College of Education

School of Continuing and Distance Education2014/2015 – 2016/2017

ECON 216

Economy of Ghana II

Session 9: Employment,

Unemployment and Underemployment

Lecturer: Dr. Frank Agyire-TetteyContact Information: fagyire-tettey@ug.edu.gh

Session Overview

Employment is critical for the development of any country and Ghana is no exception. This session seeks to explain the concepts of employment, unemployment and underemployment.

The session examines causes and types of unemployment .

It will further discuss the measurements of employment and employment as well as identify the costs of unemployment.

Lastly, students will be introduced to the trends and types of employment in Ghana.

At the end of the sessions, students are expected to:

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Session Overview

Be in a position to working definition for employment

and unemployment in general and how the Ghana

Statistical Service defines employment.

Analyse the Sustainable Development Goal on

Employment and assess the targets of the Goal.

Appreciate the measurements of employment and

unemployment

Understand the causes and costs of unemployment

Distinguish between the types of unemployment

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Session Outline

The key topics to be covered in the session are as follows:

Topic One : Definitions and Concepts

Topic Two : Measurements of Employment and

Unemployment

Topic Three : Types, Causes and Costs of Unemployment

Topic Four : Trends of Employment and Unemployment in

Ghana

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Reading List

Ghana Ministry of Employment and Labour Relations

(2014). National Employment Policy (Ghana)

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DEFINITION AND CONCEPTSTopic One

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Definition and Concepts

The labour force consists of all persons over the age of16 who are either working for pay or actively seekingpaid employment.

People who are not employed and not actively seekingemployment are not counted as part of the labor force.This category consists of discouraged workers andstudents.

The International Labour Organisation (ILO) defines theemployed to consist of all persons above a certain agewho during a specified period were in either paid or selfemployment.

Definition of employment therefore differs by countrybased on the legal requirement on age.

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Definition and Concepts

• In Ghana, employment is defined as either the person

was actually engaged in any work (as defined above)

during the reference week, or he/she had an attachment

to a job or business but for some reasons did not work

during the reference week.

According to the ILO a person is unemployed, if

he is older than the minimum age and without a job,

available for work and have not worked at least one

hour during a given reference period

actively looking for a job

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Definitions and Concepts

A individual worker may be said to be underemployed, either, when s(he) is working fewer hours than desired or

is working at a job in which one is less productive than would be if one's skills were fully used elsewhere

Employment may be classified by: Industrial Sector

Occupation

Type or status

Industrial classification in Ghana puts employment under threemain categories;

Agriculture and related activities

Industry

Services

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Definitions and Concepts

Occupational Classification categorisesemployment by job or profession. These includeindividuals engaged in agriculture,administrators/managers, sales, clerical,production, services etc.

Status classification is based on ILOclassification which covers the nature ofemployment under wage employment,employer (self-employed with employees), ownaccount work (self-employed withoutemployees), unpaid family work (contributingfamily work) unclassified workers.

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MEASUREMENTS OF EMPLOYMENT AND UNEMPLOYMENT

Topic Two

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Measurements of Employment and

Unemployment The labour-force participation rate is the percentage of

the working-age population working or seeking

employment.

Labour Force Participation Rate: This is the proportion of the

labour force to the entire population.

LFPR = Labour force X 100

Population

Larger labour force increases the capacity of the economy to produce

goods and services.

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Measurement of Employment and

Unemployment The employment rate is a ratio of the employed to the labour force.

The employment rate (ER) is computed as:

𝑬𝑹 =𝑬𝒎𝒑𝒍𝒐𝒚𝒆𝒅

𝑳𝒂𝒃𝒐𝒖𝒓 𝒇𝒐𝒓𝒄𝒆𝑿 𝟏𝟎𝟎

This measures the ability of the country to provide jobs. A high ratioimplies a high proportion of a country’s population is employed andvice versa.

Majority of the economically active population 15 years and older were employed (94.9%) in 2012/13 in Ghana

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Measurement of Employment and

Unemployment The unemployment rate is the proportion of the labor

force that is unemployed. To calculate the rate, youneed to know the number of people unemployed and thenumber of people in the labor force.

Unemployment Rate = Unemployed X 100

Labour force

Based on the ILO definition, The Ghana statisticalservice an overall unemployment rate to be 5.2 percentin 2012/13 for those 15 years or older.

Unemployment rates are higher in urban areascompared to rural areas.

