CHAPTER
16
UNEMPLOYMENT,
INFLATION
AND
POVERTY
GENERAL INFORMATION
-
GENERALLY, THE UNEMPLOYMENT RATE MEASURES THE LEVEL
OF JOBLESSNESS
SPECIFICALLY
-
THE RATE OF UNEMPLOYMENT = # OF PEOPLE UNEMPLOYED
SIZE OF THE WORKFORCE
-
THOSE CONSIDERED AS UNEMPLOYED BY THE BUREAU OF
LABOR STATISTICS ARE THOS INDIVIDUALS WHO HAVE MADE A SPECIFIC ATTEMPT AT
FINDING A JOB WITHIN THE LAST MONTH
o
DOES NOT INCLUDE
§
THOSE NOT LOOKING FOR WORK
·
DROPOUTS OR DISCOURAGED WORKERS
§
SELF-EMPLOYED INDIVIDUALS WHO WORK LESS THAN 15 PER WEEK
-
THE CONCEPT OF FULL EMPLOYMENT DOES NOT TRANSLATE TO ZERO
UNEMPLOYMENT
o
ANY UNEMPLOYMENT UNDER 4.2% IS CONSIDERED AS FULL
EMPLOYMENT
-
UNDEREMPLOYMENT COULD LIKEWISE EXIST BUT MAY NOT BE REPRESENTED IN
THE STATISTICS
o
WORKING AT A JOB FOR WHICH YOU ARE OVERQUALIFIED
o
WORKING PART TIME WHEN YOU WANT TO WORK FULL TIME
KINDS OF UNEMPLOYMENT
-
SEASONAL
o
EXAMPLE – A SKI INSTRUCTOR
-
TECHNOLOGICAL
o
WHEN HUMAN LABOR IS REPLACED BY A MACHINE
§
ELEVATOR AND TELEPHONE OPERATORS
-
CYCLICAL
o
Def - UNEMPLOYMENT THAT MIRRORS THE BUSINESS CYCLE
o
THIS TENDS TO BE BROAD BASED INCLUDING BOTH WHITE
AND BLUE COLLAR WORKERS
-
FRICTIONAL
o
Def – PEOPLE WHO ARE BETWEEN JOBS
o
EXAMPLES – FIRED, MATERNITY LEAVE, LAID OFF, PLANT CLOSING, QUITTING
-
STRUCTURAL
o
Def – UNEMPLOYMENT CAUSED BY FUNDAMENTAL CHANGES IN
THE ECONOMY
§
EXAMPLE – BLACKSMITHS, LAMPLIGHTERS ETC
§
CAUSES
·
CHANGES IN TECHNOLOGY
o
COMPACT DISK/CASSETTES
·
DISCOVERY OF NEW RESOURCES
o
PETROLEUM/WHALE OIL
·
CHANGE IN CONSUMER DEMAND
o
SNEAKERS/DRESS SHOES
·
GLOBALIZATION
·
LACK OF EDUCATION
INFLATION – def – A GENERAL RISE IN PRICES
-
CHARACTERISTICS
o
RISING PRICES
o
RISING MONEY SUPPLY
o
DECREASE IN THE VALUE OF THE DOLLAR
-
GENERAL CAUSES
o
DEMAND EXCEEDS SUPPLY
o
AMOUNT OF MONEY IN CIRCULATION EXCEEDS PRODUCTION
o
AN INCREASE IN WAGES EXCEEDS AN INCREASE IN
PRODUCTIVITY
-
DEGREES OF INFLATION
o
CREEPING INFLATION– 1% TO 3%
o
GALLOPING INFLATION – GREATER THAN 100%
o
HYPERINFLATION – 500% OR MORE
§
THIS TYPE OF INFLATION PRECEDES ECONOMIC AND
POLITICAL COLLAPSE
-
TYPES OF INFLATION
o
DEMAND PULL
§
EXCESSIVE DEMAND PULLS UP PRICE
o
COST PUSH
§
THE COSTS OF DOING BUSINESS INCREASE AND ARE PASSED
ON TO THE CONSUMER
o
SOCIAL
§
INCREASED TAXES OR GOVERNMENTAL REGULATION LEADS TO
AN INCREASE IN PRICE
·
AUTOMOBILE AIRBAGS
o
STRUCTURAL
§
PRICES HAVE UPWARD MOBILITY BUT DOWNWARD RIGIDITY
§
PRICES SELDOM RETURN TO PRE-INFLATION DAYS
o
GOVERNMENTAL DEFICITS
§
MONETIZING THE DEBT – PRINTING PAPER MONEY
§
ENTERING CREDIT MARKETS THUS DRIVING UP INTEREST
RATES WHICH IN TURN DRIVE UP PRICES
-
STAGFLATION – def – LINGERING INFLATION PLUS RECESSION
o
CAUSED BY INFLATIONARY PSYCHOLOGY
§
Def – PAYING A HIGH PRICE FOR A PRODUCT BECAUSE OF A
SUB-CONSCIOUS BELIEF THAT THE PRICE WILL ONLY BE HIGHER TOMORROW
-
PERSONAL IMPACT OF INFLATION
o
HELPED
§
DEBTORS
§
PEOPLE OWNING EQUITIES AND REAL ESTATE
o
HURT
§
PEOPLE ON FIXED INCOME
·
RETIREES
§
CREDITORS
§
BONDHOLDERS AND SAVERS
-
OTHER GENERAL CONSEQUENCES OF INFLATION
o
SPENDING HABIT CHANGE – INFLATIONARY PSYCHOLOGY
o
THE DOLLAR BUYS LESS – SOL GOES
DOWN
§
Def – A MEASURE OF HOW A PERSON LIVES WITH REGARD TO
THE AMOUNT OF GOODS AND SERVICES THAT CAN BE USED TO SATISFY WANTS AND NEEDS
o
SPECULATION INCREASES
o
THE DISTRIBUTION OF INCOME CHANGES
§
THE RICH GET RICHER AND THE POOR GET POORER
·
THE LORENZ CURVE SHOWS THE DISTRIBUTION OF INCOME –
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