Unemployment Rates in Canada 2014 - Research Paper Example

THE STUDY OF UNEMPLOYMENT RATES IN CANADA INTRODUCTION The rate of unemployment in Canada has been an issue of interest and attention for the national and global actors in the recent past. This stems from the fact that the Canadian economy has recorded almost a stagnant rate of the number of people who are willing to work at the existing wage rate but are unable to find jobs. Specifically, the unemployment rate has been at 6.8% over the last two months, something which would get economic commentators and thinkers worried. In retrospect, it would be the goal and aim of this paper to contextualize and internalize in totality, the reasons which would make the unemployment rate not to change (Mankiw, 2014). It is important to note and mention that other sections and areas of this dissertation and exposition would focus in details in trying to analyze the unemployment phenomenon. Conventionally, the methodology section would be concerned with the models, data and concepts necessary to internalize the unemployment phenomenon. This is to say that the theories and data used to deduce the rate of unemployment would be considered at length. Similarly, the analysis section would focus on evidential confirmation or disapproval of the facts and figures collected during the study. In the clinical sense, would also touch on the prediction of theory in prospective future patterns of the rate of unemployment based on the current or existing records and information. The conclusion in its part would sum up the inferences and deductions arrived at. This would focus on the implications of the study, the failure and achievements recorded with an aim of improving accordingly in subsequent research processes and studies. THE RESEARCH METHODOLOGY This section describes the empirical estimation used to study, monitor and evaluate what unemployment entails in Canada. It involves estimating the types of unemployment, the causes, results and impacts or effects of unemployment. In addition, the section shows the future prospects and prediction of the rate of unemployment in Canada and indicating the possible improvements on the unemployment rates (Department of Finance Canada, 2014). There is also the validation of the study findings by comparing them with the past empirical studies. Concepts of the rates of unemployment in Canada Canada has many types of unemployment. These types of unemployment are crucial in determining the policy directions. There is the cyclical unemployment representing short-term employment. The cyclical unemployment in Canada changes with the fluctuations in the business cycle (Hoffmann & Lemieux, 2014). On the other hand, there is the natural rate of unemployment made up of structural and frictional unemployment. What starts out as a cyclical unemployment may grow into a structural unemployment if the economic recession persists for a long time. The occurrence of structural changes causes higher rates of unemployment. Both the provincial and federal governments share jurisdiction over the labour market policies in Canada. The rates of unemployment in Canada represent the loss of production to the Canadian economy (International Labour Organization, 2014). It results into increased demand for government services, substantial financial hardship and diminished physical and mental health of the unemployed citizens. Theory of unemployment in Canada Neo-classical theorists argue that local difference cannot persist in integrated economies such as Canada. The local inequality generates relative wage changes that trigger the labour market adjustments. The recent studies showed that specific determinants of the natural unemployment rate differ across localities. For instance, the western provinces experienced the reduction in structural unemployment in the mid 1990s while east and central provinces of Canada did not. These theorists also argue that the differences in labour market institutions play a role in determining the natural rate of unemployment. These disparities become conspicuous during economic down turns. The provincial rates of unemployment differ at any given time. In addition, different industrial structure and performance create varying adjustment speeds within each provincial labour market (Karpenko, 2008). This further influences the rates of unemployment. Model of unemployment in Canada The total rate of unemployment is equal to the natural and cyclical rates. The unemployment rate falls when there is growth of the economy. However, when unemployment rises, the economy is in a recession. The increase in the price of oils increases unemployment in the areas where oil is manufactured and produced. Besides increased energy prices, the persistence of oil prices alters the production processes leading to structural unemployment. In Canada, the impact of interest rate depends on whether capital is predominantly used as a substitute or complement to labour. When the interest rate rises, the demand for labour increases and the producers switch away from capital. This reduces unemployment. THE STUDY ANALYSIS The study analysis for the rates of unemployment in Canada The youth unemployment rate has historically been higher than that for adults. Recent years, marked by the 2008-2009 recessions and the subsequent recovery, have been no exception. In 2012, the unemployment rate of youths aged 15 to 24 was 14.3%, compared with a rate of 6.0% for workers aged 25 to 54 and workers aged 55 or older. The gap between the unemployment rates of youths and adults has not decreased since the early 1990s, and has even increased slightly since 2010 (Karpenko, 2008). It is worth noting