Question

1. Classify the following situations as frictional, structural, or cyclical unemployment. Explain briefly the reason for your choice. (30%)
   1. An auto assembly worker is laid off because auto sales decrease during a slowdown in overall economic activity.
   2. An electrical engineer refuses a job offer and decides to look for another job that has a higher remuneration.
   3. Juan left high school without graduating and cannot find any jobs he is qualified for.

2. For each of the following situations, is Alexander counted as employed, unemployed, or not in the labour force by Statistics Canada? (no need to explain your choice) (30%)

1. Alexander moves from Alberta to Ontario and begins looking for a job.
2. Alexander feels discouraged looking for work and stop applying for jobs.
3. Alexander is self-employed in his job as a carpenter.

3. In Canada, during regular economic times, the maximum length of time a worker can collect unemployment insurance is 45 weeks. During recessions, however, Parliament often increases the length of time for which workers can collect benefits. During a recent recession, workers could collect benefits for more than 45 weeks in some regions. Comment on the advantages and disadvantages of this system.

Answer 1

1. a) An auto assembly worker is laid off because auto sales decrease during a slowdown in overall economic activity.

This is an example of cyclical unemployment. It happens when there is a recession or a slowdown in the economy or when there are swings in the business cycle. Here an auto assembly worker is laid off because of the slowdown in the economy and there is a drop in sales.

b) An electrical engineer refuses a job offer and decides to look for another job that has a higher remuneration.

This is an example of frictional unemployment. It happens when a person is looking for a job for the first time or wants to change his job for better opportunities. Here the electrical engineer is lo9king for a job with high remuneration.

​​​​​​c) Juan left high school without graduating and cannot find any jobs he is qualified for.

This is an example of structural unemployment. It happens when a person is looking for a job but is not getting one because he lacks the skills or degree required for the job. Here Juan did not complete his graduation, therefore, he is not able to a suitable job for him.

2. a) Alexander moves from Alberta to Ontario and begins looking for a job. He is unemployed.

b) Alexander feels discouraged looking for work and stop applying for jobs. Not in the labour force by Statistics Canada.

c) Alexander is self-employed in his job as a carpenter. He is employed.