What are the different components of Employment?
Employment can be defined as a legal contract that defines terms and conditions of a given job with regards to the employer-employee relationship. As such, an employment contract must have distinct elements or components that make the whole undertaking a success both in the long-run and short-run. Essentially, some of the main components of employment include performance, compensation, benefits, length of the contract, termination, and definition of position. When signing an employment contract, the employer in question should include and indicate clearly each and every performance barometer to be measured in the employee during the employment. Such may take into account improvement and acquisition of certain skills (Keynes, 2015).
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Compensation and benefits to employees should be spelled out in the best way possible. This should be so based on the fact that the sole purpose of entering employment is to earn and reap benefits. On the same note, the length and reasons for termination of employment should be communicated in a concise and easy to understand manner. An employee must be aware of all the possible factors and faults leading to contract termination. This goes hand in hand with the definition of position. Very simply, the employer should ensure that the employee is conversant with their position, role, and responsibilities at the workplace (Keynes, 2015).
Who is in the Labor Force (LB) and Not in the Labor Force (NLF)
The labor force (LB) involves persons who are 16 years old to just retirement age (Levernier &Yang, 2011). These are individuals who are within the working and productive age. They are either employed or unemployed but looking for work. However, this group of individuals excludes populations in mental homes, military, nursing homes, and prisons. The exact opposite of labor force revolves around persons who are not in the labor force. They are also known as the out of the labor force. An individual is considered not in the labor force if she or he neither worked in the past one week nor looked for any work for the past four weeks (Keynes, 2015). Therefore, a person who is unemployed or not employed is out of the labor force. Persons in this category include unpaid homemakers, full-time students, and retirees.
What are the three types of Unemployment?
Both developing and developed economies tend to experience three different types of unemployment, which include frictional, cyclical, and structural unemployment (Levernier &Yang, 2011). Frictional unemployment often takes place during the normal turnover, especially in the labor market in relation to the total time taken by the worker to search for and find a new job. For example, if a university graduate may start looking for their dream jobs. However, they may be in the search for approximately five months to 1 year. In this case, therefore, the graduates in question are considered fractionally unemployed. Cyclical unemployment occurs when the country’s economy is facing unlimited ups and downs for a quite long or for a short period (Keynes, 2015). During this time, employees lose jobs.
One of the best possible examples is an increased unemployment rate during an economic recession such as the one witnessed in the Great Depression (Levernier &Yang, 2011). Structural unemployment is brought about by a mismatch in the skills required and skills possessed. Briefly speaking, the employee may be qualified for a particular job but lacks necessary skills demanded by the employer. Similarly, major advances and new trends in technology also leads to structural unemployment since the employee may not be in a position to adapt and acquire new technological skills. This means that the worker’s skills and abilities are obsolete and outdated to fit perfectly well in a competitive corporate sector.
Explain the Natural Rate of Unemployment (NRU)
The natural rate of unemployment refers to an estimate used to determine the unemployment rate that prevails when the economy of the country is at full employment. Full unemployment is a situation when a nation’s state of all unemployment is structural or frictional. In relation to the above definition, it is evident that the difference between the actual rate of unemployment and natural unemployment rate results into cyclical unemployment (Levernier &Yang, 2011).
How do you calculate the Unemployment Rate (UR)?
Essentially, the unemployment rate is one the key indicators of the prevailing state of the labor market. Notably, a high unemployment rate is directly proportional to few job opportunities. In short, it is extremely hard to land a job while at the same time the working category finds it complicated to get wage increases and promotions. Based on the above, unemployment rate is arrived at by dividing the total number of the unemployed persons by the overall labor force in the market. Unemployment rate = Unemployed workers/Total labor force (Federal Bank of Atlanta, 2009). For example, if there are seven unemployed individuals a given village and a total of 27 market labor force, then the unemployment rate is 0.33 multiplied by 100 to bring 33%.
Explain at least two criticism of how we measure unemployment rate
The Claimant Count and International Labor Organization (ILO) are the most commonly used unemployment rate measurement methods (Higson, 2011).The Claimant Count is used to record individuals that claim unemployment benefit and are in a position to prove that they are indeed looking for work. However, the Claimant Count is unreliable since it cannot reflect the actual level of unemployment. For example, some of the unemployed may not bother claiming that they are looking for work while others are deterred from proving their search for work. ILO is unemployment direct assessment method that interviews 60,000 household, which is approximately 120,000 persons. In this manner, it tries to measure and establish facts about unemployment rather than relying on claiming benefits. As such, ILO considers one unemployed when he or she has not been working for four weeks and also must be ready to work in the shortest time possible (2 weeks) (Higson, 2011).
- Keynes, J. (2015). The General Theory of Employment, Interest, and Money. Cambridge, England: John Maynard Keynes, Jan 29, 2015
- Levernier, W. &Yang, B. (2011). A Note on the categories of Unemployment in Principles of Macroeconomics Course. Vol.7, (1), pp. 1-16. Retrieved from http://www.isu.edu
- The Federal Reserve Bank of Atlanta. (2009). The Labor Force and Unemployment.Education Resources.
