2.3: Unemployment Flashcards
What is unemployment?
Workers are looking for a job, but aren’t working
The unemployment rate
(#unemployed/# in labor force) * 100
Who is considered part of the labor force?
- At least 16 years old
- Able and willing to work
- Not institutionalized
- Not in military, in school full time, or retired
Frictional and Seasonal unemployment
- Temporary unemplyment of qualified with transferrable skills
- Due to the time of year and nature of the job
Structural and technological unemployment
- When changes in the labor force have made skills obsolete and those workers do not have the transferrable skills to find something else
- When automation and machinery replace workers
Cyclical unemployment (demand deficient unemployment)
Unemployment caused by a recession; As demand for goods and services falls, demans for labor falls with it and workers are laid off
Equation: Actual - natural unemployment rate
Natural rate of unemployment (NRU)
Frictional plus structural unemployment/labor force; The amount of unemployment that exists when the economoy is healthy and growing
Full employment output
Maximum sustainable production; The real GDP created when there’s no cyclical unemployment
NRU vs NAIRU
focuses on output and not having too much unemployment vs focusing on infaltion and not having too little unemployment
Criticisms of unemployment rate
- It doesn’t count workers who are no longer looking for a job because they’ve given up
- It doesn’t count workers who have a job but want more hours and can’t get them
- It doesn’t show disparity for minorities and teenagers
Labor force participatation
current labor force/everyone considered part of the labor force
Underground Economy
Activities generating transations that do not go through traditional markets and are excluded from the GDP
Full Employment Rate
There’s no cyclical unemployment and the employment rate = the nairu
Nairu
lowest level of unemployment that can occur in the economy before inflation starts to rise.
