Groups in a Labour Market 5.

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The macroeconomic analysis of labor market includes variables like employment level, unemployment level, labor force, and unfilled vacancies which are called stock variables because they measure a quantity at a point in time. Some other variables are called flow variables that measure a quantity over duration of time. Changes in the labor force are due to flow variables such as natural population growth, net immigration, new entrants, and retirements from the labor force. Changes in unemployment depend on: inflows made up of non-employed people starting to look for jobs and of employed people who lose their jobs and look for new ones; and outflows of people who find new employment and of people who stop looking for employment. Employment The term "employment" means service performed for wages under a contract of hire, written or oral, expressed or implied. In other words, employment is human effort, under a contract, used for economic value addition and provided against payment i.e., salary, wage, and fee. Unemployment Unemployment is the state of an individual looking for a paying job but not having one. Unemployment does not include full-time students, the retired, children, or those not actively looking for a paying job. A person is said to be "unemployed" if he or she is looking for work, is willing to work at the prevailing wage, but is unable to find a job.

Employed
Layoffs Quits

Labour Force

New hires Recall

Unemployed

Population (age 18 & over)

New entrance Re-entrance

Dropout Retirement

Labor force participation rate

Labor Force Population Employed Population

Not in Labor Force

Employment Rate Unemployment Rate

Labor Force Unemployed Population Labor Force

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Employed persons (Current Population Survey): Persons 18 years and over in the civilian non-institutional population who, during the reference week, did any work (at least 1 hour) as paid employees, worked in their own business, profession, or on their own farm, or worked 15 hours or more as unpaid workers in an enterprise operated by a member of the family, and all those who were not working but who had jobs or businesses from which they were temporarily absent because of vacation, illness, bad weather, childcare problems, maternity or paternity leave, labor-management dispute, job training, or other family or personal reasons, whether or not they were paid for the time off or were seeking other jobs. Each employed person is counted only once, even if he or she holds more than one job. Excluded are persons whose only activity consisted of work around their own house (painting, repairing, or own home housework) or volunteer work for religious, charitable, and other organizations. Unemployed persons: Persons 18 years and over who had no employment during the reference week, were available for work, except for temporary illness, and had made specific efforts to find employment sometime during the 4-week period ending with the reference week. Persons who were waiting to be recalled to a job from which they had been laid off need not have been looking for work to be classified as unemployed. Labour force The quantity of the labor supply is termed the labor force. The total number of people employed or seeking employment in a country or region is called labour force or work force. A person is included in the labor force if he or she is 16 years of age or older (14 with permission in the U.S. and also in Bangaldesh for certain jobs) varying by country, is able to work, and is either working or looking for work. Not in the labour force The persons not in the labour force or, equivalently, not currently active population, comprises all persons who were neither employed or unemployed during the short reference period used to measure current activity. They may, according to reason for not being currently active, be classified in any of the following groups: attending an educational institution; performing household duties; retiring on pension or capital income; other reasons, including disability or impairment.

Labour force participation rate The labour force participation rate is the percentage of working-age1 persons in an economy who are employed or unemployed but looking for a job. Labor Force

Typically "working-age persons" is defined as people between the ages of 16-64 (in USA). People in those age groups who are not counted as participating in the labor force are typically students, homemakers, and persons
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Participation Rate depends on labor-supply decisions within a household that are made only partially on economic grounds. These rates vary by age, gender, race, and educational attainment. The labor force participation rate has been shown to vary in the same direction as labor demand. This conclusion comes largely from studies of labor-force response to unemployment. There are arguments for two different responses. The first is that new workers try to get into the work force to help the economic situation in households where unemployment has occurred and the second is that the unemployed get discouraged if they cannot find a new job and simply drop out of the labor market. Population growth increases the potential labor force. The "baby boom" (roughly 1946-1964) greatly increased today's labor force in USA but these workers are nearing retirement. The numbers of workers in the generations that follow are smaller, creating problems for the USA economy and organizations. The labor-force participation rate has also been changing by the increased participation of adult women and the lower rates of participation by people under 20 and over 65. Beginning with the early 2000s the expected changes are: fewer young entrants and a bulge in the 45 to 64 age bracket. More women, older workers, part-time employment, and moonlighting are also expected. In Bangladesh, as a result of high population growth, the size of the labour force is in a gradual expansion. Whereas, poverty related push factors and increasing interest and scope of women participation leads to an increase in the labour force participation rate. Employment rate The Employment rate is the percentage of the labor force that is employed. The employment rate is one of the economic indicators that economists examine to help understand the state of the economy. Unemployment Rate The unemployment rate is defined as the number of unemployed persons divided by the labor force, where the labor force is the number of unemployed persons plus the number of employed persons. The unemployment rate is a measure of the prevalence of unemployment and it is calculated as a percentage by dividing the number of unemployed individuals by all individuals currently in the labour force.

Sectoral pattern of unemployment

The economy is often separated into three basic sectors: o the primary sector (the agricultural sector), o the secondary sector (the industrial sector), and o the tertiary sector (the service sector). The agricultural sector is called the primary sector because economies must produce enough food for the population to survive before anything else can be produced. For most of the history of our species, most work was devoted to agrarian activities. It is only in recent centuries that the industrial and service sectors have become important. The employment in the primary sector has been
under the age of 64 who are retired. In the United States the labor force participation rate is usually around 6768%.
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steadily declining as a share of total employment in many developed and developing countries. Employment in the service sector has been growing steadily as a share of total employment while the share of employment in the industrial sector had been relatively stable for most of the countries.

