Chapter 15 Flashcards
Cyclical unemployment
The year-to-year fluctuations in unemployment around it’s natural rate
Closely associated with the short-run ups and downs of economic activity
Explanations for the economy’s natural rate of unemployment
Job search, minimum-wage laws, unions, and efficiency wages
Agency that measures unemployment
Bureau of Labor Statistics
Unemployed
Those who were not employed, were available for work, and had tried to find employment during the previous four weeks.
Includes those waiting to be recalled to a job from which they had been laid off
Labor force
Some of the employed and unemployed
Labor force = number of employment + number of unemployed
Unemployment rate
The percentage of the labor force that is unemployed
Unemployment rate = number of unemployed/labor force x 100
Labor force participation rate
Measures the percentage of the total adult population of the US that is in the labor force
Labor force participation rate = labor force/adult population x 100
Discouraged workers
Individuals who give up after an unsuccessful job search
Don’t show up in unemployment statistics
Overall trend of unemployment
Most spells of unemployment are short and most unemployment observed at any given time is long term
Frictional unemployment
The unemployment that results from the process of matching workers and jobs
Explains relatively short spells of unemployment
Structural unemployment
Occurs when the quantity of labor supplied exceeds the quantity of labor demanded
Explains longer spells of unemployment
occurs when wages are set above the equilibrium level for supply and demand
Job search
The process of matching workers with appropriate jobs
Sectoral shifts
Changes in the composition of demand among industries or regions
Unemployment insurance
Pays benefits to individuals who lose their jobs involuntarily
Increases frictional unemployment w/o intending to do so: makes the unemployed devote less effort to job search
Effect of minimum wage laws
When minimum wage law puts wage above equilibrium: ⬆️ Qs labor ⬇️ Qd labor = surplus of labor = unemployment
*minimum wage law matters most for unskilled and least experienced members of labor force
Min wage workers tend to be: young, less educated, work PT, work in leisure in hospitality
Unions
A worker association that bargains with employers over wages, benefits, and working conditions
Collective-bargaining
The process by which unions and firms agree on terms employment
Workers in unions reap benefits while others reap cost
Theory of Efficiency wages
Firms operate more efficiently if wages are above the equilibrium level; it may be profitable for firms to keep wages hi even when there’s a surplus of labor
Wages and worker turnover
The more a firm pays its workers, the less often its workers will choose to leave
Wages and worker quality
Higher wages attract a better pool of workers
Natural rate of unemployment
The amount of unemployment that the economy normally experiences
