LABOR MARKET,

UNEMPLOYMENT
AND POVERTY
AFL - MAKSI
The Labor Market: Basic Concepts
 The labor force participation rate is the ratio
of the labor force to the working age
population.
 The unemployment rate is the ratio of the
number of people unemployed to the total
number of people in the labor force.
 Frictional unemployment is the portion of
unemployment that is due to the normal
working of the labor market; used to denote
short-run job/skill matching problems.
The Labor Market: Basic Concepts
 Structural unemployment is the portion of
unemployment that is due to changes in the
structure of the economy that result in a
significant loss of jobs in certain industries.
 Cyclical unemployment is the increase in
unemployment that occurs during recessions
and depressions. Employment tends to fall
when aggregate output falls and rise when
aggregate output rises.
The Classical View of the Labor
Market
 The view of classical economists was that if the quantity
of labor demanded and the quantity of labor supplied
are brought into equilibrium by rising and falling wage
rates, there should be no persistent unemployment
above the frictional and structural amount.
The Classical View of the Labor
Market
• The labor supply
curve illustrates the
amount of labor that
households want to
supply at the particular
wage rate.
 The labor demand
curve illustrates the
amount of labor that
firms want to employ
at the particular
wage rate.
The Classical View of the Labor
Market
• Classical economists
believe that the labor
market always clears.
 If labor demand
decreases, the
equilibrium wage will
fall. Everyone who
wants a job at W* will
have one. There is
always full
employment in this
sense.
The Classical Labor Market and
the Aggregate Supply Curve
 The classical idea that wages adjust to clear the labor
market is consistent with the view that wages respond
quickly to price changes.
 This means that the AS curve is vertical. Therefore,
monetary and fiscal policy cannot affect the level of
output and employment in the economy.
The Unemployment Rate and the
Classical View
 The unemployment rate as measured by the
government is not necessarily an accurate indicator
of whether the labor market is working properly.
 The unemployment rate may sometimes seem high
even though the labor market is working well.
 The fact that people are willing to work at a wage
higher than the current wage does not mean that the
labor market is not working.
Explaining the Existence
of Unemployment
 The term sticky wages refers to the downward rigidity of
wages as an explanation for the existence of
unemployment.

• If wages “stick” at W0
rather than fall to the
new equilibrium wage
of W* following a shift
of demand, the result
will be unemployment
equal to L0 – L1.
Explaining the Existence
of Unemployment
 One explanation for downwardly sticky
wages is that firms enter into social, or
implicit, contracts. These contracts are
unspoken agreements between workers
and firms that firms will not cut wages.
Explaining the Existence
of Unemployment
 The relative-wage explanation of
unemployment holds that workers are
concerned about their wages relative
to the wages of other workers in other
firms and industries. They may be
unwilling to accept wage cuts unless
they know other workers are receiving
similar cuts.
Explaining the Existence
of Unemployment
 Explicit contracts are employment
contracts that stipulate workers’ wages,
usually for a period of one to three
years. Wages set in this way do not
fluctuate with economic conditions.
 Cost of living adjustments (COLAs) are
contract provisions that tie wages to
changes in the cost of living. The
greater the inflation rate, the more
wages are raised.
Explaining the Existence
of Unemployment
 The efficiency wage theory is an
explanation for unemployment that
holds that the productivity of workers
increases with the wage rate. If this is
so, firms may have an incentive to pay
wages above the market-clearing rate.
Explaining the Existence
of Unemployment
 If firms have imperfect information, they
may simply set wages wrong—wages
that do not clear the labor market.
 Minimum wage laws set a floor for
wage rates, and explain at least a
fraction of unemployment.
Wages, Prices, and Unemployment

W  P F (u, z)
e

(  , )
The aggregate nominal wage, W, depends on
three factors:
 The expected price level, Pe
 The unemployment rate, u
 A catchall variable, z, that catches all other
variables that may affect the outcome of wage
setting.
Approaches to Unemployment
WAGE SETTING RELATION AND PRICE SETTING RELATION
The Expected Price Level

Both workers and firms care about real wages (W/P), not nominal
wages (W):
 Workers do not care about how many dollars they receive but about how
many goods they can buy with those dollars. They care about W/P.
 Firms do not care about the nominal wages they pay but about the
nominal wages (W) they pay relative to the price of the goods they sell
(P). They also care about W/P.
The Unemployment Rate
Also affecting the aggregate wage is the unemployment
rate u.
Ifwe think of wages as being determined by bargaining,
then higher unemployment weakens workers bargaining
power, forcing them to accept lower wages. Higher
unemployment also allows firms to pay lower wages and still
keep workers willing to work.
The Other Factors

The third variable, Z, is a catchall variable that stands for all the
factors that affect wages given the expected price level and the
unemployment rate.
Unemployment insurance is the payment of unemployment
benefits to workers who lose their jobs.
Price Determination
The production function is the relation between the inputs
used in production and the quantity of output produced.
Assuming that firms produce goods using only labor, the
production function can be written as:

Y = output
Y  AN
N = employment
A = labor productivity, or output per worker

Further, assuming that one worker produces one unit of output—so

that A = 1, then, the production function becomes:

Y N
Price Determination
 Firms set their price according to:

P  (1  )W

The term  is the markup of the price over the cost of

production. If all markets were perfectly competitive,  = 0,
and P = W.
The Natural Rate
of Unemployment

This section looks at the implications of wage and price

determination for unemployment.

