chapter 10 Flashcards
Value Marginal Product (VMP)
The Marginal Product of a
worker multiplied by the price of the output
human capital
Education and training
Screening theory
education and
training may be valuable to the individual, not because the training increases productivity, but because it
points out which employees will be good.
Make Work Fallacy
The idea that jobs have value, regardless of whether the
labor actually creates value
establishment survey
Government asking large businesses about how many employees are on their payroll, to measure the number of jobs the economy is creating.
The BLS household survey asks
individuals about their employment status by telephone.
The unemployment rate is
unemployed / civilian labor force
The Labor Force Participation Rate (LFPR)
Labor Force / CNIP
It measures how many people
are interested in holding a job.
Discouraged workers
are those who have looked for a job at some time during the previous 12 months,
but are no longer looking because they think no jobs are available.
Frictional unemployment
occurs because of the normal workings of the labor force with people changing
jobs and entering the labor force with the skills that will likely soon yield a job.
Structural unemployment
is a longer term problem which occurs due to changes in the labor force that
render some skills obsolete
Cyclical unemployment
is what we usually think of as unemployment—it arises due to contractions that
occur during the business cycle
Full employment is
When there is no cyclical unemployment. This means that a fully employed
economy has some frictional and structural unemployment.
True False: the employer will hire an extra employee if his/her marginal product is positive
F the employer will hire an employee if the value of the marginal product is greater than the cost of having the employee
average wage and average benefits in the US
average wage: $20
Average Benefits:$10
True False: the labor supply curve gets its shape from the Law of diminishing returns.
F the labor supply curve gets its shape from
- the alternative value of the employees time
- the principle of optimal arrangement
True False: at any wage the employee is willing to work for all the hours that the employer will offer
F at any wage there is a particular amount of labor supplied, that will only be equal to the amount of labor demanded at the equilibrium
Social welfare programs…..
lower the supply of labor, causing wages to rise and unemployment to rise
difference between screening theory and human capital theory
HCT says education makes a worker more productive ST says that education only points out which workers are already productive
how does capital help productivity?
makes labor more productive increases the demand for labor
True False: the age of railroads resulted in high unemployment rates as many transportation workers lost jobs
F more jobs were created as transportation costs fell
effect of minimum wage laws
More workers willing to work but less workers being hired causing unemployment
how establishment survey differs from household survey
establishment only asks employers about payroll not self employed people
who is not in the civilian non-institutional population
people under 15
in the military
in an institution
how many hours of work in a week makes you employed?
1 for pay or profit 15 for unpaid family business
who is considered unemployed?
anyone with no job who has made effort within the last 4 weeks
high unemployment rate
5.5%
great depression highest unemployment rate
24% since then 11%
people in CNIP but not in the labor force
stay at home parents, reitred, some students, bums
major cause of teen unemployment today
large increases in the minimum wage
trends in LFPR (men and women)
LFPR is down for both men and women it has fallen for men for decades but was climbing for women until the 2009 recession
what is U-6?
unemployment rate that counts discouraged workers and those working part time that would like to be full time.
what is full employment percentage
5.5%
what is true of PPF if we have a surplus of labor
surplus of labor is unemployment which means it is below the curve
what did keynes say about labor markets that was different than classical econ?
labor surpluses can last a long time becasue wages refuse to fall
what 2 reasons did keynes give for wages refusing to fall
labor contracts which prevent employers from cutting wages
People mistake nominal wage cuts with real wage cuts.
