Chapter 11- Unemployment

Question 1

Unemployment

Answer 1

adults who do not have a job but are looking for work
must be an adult, not institutionalized, a civilian, and looking for work
equation= unemployed/unemployed + employed times 100

Question 2

How Good of an Indicator?

Answer 2

good but not amazing
doesn’t count discouraged workers(workers who want/available for work gave up looking for a job)
doesn’t measure quality of jobs(how much people like their job)
underemployment rate- part time workers who want full time position, people who want work but can’t find any

Question 3

Frictional Unemployment

Answer 3

short term unemployment caused by the difficulties of matching employees to employers
scarcity of information one cause- workers don’t know all of the jobs out there and employers don’t know all available candidates
large share of unemployment

Question 4

Structural Unemployment

Answer 4

long term unemployment caused by long lasting shocks or permanent feature of an economy that makes it difficult to find jobs
typically more than 1 year
occurs because economy needs time to restructure
structural changes in businesses happen during recessions
two problems to the structural unemployed- skills decay and employers may see being unemployed as sign of laziness
labor regulations(benefits, minimum wage, unions, etc) can increase unemployment rate

Question 5

Structural Unemployment and Unemployment Benefits

Answer 5

when price of unemployment is low, more unemployment exists

reduce incentive for workers to search for and take new jobs

Question 6

Structural Unemployment and Minimum Wages/Unions

Answer 6

minimum wage raises price of labor from market wage, and as labor becomes more expensive they lay off workers
median wage- one half of all workers earn wages below and one half earn above
union- collection of workers that bargain together over wages, benefits, and working conditions
unions raise price of labor

Question 7

Structural Unemployment and Employment Protection Laws

Answer 7

employment at will doctrine- employee may quite and an employer may fire an employee
severance packages- make labor market less flexible and dynamic
businesses don’t want to hire when costs are too great and require long term commitments

Question 8

Labor Regulations Reducing Structural Unemployment

Answer 8

active labor market policies- work tests, job search assistance programs, early employment bonuses, and job retraining programs that focus on getting the unemployed employed

Question 9

Cyclical Unemployment

Answer 9

unemployment that correlates with the business cycle

Question 10

Labor Force Participation

Answer 10

percentage of adult, noninstitutionalized adults, civilian population
unemployed + employed/adult population times 100
2 factors- lifecycle effects and demographics and incentives

Question 11

LFP Lifecycle Effects and Demographics

Answer 11

prime working years between 25 and 54, most retire at 65

falling labor force participation rate means fewer tax receipts

Question 12

LFP and Incentives

Answer 12

work pays more than leisure
can’t encourage or discourage early or late retirement
women rule