We assume that Pe = P, and that nominal wages depends on

the actual price level, P, rather than on the expected price level,
Pe.

Wage setting and price setting determine the equilibrium rate

of unemployment.
The Wage-Setting Relation
According to efficiency theories, the nominal wage rate
was determined as follows:

W  P F (u, z)
e

(  , )
Now, since Pe = P, then:

W  PF (u, z)
Dividing both sides by P, then:
W The wage-setting
 F ( u, z )
P (  , ) relation
This relation between the real wage and the rate of unemployment is
called the wage-setting relation.
The Price-Setting Relation
 The price-determination equation is:

P  (1  )W
If we divide both sides by W, we get:

P
 (1   )
W
To state this equation in terms of the wage rate, we invert both
sides:

W 1 The price-setting
 relation
P (1  )
Wages, Prices, and the Natural Rate of
Unemployment

The natural rate of

unemployment is
the unemployment
rate such that the
real wage chosen in
wage setting is
equal to the real
wage implied by
price setting.
The Price-Setting Relation
The price-setting relation is drawn as the
horizontal line PS (for price setting) in Figure 6-6.
The real wage implied by price setting is
1/(1
= µ); it does not depend on the
unemployment rate.
Equilibrium Real Wages
and Unemployment

Eliminating W/P from the wage-setting and the price-

setting relations, we can obtain the equilibrium
unemployment rate, or natural rate of unemployment, un:

1
F (un , z) 
1 

The equilibrium unemployment rate (un) is called the

natural rate of unemployment.
Equilibrium Real Wages
and Unemployment

The positions of the wage-setting and price-setting curves,

and thus the equilibrium unemployment rate, depend on both z
and u.
 At a given unemployment rate, higher unemployment benefits
lead to a higher real wage. A higher unemployment rate is needed
to bring the real wage back to what firms are willing to pay.
 By letting firms increase their prices given the wage, less stringent
enforcement of antitrust legislation leads to a decrease in the real
wage.
Unemployment Benefits and the Natural Rate of
Unemployment

An increase in
unemployment
benefits leads
to an increase
in the natural
rate of
unemployment.
Markups and the Natural Rate of Unemployment

Figure 6 - 8
Markups and the
Natural Rate of
Unemployment
An increase in
markups decreases
the real wage, and
leads to an increase in
the natural rate of
unemployment.
KEMISKINAN
AFL - MAKSI
Pengertian Kemiskinan

 Pengertian kemiskinan bersifat multi dimensi:

 Ekonomi: insufficient of income, nutrition,

home, cloth
 Sosial:lack of soc. relation/keterasingan,
insecurity
 Politik: powerlessness, tiada perwakilan politik
 Budaya: low self esteem, low
literacy/education
Beberapa Definisi Kemiskinan

World Bank:
 World Dev’t Report (1990):
The inability to attain a minimal standard of living [Ketidakmampuan
memenuhi standar hidup minimal]
 World Dev’t Report (2000/2001):
The deprivation of well being [Kesenjangan dari hidup yang
sejahtera]
 World Bank (2004)
“Poverty is hunger. Poverty is lack of shelter. Poverty is being sick and
not being able to see a doctor. Poverty is not having access to
school and not knowing how to read. Poverty is not having a job, is
fear for the future, living one day at a time. Poverty is losing a child
to illness brought about by unclean water. Poverty is powerlessness,
lack of representation and freedom.”
Beberapa Definisi Kemiskinan

United Nation (2001):

The lack of basic capabilities to live in dignity [Ketiadaan kemampuan
yang mendasar untuk hidup layak]
BPS (2000):
Pendekatan kebutuhan dasar, kecukupan kalori (2100 kcal/cap/hari)
dan non-makanan
BKKBN (1999):
Pendekatan kesejahteraan keluarga (ibadah,makan 2x, pakaian, rumah,
sarkes), kel prasejahtera dan sejahtera I.
The Vicious Circle of Poverty
Kekurangan
Modal

Investasi Produktivitas
Rendah Rendah

Tabungan Pendapatan
Rendah Rendah
KONSEP KEMISKINAN INDONESIA

 Konsep yang dipakai BPS dan juga beberapa negara lain adalah
kemampuan memenuhi kebutuhan dasar (basic needs approach)

“ Kemiskinan dipandang sebagai

ketidakmampuan dari sisi ekonomi untuk
memenuhi kebutuhan dasar makanan dan
bukan makanan (diukur dari sisi pengeluaran)”
 Penduduk miskin adalah penduduk yang memiliki rata-rata
pengeluaran per kapita perbulan di bawah Garis Kemiskinan, yang
diperoleh dari hasil survei (sampel).
 GARIS KEMISKINAN (1)

