ECONcepts Vol. 4: Unemployment
By the Education & Research Core | October 2015


​Concepts and Definitions

The labor force can be filed under three categories: employed, unemployed and underemployed.
To be employed generally pertains to being a paid worker or owning a business. Under this definition, the individual works at total of 40 hours a week or 8 hours per working day

To be unemployed means to have no work, despite being both available to work and the willingness to seek for work. It is of note that an individual is not counted as unemployed if he or she is not actively looking for employment; this condition excludes them from being part of the counted labor force.
To be underemployed means that an individual is already working but wishes to work even more hours than prescribed to him or her. This usually applies for individuals in low-paying and part-time occupations. It is of note that underemployment that not take into consideration quality or satisfaction from work itself.
The Phenomenon of Unemployment

Unemployment can be further divided into two, that is, frictional and structural unemployment.

Frictional unemployment is caused by the time lag it takes for individuals to find jobs. This time lag is attributable to a number of factors that reduces the rate of finding jobs. These include the mismatch of an individual’s preference to the required competencies of a job, the imperfect dissemination of information regarding job opportunities and geographical constraints, among others. Another prevalent cause is sectoral shifts, or the varying changes in demand for different goods in the economy, which lead to constant changes in the demand for labor in various industries.

Structural unemployment, on the other hand, occurs when there are more laborers available than demanded. This is due to a concept called wage rigidity; in classical economics, it is wage that determines how much labor firms will demand, as well as the amount of labor that workers are willing to supply (Note that firms would want to minimize costs, while workers would want to maximize earnings). Consequently, when wages are too high, firms would not be able to accommodate all workers, which leads to unemployment.

It is these nuances in unemployment that trigger the often disputing discourse in terms of wage rates, public policy and collective bargaining groups. Laws like unemployment insurance, a condition where unemployed individuals are given a fraction of their former job’s pay while searching for work, delves into frictional unemployment. The presence of laws like the Minimum Wage and the prevalence of labor unions resulted from disputes on the structural end of unemployment.

​A Special Application: Unemployment of Persons with Disabilities (PWD’s) in the Philippines

As stated, frictional unemployment deals with mismatches due to the abilities and preferences of an individual as paired with competencies demanded for in jobs. The issue of matching work with worker is none the more emphasized with PWD’s.

The results of a study conducted by the Philippine Institute for Development Studies (PIDS) in 2013 yielded the following observations:

  • “ Roughly half of working PWDs are underemployed”
  • “ The majority of employed respondents in both areas are considered as vulnerable workers—self-employed and unpaid family workers;”
  • “ Some PWDs who are wage/salary workers are considered as informally employed as they are working as temporary workers without formal contract, seasonal workers, or hired on a daily basis;”
  • “ MCA also revealed that PWDs who are at least college graduates are more closely related to being officers/managers/supervisors, professionals and technicians/associate professionals while those who are at most elementary graduates tend to be laborers/unskilled and agricultural workers.”


From the following observations, it is implied that the potentials and capacities of PWD’s as productive members of the workforce are not yet fully realized. Furthermore, the presence of informal employment and lack of formal contracts opens the door for labor exploitation.

A study conducted by the Institute for Labor Studies regarding the mainstreaming of PWD’s for work have stressed the following points for better integration:

  • More effective implementation of already present pro-PWD legislation like the Magna Carta for Persons with Disability and the Accessibility Law, which promotes the building of infrastructure that will be of help to PWD’s like ramps.
  • PWD’s must be given jobs that are formalized by contracts that would grant long term employment possibilities.
  • A change in the paradigm of PWD integration. The inclusion of PWD’s must not be looked as an act of charity, but as a way to empower the rights of a person to apply oneself and make a living. Training programs in livelihood, entrepreneurship, first aid etc. were emphasized.


References:
Mankiw, N. Gregory Intermediate Macroeconomics 7th Edition. New York: Worth Publishers. 2010. Print

​Mina, Christian D. Employment of Persons with Disabilities (PWDs) in the Philippines: The Case of Metro Manila and Rosario, Batangas. Philippine Institute for Development Studies. 2013. Web. Accessed October 9, 2015.

Fojas, Julieta R. Employment Mainstreaming of Workers with Disability. Institute of Labor Studies. 2012. Web. Accessed October 9, 2015.Z
ECONcepts Series

Vol. 1: John Nash & Game Theory

Vol. 2: Economics of Taxation

Vol. 3: Government Budget

​Vol. 4: Unemployment