Chapter 11- Unemployment Flashcards
Unemployment
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
How Good of an Indicator?
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
Frictional Unemployment
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
Structural Unemployment
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
Structural Unemployment and Unemployment Benefits
when price of unemployment is low, more unemployment exists
reduce incentive for workers to search for and take new jobs
Structural Unemployment and Minimum Wages/Unions
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
Structural Unemployment and Employment Protection Laws
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
Labor Regulations Reducing Structural Unemployment
active labor market policies- work tests, job search assistance programs, early employment bonuses, and job retraining programs that focus on getting the unemployed employed
Cyclical Unemployment
unemployment that correlates with the business cycle
Labor Force Participation
percentage of adult, noninstitutionalized adults, civilian population
unemployed + employed/adult population times 100
2 factors- lifecycle effects and demographics and incentives
LFP Lifecycle Effects and Demographics
prime working years between 25 and 54, most retire at 65
falling labor force participation rate means fewer tax receipts
LFP and Incentives
work pays more than leisure
can’t encourage or discourage early or late retirement
women rule