Understanding Unemployment and Economic Indicators

Types of Unemployment

Structural: This occurs when companies do not provide sufficient work for the population. Cyclical: This is produced when there is an economic recession or crisis. Seasonal: This is when the demand for workers is different in distinct periods of the year. Frictional: This occurs when a person decides to change their job and, while in this situation, they are unemployed.

Personal Income

This represents the gross salary of a person. A part of this money is appropriated by the state through taxes. The money that remains is called personal income or disposable income. Studies show that this income is divided between consumption and savings. The percentages are known in economics as the propensity to consume and save. Do not confuse income with wealth. Income is the money obtained in a determined period by families, while wealth is the family heritage, their properties, those goods that they possess.

Consumer Price Index (CPI)

This is an indicator that allows us to know the evolution of prices. CPI > 0% = Inflation. CPI = 0% = Price Stability.

Harmonized CPI

Each European country develops its own consumer price index. As they are different, we cannot compare them. To solve this, the EU estimates the HICP. It is a representative consumer price index of average European products and how much it costs in each country.

Underlying CPI

Within the shopping basket, there are products whose prices suffer strong variations and alter the results. If we want to know how much prices really change in a country without seasonal effects, we calculate the underlying CPI. It is estimated as a normal CPI, but only eliminating those products whose prices vary greatly.

Economic Well-being

If a person has a job, earns a good salary, and can buy a wide variety of products at a reasonable price, they have economic well-being. The most used indicator to measure it is per capita GDP. = GDP / Number of inhabitants. To improve the well-being of the inhabitants of a country, this indicator has two ways to improve: Increasing the GDP by producing more, or reducing the number of inhabitants through birth control policies. This indicator is criticized because it only takes into account economic aspects.