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1. tutor2u™
Course:Course:
Introduction to ECONOMICSIntroduction to ECONOMICS
Topic: UnemployemntTopic: Unemployemnt
3.00 Credit Hours, Fall 2013,3.00 Credit Hours, Fall 2013,
Undergraduate/Graduate ProgramUndergraduate/Graduate Program
Instructor: Madiha KhalidInstructor: Madiha Khalid
Email: Madiha.khalid@uogsialkot.edu.pkEmail: Madiha.khalid@uogsialkot.edu.pk

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Unemployment
1- Introduction of unemployment
2- Causes of unemployment
3- Types of unemployment
4- Polices to reducing unemployment
5- Rate of unemployment in Pakistan
6- Solution of unemployment

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Unemployment Introduction
• Unemployment is likely to be the major economic
topic. Early indications suggest that the jobless
rate has begun to rise and that finding work has
become harder. This is particularly the case
amongst the young.
• The Australian jobless rate is predicted to rise from
the present official 5.4% to 6%. Unemployment
among the young is presently officially 16.8% and
likely to remain at 3 times the general rate.
• The situation in many other countries, particularly
in Europe, is far worse.

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Cont.…..
• The concept of unemployment has
changed considerably over time. At
various times in the past, for example, it
has been considered inappropriate to
regard women, children or the elderly
as unemployed.
• Questions still arise today as to just
who are to be regarded as such. Does
it include those who are working part-
time but would prefer full-time? Is, for
example, a brain surgeon only able to
find work as a laborer, a seasonal
worker between jobs, or a young
person opting to continue at school due
to the unavailability of paid work,
unemployed?

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CAUSES OF UNEMPLOYMENT IN
PAKISTAN
1-Growth of Population:
•One of the major problems
regarding unemployment in
Pakistan is uncontrolled
growth of population. The
population of Pakistan is
increasing at very high rate
this time. According to the
statistical the population of
Pakistan is increasing at the
rate of 2.2%.

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Cont.….
2-Poor Education System:
•The education system in
Pakistan has been really poor
since the creation of Pakistan.
Unfortunately any government
since independence didn’t take
especial steps to make the
education system good. It has
been seen even talented
students left study due to
injustice of system.

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Cont.….
3-Violence and Terror Activities:
•As we all know very well that the
Karachi is hub of trade and
business in Pakistan. Terrorist
activities in Pakistan are on peak at
this time especially in Karachi,
therefore situation in Karachi is
really threatening and alarming and
due to this the nationals and as well
as foreigners are frightened to
invest in Pakistan.

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Cont.….
4-Energy Crisis:
•Could you believe country with
plenty of natural resources and
atomic power is lacking of
energy crisis? There are many
sources of producing of energy
in Pakistan but due to lack of
proper planning and efforts
Pakistan is having problem of
energy crisis.

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Cont.….
5-High Age of Retirement:
•The age of retirement in Pakistan is 60 years and it is really
high age of retirement and the government of Pakistan is
directly responsible for this factor. There are various
educated people are in wait of jobs but high age of
retirement is making young ones frustrated.
•6-Afghans Refugees:
•Afghans refugee to Pakistan is the additional problem of
unemployment in Pakistan. When American army attacked
on Afghanistan in 2001 about 13 years ago and due to this
plenty of Afghans migrated to Pakistan. The migrated people
caused labor markets as they are ready to work for fewer
wages.

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Key Issues
• The meaning of unemployment
• Different types of unemployment
• Consequences of unemployment

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Classification Of Unemployment
Unemployment can be broadly classified under two broad categories –
VOLUNTARY UNEMPLOYMENT - Unemployment that results when resources which are willing and
able to engage in production choose not to produce output. These are resources (especially labor) that decide
to leave one job, often in search of another.
 INVOLUNTARY UNEMPLOYMENT - The contrast to voluntary unemployment is involuntary
unemployment, in which resources are forced out of work. Involuntary unemployment is also known as
Forced Unemployment.

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TYPES OF UNEMPLOYMENT
1. Seasonal Unemployment
2. Cyclical Unemployment
3. Technical Unemployment
4. Frictional Unemployment
5. Structural Unemployment
6. Disguised Unemployment
7. Regional Unemployment

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Seasonal Unemployment
Seasonal unemployment refers to a situation where a
number of persons are not able to find jobs during
some months of the year.
EXAMPLE-: Agriculture is a seasonal activity. There is an increased
demand for labor at the time of sowing, harvesting, weeding and
threshing. In between there is little or no demand for labor. Agricultural
labor finds himself unemployed during this period. This is called
seasonal unemployment.

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Cyclical unemployment
Cyclical unemployment, occurs when there is not enough
aggregate demand in the economy to provide jobs for everyone
who wants to work.
Demand for goods and services fall, less production is needed and
less workers too.
If GDP is growing then unemployment would be low and vice
versa.

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Technical Unemployment
Unemployment caused by technological changes or new methods of
production in an industry or business.
Example: The evolution of the automobile assembly plant. In the
beginning, everything on the line was done by humans in order to
build a car. The assembly line itself was a great technological
innovation. Today, robots are employed for much of the hand-work
humans used to do.

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Frictional Unemployment
Example: When you make up your mind and set off looking for a
better job and abandoning the current one, you are in the frictional
unemployment labor force.
The unemployment which exists in any
economy due to people being in the process of
moving from one job to another.

