ECS 1601

Study Unit 10 and 11

Please note:

According to the
proposed timetable in
your tutorial letter,
you have one week to
complete both study
units 10 and 11!

ECS 1601
Study Unit 10
Unemployment

Take out your text book. Keep

it next to you!
TheIf slides
for
the slide has a red
Learning
Unitthat
10 says
are
speech bubble
inREAD
twosection
parts,so-and-so.
Part A
Then hit pause, read the
and
Part
thisthe
is slide
section
andB.
watch
Part A.thereafter!

Remember, the
best way to learn
is to take notes
and ASK if you
dont understand.

Content
In this study unit you will learn more
about:
Unemployment

Measuring unemployment
The cost of unemployment
Types of unemployment
Policies to reduce unemployment
Unemployment in the Keynesian and AD-AS
models

Unemployment and inflation

The Phillips curve

Read section
13.4 in textbook
pp 244-246 and
section 21.1 on
pg. 400-405

10.1 Unemployment

People who are willing and able to work is

called the Economic Active Population
(EAP)
The unemployment rate is the percentage
of the EAP that is not working
Although unemployment is a stock
concept, for example there are 5 million
unemployed on 1 December, there are
also continuous flows, for example; this
year 200 000 people became unemployed
and 150 000 employed.

10.1 Continued
Why does someone enter the unemployment pool?
They are new to the job market (just finished school)
They left a previous job and is looking for a new job
They were laid off (temporarily fired until the company
can afford them again)
They lost their job

Why does someone exit the unemployment pool?

They are hired (they got a job)
They were laid off, the company recovered and reemployed them (they got their old job back)
They are tired of looking for a job and give up
(they exit the EAP, because they not willing
to look for a job anymore)

10.1 Continued
Where do we get the data to calculate the
unemployment rate?
Census data (only every four years)
Registered unemployed (not everybody is
registered)
EAP - formally employed - informally employed
subsistence farmers = unemployed
Official estimations published by Stats SA

Now that we have the data, how do we

define unemployment
Strict definition
Expanded definition

10.1 Strict definition

Younger than 15 years
or older than 65

Employed

Working age: between

15 and 65

Unemployed

Total population

Cannot or do not want

to work

Strict unemployment rate =

Actively seeking
employment (in the last
four weeks did
something to get a job)
Discouraged, can and
wants to work but
stopped searching for a
job

10.1 Expanded definition

Younger than 15 years
or older than 65

Employed

Working age: between

15 and 65

Unemployed

Total population

Cannot or do not want

to work

Expanded unemployment rate =

Actively seeking
employment (in the last
four weeks did
something to get a job)
Discouraged, can and
wants to work but
stopped searching for a
job

This is the end of

Part A of the
slides for
Learning Unit 10,
Take a break and
then view Part B.