Ch. 9- Unemployment And The Demand For Labour

Question 1

Unemployment

Answer 1

Occurs when someone wants to work but cannot find a job

Question 2

Labour Force Survey (LFS)

Answer 2

Survey conducted by Statistics Canada which samples 50 000 households each month to calculate unemployment.

Question 3

Labour Force

Answer 3

People who are employed or looking for employment (excluding retirees, full-time students, stay-at home parents, etc.)

Question 4

Working-age population

Answer 4

Civilian, non-institutionalized (armed forces, prisoners, metal health facility) population aged 15+ who are available for work and are making specific efforts to be employed.

Question 5

Labour-force participation rate

Answer 5

The fraction of the population that wants to be working

Question 6

What condition(s) must an individual meet to be considered employed?

Answer 6

Spent some of the previous week at a paid job or working for profit

Question 7

What condition(s) must an individual meet to be considered unemployed?

Answer 7

One condition must be true:
>They’ve been actively looking for work in the last 4 weeks but cannot find a job

> On temporary lay-off and expected to return to their job

> They have arrangements to start a new job in 4 weeks of less.

Question 8

What condition(s) must an individual meet to be considered not in the labour force?

Answer 8

Neither employed nor unemployed

Question 9

How accurately does unemployment rate represent the effect of a recession?

Answer 9

Unemployment rate understates the effect of a recession

Question 10

Discouraged Workers

Answer 10

People who looked for work in the previous year, but quit looking because of the condition of the labour market.

Question 11

Underemployed Workers

Answer 11

People who have part time jobs but would like to work full time or those who are overqualified for the position they hold.

Question 12

What are the short-run and long-run problems of unemployment?

Answer 12

Short-run Problem: Cyclical Unemployment

Long-run Problem: Natural rate of unemployment

Question 13

What are the 3 determinants of the Natural Rate of Unemployment?

Answer 13

Frictional Unemployment
Structural Unemployment
Real Wage (Classical) Unemployment

Question 14

Frictional Unemployment

Answer 14

Caused by workers changing their location, job, or career. Used to explain relatively short spells of unemployment.

Question 15

Structural Unemployment

Answer 15

Caused by a mismatch between skills workers have and skills that are in demand. Used to explain longer spells of unemployment.

Question 16

Real Wage (Classical) Unemployment

Answer 16

Caused by wages being set above the equilibrium level (surplus of labour; only some workers are employed).

Question 17

What public policy can governments implement in response to unemployment?

Answer 17

> Government run employment agency (ex. Service Canada Centres)

> Public training programs to train workers in highly demanded skills

> Employment Insurance (EI)

Question 18

Employment Insurance (EI)

Answer 18

Money paid by the government to people who are unemployed. Helps unemployed workers recover; however, it can also disincentivize workers from finding a new job.

Question 19

Cyclical Unemployment

Answer 19

Caused by short-term economic fluctuations. As the economy grows, demand for workers increases because firms expand and vice versa. However, when the economy declines, unemployment goes up.

Question 20

Lagging/Trailing Indicator

Answer 20

It takes time for changes in the economy to translate into changes in employment.

Question 21

Labour Demand Curve

Answer 21

Represents the relationship between total quantity of labour demanded by all the firms in the economy and the wage rate.

In general, firms want to hire more labour when wages are lower and less labour when wages are higher

Question 22

Labour Supply Curve

Answer 22

Represents the relationship between total quantity of labour supplied by all the workers in the economy and the wage rate.

In general, workers want to supply more labour when wages are higher and less labour when wages are lower.

Question 23

How is unemployment represented in a labour supply/demand equilibrium?

Answer 23

Surplus of workers

Question 24

Why are wages not decreasing?

Answer 24

> Minimum wage laws set the wage above the equilibrium level

> Unions and Bargaining

> Efficiency Wages

Question 25

Sticky Wages

Answer 25

Wages are slow to respond to shifts in the economy

Question 26

Union

Answer 26

A worker association that bargains with employers over wages and working conditions

Question 27

Efficiency Wages

Answer 27

Firms set wages above the equilibrium wages in order to increase worker productivity (to provide incentive to be productive).

Question 28

Minimum Wage

Answer 28

Lowest wage a firm is legally allowed to pay its workers