 Garis kemiskinan adalah rupiah yang diperlukan agar

penduduk dapat hidup layak secara minimum yang mencakup
pemenuhan kebutuhan minimum pangan dan non-pangan
essential
 Hidup layak secara minimum diwakili oleh 20% kelompok
terbawah penduduk tidak miskin => kelompok acuan

 Garis Kemiskinan adalah harga yang dibayar oleh kelompok

acuan untuk memenuhi kebutuhan pangan sebesar 2.100
kkal/kapita/hari dan kebutuhan non-pangan esensial seperti
perumahan, sandang, kesehatan, pendidikan, transportasi
dan lainnya
 GARIS KEMISKINAN (2)
 Garis Kemiskinan Makanan (GKM) merupakan nilai pengeluaran
kebutuhan minimum makanan yang disetarakan dengan 2.100 kkalori
per kapita per hari. Paket komoditi kebutuhan dasar makanan
diwakili pleh 52 jenis komoditi.

 Garis Kemiskinan Bukan Makanan (GKNM) adalah kebutuhan

minimum untuk perumahan, sandang, pendidikan, dan kesehatan.
Paket komoditi kebutuhan dasar bukan makanan diwakili oleh 51
jenis komoditi di perkotaan dan 47 jenis komoditi di perdesaan.

 Garis Kemiskinan = Garis Kemiskinan Makanan + Garis Kemiskinan

Non-Makanan dan dinyatakan dalam Rupiah per bulan per kapita
 KOMODITI UNTUK PENGHITUNGAN
GARIS KEMISKINAN MAKANAN
BERAS DAGING BABI NANGKA MUDA GULA PASIR
BERAS KETAN DAGING AYAM RAS BAWANG MERAH GULA MERAH
JAGUNG PIPILAN DAGING AYAM KAMPUNG CABE MERAH TEH
TEPUNG TERIGU TETELAN CABE RAWIT KOPI
KETELA POHON TELUR AYAM RAS KACANG TANAH GARAM
KETELA RAMBAT TELUR ITIK/MANILA TAHU KEMIRI
GAPLEK SUSU KENTAL MANIS TEMPE TERASI/PETIS
TONGKOL/TUNA SUSU BUBUK MANGGA KERUPUK
KEMBUNG BAYAM SALAK MIE INSTANT
TERI BUNCIS PISANG AMBON ROTI MANIS
BANDENG KACANG PANJANG PEPAYA KUE KERING
MUJAIR TOMAT SAYUR MINYAK KELAPA KUE BASAH
DAGING SAPI DAUN KETELA POHON KELAPA ROKOK KRETEK
FILTER
 KOMODITI UNTUK PENGHITUNGAN
GARIS KEMISKINAN BUKAN MAKANAN
PERUMAHAN KESEHATAN HANDUK, IKAT PINGGANG, DSB
LISTRIK BAHAN PEMELIHARAAN PAKAIAN PERLENGKAPAN PERABOT RUMAH
TANGGA
AIR PEMELIHARAAN KESEHATAN PERKAKAS RUMAH TANGGA
MINYAK TANAH BENSIN ALAT-ALAT DAPUR/MAKAN
KAYU BAKAR ANGKUTAN ARLOJI/JAM, KAMERA, DLL
OBAT NYAMUK, KOREK, API, BATERAI, KTP, SIM, AKTE KELAHIRAN, TAS, KOPER, DSB
AKI, DSB FOTOCOPY, PHOTO, DSB

POS DAN BENDA POS PAKAIAN JADI LAKI-LAKI DEWASA MAINAN ANAK DAN PERBAIKANNYA
PERLENGKAPAN MANDI PAKAIAN JADI PEREMPUAN PAJAK BUMI DAN BANGUNAN
DEWASA
BARANG KECANTIKAN PAKAIAN JADI ANAK-ANAK PAJAK KENDARAANG BERMOTOR
PERAWATAN KULIT, MUKA, KUKU, KEPERLUAN MENJAHIT PUNGUTAN/RETRIBUSI
RAMBUT
SABUN CUCI ALAS KAKI PERAYAAN HARI RAYA AGAMA
PENDIDIKAN TUTUP KEPALA UPACARA AGAMA ATAU ADAT LAINNYA
 INDIKATOR KEMISKINAN

• mengukur persentase penduduk

Headcount Index:
miskin terhadap total penduduk
• ukuran rata-rata kesenjangan
pengeluaran penduduk miskin thd
Indeks Kedalaman
garis kemiskinan. Semakin tinggi nilai
Kemiskinan/ Poverty
indeks, semakin jauh rata-rata
Gap Index pengeluaran penduduk dari garis
kemiskinan.
Indeks Keparahan • semakin tinggi nilai indeks, semakin
Kemiskinan/ Poverty tinggi ketimpangan pengeluaran
Severity Index diantara penduduk miskin
THANKS
AFAHMI91@GMAIL.COM