that the labour force participation rate of youth is historically lower than that of adults, mainly because a majority of young people attend school. The historical difference between youth and adult unemployment rates is not unique to Canada. The gap of unemployment between the youth and adults is as a result of the inflow rates among youth, a phenomenon linked largely to their higher risk of layoff and their periodic departures from the labour force to attend school full-time. Their higher risk of layoff is explained in large part by their lower seniority with employers. The validation of the empirical data (figures and facts) for the rates of unemployment in Canada The validity of results is done by correcting for possible statistical shortcomings. The lagged effects of unemployment are controlled by creating a dynamic model with lagged dependent variables. The impact of the lagged variables on unemployment is positive and significant with diminishing effects over time. A central finding of empirical research on displacement is that some workers suffer much more from losing their jobs than do others (Riddle, 2011). On average, those who have held their jobs for an extensive period of time experience considerable income losses, while those who have been employed for short periods of time experience small losses. CONCLUSION Study findings/results for unemployment rates in Canada The study shows that most people who are unemployed are willing and able to work. Therefore, unemployment is the loss of potential output that could have been produced from the limited resources that includes capital, labour, and land. The output lost when a person is not employed is lost forever. Again, unemployment imposes significant personal costs on the workers and their families in terms of loss of personal income (Estevao & Tsounta, 2010). The study also shows that the primary source of income for most of the Canadian families come from their wages hence prolonged unemployment causes significant hardship to both the families and individual workers. It also results into additional government spending on social programs putting a strain on the government finances. Furthermore, the study shows that unemployment causes significant psychological and health costs on the workers and their families (Department of Finance Canada, 2014). Some of the negative consequences of unemployment are increased anxiety and depression, mental hospitalization, drug and substance abuse, increased risk of chronic illness, higher rates of suicide and early deaths. Hence, unemployment comes with increased cost of healthcare. Similarly, the long term impacts of unemployment in Canada have caused low self esteem, low productivity and helplessness. Achievements of the study of rates of unemployment in Canada Canada’s economy performed reasonably well in the post-war period, achieving high rates of employment growth and advances in living standards (Riddle, 2011). A key contributor to this good performance has been a dynamic labour market that shifts workers into sectors where they are needed. Canadians gain from the reallocation process of adjusting to changing opportunities. The shortcomings of the study of rates of unemployment in Canada The research into the effects of living wage laws is not as developed as the literature on minimum wage legislation. Part of the reason is that living wage legislation is a relatively new wage floor policy and it applies to such a small segment of a city’s population, which makes it difficult to measure the policy’s overall impact (Karpenko, 2008). In addition, there are data limitations that pose challenges to measuring the economic impact of living wage laws. The evidence shows that living wage laws, like minimum wage legislation, typically lead to fewer job opportunities for less-skilled workers and, contrary to what advocates claim, do not generally help the poorest families escape poverty. There is also the potential for living wage laws to inflate city budgets through higher costs for public services and to reduce the efficiency of local government. The implications of the study of rates of unemployment in Canada These findings have important policy implications. In Canada, publicly provided insurance does not provide adequate insurance against the risk of permanent job loss. In particular, these programs do not take into account the fact that earnings losses are much larger for long tenure displaced workers (Estevao & Tsounta, 2010). The possible improvements for the subsequent studies of rates of unemployment in Canada Adjustment assistance policies can promote both economic efficiency and the pursuit of equity goals. The shifting of resources that are low priced to more highly valued uses promotes economic efficiency. It enhances higher living standards (Department of Finance Canada, 2014). A general theme resulting from the economic analysis is that adjustment assistance should focus on workers rather than firms or their shareholders. References Department of Finance Canada, (2014). Jobs Report. The State of the Canadian Labour Market. Estevao M. & Tsounta E., (2010). Canada’s Potential Growth: Another Victim of the Crisis. Hoffmann, F. & Lemieux T., (2014). Unemployment in the Great Recession: A Comparison of Germany, Canada, and the United States. International Labour Organization. (2014). Global Employment Trends 2014. Risk of a Jobless Recovery? Karpenko, Y. (2008). How to Embrace Change: Provincial Unemployment after the 2008 Recession. Mankiw, N. G. (2014). Principles of microeconomics. Riddle, W. C. (2011). Unemployment Compensation and Adjustment Assistance for Displaced Workers: Policy Options for Canada. Read More