Chapter 10 Flashcards
Definition of ‘Unemployment’ and Government definition
a situation where someone wants to work but cannot find a job in the current market.
‘aged 15 years and older who didn’t work last week, was available to do so, and made efforts to work in 4 week period.’
3 Traits to being considered ‘Unemployed’
- Did not work in previous week
- Were available to work if they were offered a job
- Were making efforts to look for a job
We also want to be sure to only count those people who are available to work, and making efforts to find employment
Definition of ‘Labour Force’
Everyone who has a job or is unemployed; over 15 years old and part of general public.
Equation for ‘Unemployment Rate’
(# of unemployed / labour force) x 100
Definition of ‘Working Age Population’
the civilian, non institutionalized population aged 15 and over. All Adults except those in armed forces or inmates in an institution.
Examples of populations that are NOT counted in unemployment rate.
full time students, people living with disabilities, parents taking care of children, retired people
These people are part of the labour force.
Equation for Labour Force Participation Rate
(# of people in labour force / working age population ) x 100
What does the Labour Force Participation Rate tell us?
Indicates what fraction of the population wants to be working regardless of whether or not they have a job
Definition of “Discouraged Workers” and “Underemployed Workers” and “Labour Force Survey”
Discouraged = people who were looking for work but have given up because of labour market conditions
Underemployed Workers = people who are either working less than they would like or in jobs below their skill.
“Labour Force Survey” gathering information on the 60,000 households
“Labour Demand Curve” definition
The Labour Demand Curve shows the relationship between the total quantity of labour demanded by all the firms in the economy and the wage rate.
Firms will want to hire more labour when wages are lower and less labour when wages are higher.
Labour Demand Curve: description
Describes the firms of the market and their wages - labour demand
The graph shows that with low units of labour, wages are high.
Labour Supply Curve: description
Descrbies the workers in the market. As wage goes up, labour supply increases (units of labour wanting to work).
Relationship between the total labour supplied in the economy and the wage rate. More labour at higher wage rates and less labour at lower wages.
Definition of ‘Equilibrium’
A place in the economy with stable wage, and amount of labour bought and sold. Does not explain unemployment. At this point, quantity demanded is equal to quantity supplied.
Unemployment occurs when the wage rate is higher than the equilibrium wage. Creates a ‘surplus in workers
ie) When there’s a gap between the number of people and the # of jobs offered due to wage.
Definition of ‘Natural Rate of Unemployment’
The normal level of unemployment that persists in an economy in the long run. 3 Factors contribute to this rate: 1. Frictional Unemployment 2. Structural Unemployment 3. Real Wage or Classical Unemployment
‘Frictional Unemployment’ Definition
Caused by workers who are changing location, job, career. Naturally part of any economy because as jobs change, so do employees - there’s time in between finding jobs and applications.
‘Structural Unemployment’ Definition
A mismatch between te skills workers can offer and skills demanded.Due to technology, some jobs in demand now won’t be next year.
‘Real Wage or Classical Unemployment’ Definition
Captures the effect of wages remaining persistently above the market clearing level.
Definition of ‘Cyclical Unemployment’
Unemployment caused by these short term economic fluctuations -
Definition of ‘Wage Stickiness’
Prices in the real world that are slow to respond to shifts in the economy. It’s sticky wages or prices that causes cyclical unemployment because they keep wages above the market clearing level aka, equilibrium.
Unemployment tends to go up after and vice versa - this indicates that unemployment is a lagging Or trailing indicator.
3 Things that may stop wage rates from falling
Labour Unions
Efficiency Wages
Employment Insurance
Definition of ‘Labour Unions’
A group of employees who bargain with their employers over salaries and work conditions.
Labour unions can be great for each other and not others. For example they can push for higher wages and thus affecting demand for labour - causing unemployment.
Definition of a ‘Non- Binding Minimum Wage’
a Wage that is below equilibrium wage and has no effect.
Definition of ‘Efficiency Wages’
Wages that are deliberately set above the market rate to increase productivity.
This affects market from falling into recession because only the best workers will step up to the wage.
Definition of ‘Employment Insurance’
Money paid by the government to people who are unemployed. This affects speed of how fast people find employment because if too low, they’ll find a job fast. If too much, unemployed people are sitting comfy.
If they’re taking a while with good insurance, they’re arguably trying to find a job that fits them and are less likely to leave the job - ie) lower rates of wage.
Insurance also based on how much an individual gained in the last year up to 52 weeks.
