Abu bakar Siddique (11011519-028)Junaid Arshad (11011519-072)Usama Bilal (11011519-070)Usama Imtiaz (11011519-110)Usman Saeed (11011519-074)

BS Computer Science (3rd Semester)

Unemployment & INFLATION

TOPIC TO BE COVERED

DefinitionMeasurement

Unemployment RateTypes Of UnemploymentVoluntary UnemploymentInvoluntary Unemployment

• Fractional Unemployment• Structural Unemployment• Cyclical Unemployment• Seasonal Unemployment• Regional Unemployment• Classical Unemployment

UNEMPLOYMENT

A SITUATION WHERE SOME PEOPLE ARE WILLING AND ABLE TO WORK ,BUT ARE UNABLE TO FIND PAID EMPLOYMENT

UnemploymentUnemployment (or joblessness) occurs

when people are without work and actively seeking work

Unemployment

DEFINITION ACCORDING TO ILO

• ILO (International Labor Organization)

• Unemployment as defined by the ILO occurs when people are without job and they have actively looked for work with in the past four weeks

• SOME REALITY BASE FACTS• This incidence is much higher in urban then rural area• Unemployment rates for women are higher then those

for men.

EFFECTS OF UNEMPLOYMENT

• Effect of unemployment (at individual level)• Mantel stress • Loss of self esteem• Directly linked to poverty and Malnutrition

• Effect of unemployment (at social level)• Civil unrest• Law an order problems• Trade barriers

UNEMPLOYMENT RATEUnemployment Formula

( unemployment labor force /total labor force )*100

Unemployment Rate In PakistanUnemployment Rate in Pakistan decreased to 5.70 percent in the second quarter of 2011 from 6.10 percent in the first quarter of 2011

TYPES OF UNEMPLOYMENT

Unemployment

VOLUNTARY UNEMPLOYMENT

• Voluntary unemployment is defined as a situation when workers choose not to work at the current equilibrium wage rate. For one reason or another, workers may elect not to participate in the labor market.

• Voluntary unemployment is likely to occur when the equilibrium wage rate is below the wage necessary to encourage individuals to supply their labor.

INVOLUNTARY UNEMPLOYMENT

• When workers are prepared to work at the going wage rate but cannot find jobs.

Classical UnemploymentClassical unemployment is caused when wages are ‘too’ high. when workers themselves were blamed for not accepting lower wages, or for asking for too high wages. Classical unemployment is also called real wage unemployment.

FRICTIONAL UNEMPLOYMENT

Frictional (Search) Unemployment • Frictional unemployment, also called search unemployment,

occurs when workers lose their current job and are in the process of finding another one. This suggests that full employment is impossible at any one time because some workers will always be in the process of changing jobs.

• For example, college graduates that have never been in the labor force before are considered frictionally unemployed until they manage to find a job or a person has given exams of CSS and waiting for a high job.

STRUCTURAL UNEMPLOYMENT

Structural Unemployment

• Structural unemployment occurs when certain industries decline because of long term changes in market conditions.

• Arises from the mismatch of skills and job opportunities as the pattern of labor

demand in the economy changes.

• Often involves long-term unemployment .

• Prevalent in regions where industries go into long-term decline.

• Good example include industries such as mining , engineering and textiles.

• Occupational immobility of labor.

THERE ARE THREE TYPES OF LABOR IMMOBILITY:

Geographical immobility

Geographical immobility occurs when workers are not willing or able to move from region to region, or town to town.

Other factors also contribute to geographical immobility, such as strong social and family ties,

and parents being unwilling to disrupt their children’s education by changing schools.

Industrial immobility

Industrial immobility occurs when workers do not move between industries, such as moving from employment in motor industry to employment in the insurance industry. Industrial immobility has affected the UK, and many other industrial countries, as the growth of service industries, and the decline of manufacturing industries, has increased the need for mobility.

THERE ARE THREE TYPES OF LABOR IMMOBILITY:

• Occupational immobility

• Occupational immobility occurs when workers find it difficult

to change jobs within an industry. For example, it may be

very difficult for a doctor to retrain to be a dentist.

• Industrial and occupation immobility are most likely to

happen when skills are not transferable between industry

and job.

SEASONAL UNEMPLOYMENT

• Seasonal Unemployment

• Seasonal unemployment exists because certain industries only produce or distribute their products at certain times of the year. Industries where seasonal unemployment is common include farming, tourism, and construction.

• Regular seasonal changes in employment/labor demand.• Affects certain industries more than others.• Catering and leisure.• Construction.• Retailing.• Tourism.• Agriculture.

CYCLICAL UNEMPLOYMENT

• Cyclical unemployment exists when individuals lose their

jobs as a result of a downturn in aggregate demand

•  If the decline in aggregate demand is persistent, and the

unemployment long-term, it is called cyclical or 

Keynesian unemployment.

• Caused by a fall in aggregate demand leading to a loss of

real national output and employment .

DISGUISED UNEMPLOYMENT:

• Disguised Unemployment:• When persons are working as a labor just to help and

engage busy, so a labor does not help in production increment. When more people are engaged in some activity than the number of person required for that, this is called disguised unemployment.

• Examples:• In a farm, two kids are working as a labor to help their

father and to engage busy. Here, two persons are unemployed and that is disguised unemployment.

•Regional Unemployment• When structural unemployment affects local areas of an

economy, it is called ‘regional’ unemployment. For example, unemployed coal miners in Baluchistan Area’s and ship workers in the Karachi add to regional unemployment in these areas.

