Unit 3: Full Employment

Question 1

Full employment

Answer 1

The lowest possible rate of unemployment, seasonally adjusted, after allowing for frictional and structural unemployment

• In Canada is considered to be when the unemployment rate is in the range of 6-7%. This is also known as the natural rate of unemployment.

Question 2

Natural rate of unemployment is

Answer 2

6-7%

Question 3

Frictional Unemployment:

Answer 3

Unemployment caused by workers who are between jobs who are entering or re-entering the labour force

• Results from people moving between jobs. It includes both students who are graduating from school and looking for jobs, and workers who made the choice to move from one job to another. A certain amount of frictional unemployment is natural in an economy.

Question 4

Seasonal employment

Answer 4

Unemployment caused by recurring climatic factors, such as the impact of winter on construction, tourism, farming, and so on.

• Caused by variation in climate over the course of the year. Fishing, farming, construction, and recreational camps are all examples of industries that see a decline in employment over the winter months. Statistics Canada adjusts for this type of unemployment when it calculates its “seasonally adjusted” unemployment rate.

Question 5

Cyclical Unemployment:

Answer 5

Unemployment caused by a downturn in the business cycle

• Results from a reduction in overall consumer spending. As overall demand for goods/services declines in all industries, fewer workers are needed in all industries. This is the type of unemployment in the Great Depression in the 1930s.

Question 6

Structural Unemployment:

Answer 6

Unemployment caused by long-term changes in the economy, such as shifts from goods production to services, or the introduction of technology that replaces labour.

• Occurs when skills or location of workers no longer matches the patterns of demand in the economy. This type of unemployment occurred in the 1990s in Atlantic Canada with the shutdown of cod fishery due to declining fish stocks.

Question 6

Full employment;

Answer 6

The lowest possible rate of unemployment, seasonally adjusted, after allowing for frictional and structural unemployment.

Question 6

Most economists believe in an active/free economy

Answer 6

some structural/frictional unemployment will always exist. – The only way to eliminate frictional unemployment is for the government to decide where/when workers can move from job to job.

Question 7

Workers feel more confident

Answer 7

leaving their job positions and seeking better employment when the economy is doing well– so frictional unemployment is at its highest then.

Question 8

A high unemployment rate also entails the financial costs of programs such as

Answer 8

employment insurance which help issues from unemployment. The financial cost is compounded by lost taxation revenues due to lower incomes and decreased spending on goods/services.

Question 9

People who suffer from unemployment suffer from:

Answer 9

loss of self-esteem/job skills, and an increase in family tension. This is also linked to social unrest, crime, and political upheaval