Unemployment is also higher among females comparedto males

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Measurement of Employment and

UnemploymentThe ILO shows four different methods of calculating theunemployment rate.

Labour Sample Surveys – preferred method due to thecomprehensive nature of the results. Allows calculation ofunemployment rates for different cohorts in the population.Internationally comparable data.

Social Insurance Statistics – based on statistics onunemployment benefit claimants. This system has beencriticised due to due to the expiration of benefits before aperson actually finds work.

Employment Office Statistics – least effective method as itonly entails a monthly tally of unemployed persons who enteremployment offices.

Official estimates – determined by a combination ofinformation from one or more of the other three methods. Theuse of this method has declined in favour of labour surveys.

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TYPES/CAUSES AND COSTS OF UNEMPLOYMENT

Topic Three

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Types/Causes and Costs of

UnemploymentStructural unemployment; following advances in technology including automation of production systems, improvements in productivity and development of input substitutes, the skills of the employed are rendered obsolete.

•Frictional unemployment; arises following time spent in job search. Usually short term and will always be present in an economy even if economy is functioning perfectly. One reason for this has to do with lack of information on labour market. Typical situation of graduates.

•Cyclical Unemployment (Keynesian unemployment); Deficiencies and inefficiencies in aggregate demand during certain periods in the business cycle. Coincides with under-utilised/ unused industrial capacity or capital goods.

•Seasonal Unemployment; similar to cyclical unemployment, it associated with a shortfall in demand in a particular season, sector or industry rather than economy as a whole and usually short term. Modifications to jobs or structure of a sector or industry can help absorb labour and mitigate the incidence of the problem year round.

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Types/Causes And Costs of

UnemploymentThe cost of unemployment may be divided into

microeconomic and macroeconomic costs.

Microeconomic Costs – measured from the individual, private or public standpoint

Individual direct financial cost measured as the amount of lost income, as well as of interest cost if money is borrowed for one's upkeep while unemployed.

Indirect private cost comprises forgone work experience while unemployed and the returns to that forgone experience. For example foregone pension benefits

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Types/Causes And Costs of

UnemploymentPublic financial cost may be measured by the cost

of unemployment insurance payments (direct cost) plus income tax lost (indirect cost).

Indirect financial cost to the employed public who are obliged by social considerations to provide financial support for unemployed relatives and friends

The non-financial costs comprise psychological and sociological effects. It may create social distress for the individual

High unemployment is seen as a threat to political and social stability

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Types/Causes And Costs of

UnemploymentMacroeconomic Costs

Constitutes potential waste of human

resources

i.e. labour services cannot be stored and if they are

not used in a particular year, the goods that they

would have produced are lost forever.

Constitute Output loss

measured in terms of the GDP gap i.e. the

amount by which the actual GDP falls short of

the potential GDP.

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SUSTAINABLE DEVELOPMENT GOAL ON EMPLOYMENT

Topic Four

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Sustainable Development Goal on

Employment

Goal 8 of the SDGs is to “promote inclusive and sustainable economic growth, employment and decent work for all.

The SDGs depart from the MDGs (2000-2015) for identifying the creation of sustainable employment opportunities and decent work for all as a desirable global development objective.

The goal seeks to provide women and girls equal access to equal opportunities for employment for men and boys.

Productive employment and decent work have been identified as key elements to poverty eradication and fair globalization.

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Sustainable Development Goal on

Employment Decent employment means opportunities for everyone to get work

that is productive and delivers a fair income, security in the workplace and social protection for families, better prospects for personal development and social integration.

The key employment targets of SDG 8 are:

i. Achieve higher levels of economic productivity through technological upgrading and innovation, including through a focus on high-value added and labour intensive sectors

ii. Promote development oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage the formalisation and growth of micro-, small and medium sized enterprises through access to financial services

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Sustainable Development Goal on

Employmentiii. By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value

iv. By 2020, substantially reduce the proportion of youth not in employment, education or training.

v. Take immediate and effective measures to eradicate forced labour, end modern slavery and human trafficking and secure the prohibition and elimination of the worst forms of child labour

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Sustainable Development Goal on

Employmentvi. Protect labour rights and promote safe and secure working environments for all workers, including migrant workers, in particular women migrants and those in precarious employment

vii. By 2030, devise and implement policies to promote sustainable tourism that create jobs and promotes local culture and products

vii. By 2020, develop and operationalize a global strategy for youth employment and implement the Global Jobs Pact of the International Labour Organisation

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References

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