MAJOR CAUSES OF UNEMPLOYMENT: IN PAKISTAN

• Employment in the private sector absolutely stopped because they shifted their capital to other countries because of nationalization of industrial units badly affected the investment industrial sector.

• The higher growth rate of population is the major cause of unemployment in Pakistan.

• Karachi is the biggest industrial base of Pakistan, but investors are reluctant to invest there because of unrest and violence.

• Our educational system is also responsible for increasing unemployment rate among the educated youth. The attitude of our youth towards the choice of a career is unrealistic and unproductive

MAJOR CAUSES OF UNEMPLOYMENT:

IN PAKISTAN

• Lack of enough industries to employ ever increasing number of graduate in Pakistan

• The government is not involving in capital expenditures which create more jobs.

• Main issue of unemployment in our country is that when ever a new technology comes as software or hardware then all the people starts studying about that. Then at the end, you will see ten thousand students of a particular field about 5 to 10 job vacancies.

• Lack of infrastructure and facilities in the field of energy, telecommunication and transportation also prevent the industrialist from setting up new industries.

SUGGESTIONS:

• 1) Govt. should make efforts to push economic growth process. For this purpose Economic Revival Package should announce for the revival of industries sector, to stimulate production and investment.

• 2) Govt. should seriously try to boost exports by lowering tariffs.

• 3) Govt. should announce a package for the development of agriculture sector.

• 4) Beside this a number of fiscal and monetary measures should take to attract industrialists and particularly foreign investment.

• 5) More Technical and Vocational training facilities should be provided. In this way unemployed people will get the chance to enhance their skills and become able to earn reasonable income.

• 6) With a view to reduce educate unemployment; self-employment scheme should be encouraged in true manners.

Definition

inflation

INFLATION

• Inflation is a rise in the general level of prices of goods and services in an economy over a period of time.

1. D E M A N D - P U L L I N F L AT I O N

2. C O S T- P U S H - I N F L AT I O N3. B U I LT- I N I N F L AT I O N 4. I M P O RT E D I N F L AT I O N5. I N C O M E I N F L AT I O N6. D I F I C I T I N F L AT I O N

TYPES OF INFLATION:

1. DEMAND-PULL INFLATION:

• Demand-pull inflation is generated when aggregate demand for goods for all purposes-consumption, investment and government exceeds the supply of goods at current prices.

FACTORS OF DEMAND PULL INFLATION:

• Demand for non-development expenditures: The governments in Pakistan since 1947 have not

been able to curb the non-development expenditures.

• Increase in worker remittances: During the last three years there is a rapid

increase in the flow of worker remittances in the country .

• Increase in Wages: The rise in wages , salaries ,dearness

allowances, bonuses in the annual budget increase the purchasing power of the employees.

• Foreign Economic assistance: For rapid economic development, Pakistan has

been receiving foreign assistance.

• Construction of houses: Since 1970 the unproductive expenditure on the

construction of houses, plazas etc. has also contributed to the rising trend in prices.

oPopulation explosion:

The population is increasing at the rate of about 1.9% in Pakistan.

COST-PUSH INFLATION:

• The rise in the general price level is also caused by the rising costs of the factors of production.

• Increase in Wages: The increase in wages and the rise in prices

are chasing each other at a rapid speed causing personal rise in the level of prices.

• Rising prices of imported goods: The import prices of POL chemicals,

fertilizers, non-electrical machinery etc have gone up in the world market.

• Increase in Indirect taxes: The increase in the indirect taxes every year has

given the general price level .

• Rise in POL, Gas, and Excise Duty: The multiplier effect of the rise in POL, gas

prices, and sales tax on a number of items has greatly contributed to the cost push effect.

• Sick Industrial Units: The increase in number of sick industrial units,

fall in industrial production due to strikes, electricity breakdown cause decrease in production.

• Rise in support price of agriculture crops: The Government raises the support prices of

cotton, wheat, sugar cane to protect the interests of farmers.

Built-in inflation:

Inflation caused by the expectation of inflation

occurring. For example, employees expect that inflation will happen, and so they negotiate for wage increases.

Open Inflation :

“Government takes no steps to control price rice”It is due to increase in imported goods cost.

Imported inflation

• Increase in income , causes increase the money supply in the country that leads to income inflation…

Income Inflation

• Government has to borrow from banks and non-banks & internal and external resources in case of deficit financing…

Deficit inflation

Effect of Inflation

Positive Effect

Increase in production

Increase employment opportunity

Enhance Economic development

Increase the profit of producers

Benefit the cartels

Benefits the inflator

Negative Effect

Decrease the purchasing power and saving

Increase the interest rate

Create lot of social evils

Effect the existing creditors

Effect the business cycle

hording

Monetary policy is the process by which the government, central bank, or monetary authority of a country controls supply and

availability of money.

Monetary policy is the process by which the government, central bank of a country controls

supply and availability of money.

Open market operations High interest rates… Reduction in monetary

expansion

Fiscal policy is changes in the taxing and spending of the federal government for purposes of expanding or contracting the level of aggregate demand.

Fiscal policy:

Highly increasing unproductive expenditures must be control

Control on population

Fiscal policy:

Import and export… Developments of agricultural and

industrial sectors…

Fiscal policy:

Increase in the growth rate of output Effective tax system will be helpful Improvement in balance of payment

Fiscal policy:

Moderate Inflation Range 1% to 20%

Galloping Inflation Range 20% to 1000%

Hyper Inflation Above 1000%

DEGRRE OF INFLATION:

PAKISTAN 10.4%