Chapter 8 - Unemployment Flashcards
Out of the labour force
People who are not working and not looking for work
Employed
Working for pay
Unemployed
Out of work but searching for a job
Labour force
Number of people who are employed and unemployed
Unemployment rate
Percentage of adults who are in the labor force but who do not have jobs
Unemployment rate equation
Unemployment rate = unemployed people / total labor force × 100
Underemployed
People who are trained for a level of work who are working in a lower paying job or one that does not utilize their skills
Discouraged workers
Have stopped looking for employment and are no longer counted in the unemployed
Labour force participation rate
Percentage of people in an economy who are either employed or who are unemployed and looking for a job
Current population survey (CPS)
Measures the percentage of the labor force that is unemployed
Establishment payroll survey (EPS)
Payroll survey that measures the net change in jobs created for the month
Those who typically have higher rates of unemployment
Women, young workers, African Americans, Hispanics, and those with less education
Cyclical unemployment
Varying unemployment caused by the economy going through the business cycle
Implicit contract
Employer will keep wages from falling when the economy or business is weak, and the employee will not expect salary increases when the economy or the business is strong
Efficiency wage theory
Productivity of workers depends on their pay, so employers find it worthwhile to pay their employees more than market conditions dictate
Adverse selection of wage cuts argument
Employer reacts to poor business conditions by reducing wages for all workers, then the best workers with employment alternatives are the most likely to leave
Insider outsider model
Depends on insiders to be familiar with routine procedures, to train new outsiders, etc. However, cutting wages will alienate the insiders and damage the firm’s productivity
Relative wage coordination argument
Wage cuts for all employees are hard for an economy to implement, and workers fight against them
Natural rate of unemployment
Remaining level of unemployment that occurs even when the economy is healthy
Frictional unemployment
Occurs as workers move between jobs
Structural unemployment
Unemployment because they lack skills valued by the labor market
When is the economy considered to be at full employment?
When actual unemployment rate is equal to the natural unemployment (5-6%)
Hidden employment
Includes those like the underemployed, discouraged workers, or part-time workers looking for full-time jobs. They are still working, but not at the rate or amount of time they wish to be
Reasons for unemployment
New entrants, re-entrants, job leavers, and job losers (temporary and non temporary
Reasons for changes in natural unemployment
Internet, growth of temporary workers, and aging population