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Structural Unemployment
This unemployment arises due to structural change in dynamic
economy. Unemployment caused by massive mismatch of skills or
geographic location is noted as structural unemployment.
Example: Heavy Manufacture (mining) - Manufacture now involves
machines so humans are no longer needed for the harder work.

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Disguised Unemployment
When more people are engaged in some activity than the
number of person required for that, this is called disguised
unemployment
EXAMPLE:
An agricultural field require 3 laborers but people engaged in this
activity is 6 then this unemployment for 3 labors is called disguised
unemployment

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Types of Unemployment
• Seasonal
– Regular seasonal changes in
employment / labour demand
– Affects certain industries more than
others
• Catering and leisure
• Construction
• Retailing
• Tourism
• Agriculture

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Types of Unemployment
• Frictional
– Transitional unemployment due to people
moving between jobs: Includes people
experiencing short spells of
unemployment
– Includes new and returning entrants into
the labour market
– Imperfect information about available job
opportunities can lengthen the period of
someone’s job search

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Structural Unemployment
• Structural
– Arises from the mismatch of skills and job
opportunities as the pattern of labour
demand in the economy changes
– Occupational immobility of labour
– Often involves long-term unemployment
– Prevalent in regions where industries go
into long-term decline
– Good examples include industries such
as mining, engineering and textiles

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Cyclical unemployment
• Cyclical (Keynesian)
– There is a cyclical relationship between demand,
output, employment and unemployment
– Caused by a fall in aggregate demand leading to a
loss of real national output and employment
– A slowdown can lead to businesses laying off
workers because they lack confidence that demand
will recover
– Keynes argued that an economy can become stuck
with a low rate of AD and an economy operating
persistently below its potential

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Real Wage Unemployment
• Real Wage Unemployment
– Created when real wages are maintained
above their market clearing level leading to
an excess supply of labour at the prevailing
wage rate
– Some economists believe that
unemployment can be created if the
national minimum wage is set too high

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Recent examples of cyclical unemployment
• Recession in the UK in the early 1990s
– Unemployment rose from 1.6 million in 1989
to 2.9 million in 1993
• The recent recession in UK manufacturing
industry
• Slow growth and rising unemployment in
Germany
• The end of full-employment for Japan during the
last ten years

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Cont.….
 Lower Interest Rates
• When interest rates are decreased, savings
also decrease. In return, increases a consumer’s
income available for consumption & labors are hired
to fulfill that increased demand.
 Regional Policy Incentives
Supply side factors, the government gives grants
and subsidies to firms to locate in areas of high
unemployment.
 Improving Geographical Mobility of Labor
Grants could provide to encourage workers and
reduces the problem of structural unemployment.

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Cont.…..
 Improvement in Job Information
Improving awareness in labor regarding job
information is always an effective policy to
reduce unemployment.
 Improving Flexibility in the Labor Market
Providing more flexibility in terms of hiring and
firing workers, and increased shifts or
maximum working hours can help reducing
unemployment.

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RATE OF UNEMPLOYMENT IN
PAKISTAN
• According to the recent statistics, approximately 5.95
percent of labor force is unemployed in Pakistan
• The World Bank provides data for Pakistan from 1980
to 2008. The average value for Pakistan during that
period was 4.73 percent with a minimum of 2.6 percent
in 1990 and a maximum of 7.8 percent in 2002.
• The Federal Bureau of Statistics released the Pakistan
Labor Force Survey 2011 on Monday, which shows
the unemployment rate rising to 6% in July 2011,
compared to 5.6% a year ago. The total number of
unemployed rose by 280,000 people during the past
year to 3.4 million.

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Cont.…..
• In absolute terms, the number of unemployed women
decreased to 1.18 million from 1.21 million. The number of
jobless men increased to 2.22 million from 1.91 million.
• If we give a look at the recent years in which the
unemployment rate of Pakistan was 5.5 in 2010 and 5.6 in
2011 as per the claim of the officials
• but in 2013-2014 the conditions seems to be worse than the
previous years because the political instability and the lack of
foreign investments in the country have reduced the jobs and
vacancies for the people and excessive universities which are
producing thousands of students and leaving them to
penetrate in the market has also affected the situation.

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SOLUTION OF
UNEMPLOYMENT
• It will be tough ask for government to solve one of the major
problems of Pakistan “Unemployment” due to huge population
but still we have given some solutions to reduce the
unemployment in Pakistan and we are hopeful by following
these solutions the ratio of unemployment in Pakistan can be
reduced or decreased.
 The first thing to do to reduce unemployment in Pakistan is the
proper planning by the government of Pakistan.
 The education system of Pakistan should be equal and well
managed.
 Well recognized training and technical institutions are need to
be established where skills programs are offered.
 The age of retirement should be at least 55 years.

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Cont.….
Remove energy crisis so that investor comes to Pakistan thus job
placement will automatically be created.
There should be peace across the country so foreigners will not
hesitate to invest in Pakistan.
The agriculture sector should be developed.
Jobs should be given purely on merits.
Encourage multinational companies to business in Pakistan.
Family planning centers should be opened to control the flow of
over population

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Consequences of Unemployment (2)
• Economic Consequences for Businesses
– Negative consequences
• Fall in demand for goods and services
• Fall in demand for businesses further down the
supply chain
• Consider the negative multiplier effects from the
closure of a major employer in a town or city
– Some positive consequences
• Bigger pool of surplus labour is available – but still a
problem if there is plenty of structural unemployment
• Less pressure to pay higher wages
• Less risk of industrial / strike action – fear of job
losses – leading to reduced trade union power