Types of Unemployment
There is considerable debate amongst economists as to what the main causes of unemployment are. Keynesian economics emphasizes unemployment resulting from insufficient effective demand for goods and service in the economy (cyclical unemployment). Others point to structural problems (inefficiencies) inherent in labor markets (structural unemployment). Classical or neoclassical economics tends to reject these explanations, and focuses more on rigidities imposed on the labor market from the outside, such as minimum wage laws, taxes, and other regulations that may discourage the hiring of workers (classical unemployment). Yet others see unemployment as largely due to voluntary choices by the unemployed (frictional unemployment). On the other extreme, Marxists see unemployment as a structural fact helping to preserve business profitability and capitalism (Marxian unemployment). The different perspectives may be right in different ways, contributing to our understanding of different types of unemployment. Economists distinguish between five major kinds of unemployment, i.e., cyclical, frictional, structural, classical, and Marxian. (There is another distinction between voluntary and involuntary unemployment.) Real-world unemployment may combine different types, while all five might exist at one time. The magnitude of each of these is difficult to measure, partly because they overlap and are thus hard to separate from each other. Frictional Unemployment This unemployment involves people being temporarily between jobs, searching for new ones or searching for first job by just entering in the labour force. It is sometimes called search unemployment and is seen as largely voluntary. It arises because either employers fire workers or workers quit, usually because the individual characteristics of the workers do not fit the individual characteristics of the job (including matters of the employer's personal taste or the employee's inadequate work effort) or newly redundant workers or workers entering the labour market (such as university graduates) may take time to find appropriate jobs at wage rates they are prepared to accept. Some employers such as restaurants and other providers of secondary labor markets use human management strategies that rely on rapid turnover of employees, so that frictional unemployment is normal in these sectors. This type of unemployment coincides with an equal number of vacancies and the best way to lower this kind of unemployment is to provide more and better information to job seekers and employers, perhaps through job-banks in centralized computers (as in some countries in Europe). In theory, an economy could also be shifted away from emphasizing jobs that have high turnover, perhaps by using tax incentives or worker-training programs. Technological change, for
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example, the internet made job searches cheaper and more comprehensive and improvement in labour market mediation, for example, activities of recruitment and Hiring agencies (like labour contractor or Monowar Associates) often reduces frictional unemployment. One kind of frictional unemployment is called wait unemployment; it refers to the effects of the existence of some sectors where employed workers are paid more than the market-clearing equilibrium wage. Not only does this restrict the amount of employment in the high-wage sector, but also it attracts workers from other sectors who wait to try to get jobs there. The main problem with this theory is that such workers will likely "wait" while having jobs, so that they are not counted as unemployed. In showbiz, for example, those who are waiting for acting jobs also do some work (private tuition) in the secondary labour market (while acting in some plays of any theater group at night for no pay). However, these workers might be seen as underemployed. Another type of frictional unemployment is seasonal unemployment, where specific industries or occupations are characterised by seasonal work, which may lead to unemployment. Examples include workers employed during farm harvest times or those working rain time jobs in the water bodies (ferrying boatman). Because the jobs that are lost are those that rely on the season, it is difficult to employ these workers. Structural Unemployment This reflects a mismatch between the skills and other attributes of the labor force and those demanded by employers. Even though the number of vacancies may be equal to the number of the unemployed, the unemployed workers lack the skills needed for the jobs or are in the wrong part of the country or world to take the jobs offered. It is a mismatch of skills and opportunities due to the structure of the economy changing. That is, it is very expensive to unite the workers with jobs. One possible example in the rich countries is the present combination of the shortage of nurses with an excess labor supply in Information Technology. Unemployed programmers cannot easily become nurses, because of the need for new specialized training, the willingness to switch into the available jobs, and the legal requirements of such professions. Structural unemployment is a result of the dynamic changes of a capitalist economy (such as technological change) and the fact that labor markets can never be as flexible as (say) financial markets. Workers are "left behind" due to costs of training and moving (e.g., the cost of selling one's house in a depressed local economy), plus inefficiencies in the labor markets, such as discrimination. Structural unemployment is hard to separate empirically from frictional unemployment, except to say that it lasts longer. It is also more painful. As with frictional unemployment, simple demand-side stimulus will not work to easily abolish this type of unemployment. Some sort of direct attack on the problems of the labor market such as training programs, mobility subsidies, antidiscrimination policies, a Basic Income Guarantee, and/or a Citizen's Dividend seems required. These policies may be reinforced by the maintenance of high aggregate demand, so that the two types of policy are complementary.
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Much technological unemployment (e.g. due to the replacement of workers by machines or robots) might be counted as structural unemployment. Alternatively, technological unemployment might refer to the way in which steady increases in labor productivity mean that fewer workers are needed to produce the same level of output every year. The fact that aggregate demand can be raised to deal with this problem suggests that this problem is one of cyclical unemployment. As indicated by Okun's Law, the demand side must grow sufficiently quickly to absorb not only the growing labor force but also the workers made redundant by increased labor productivity. Cyclical or Demand Deficient Unemployment Cyclical unemployment is involuntary unemployment due to a lack of aggregate demand for goods and services. This is also known as Keynesian "demand deficient" unemployment and is associated with the transition of the economy through the business cycle. When there is an economic recession we expect to see a rising level of unemployment because of plant closures and worker lay-offs. This is due to a fall in demand leading to a contraction in output across many industries. In Keynesian economics, any level of unemployment beyond the natural rate is most likely due to insufficient demand in the overall economy. During a recession, aggregate expenditure is deficient causing the underutilization of inputs (including labour). Aggregate expenditure can be increased, according to Keynes, by increasing consumption spending, increasing investment spending, increasing government spending, or increasing the net of exports and an expansion in Aggregate expenditure lessen the unemployment rate i.e., cyclical unemployment.

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