Chapter 9

Question 1

Identifying unemployment

Answer 1

• Based on the people 15 +

- Based on a survey of 50,000 households (Labour Force Survey)

Question 2

3 population groups

Answer 2

Employed, Unemployed, Not in the labour force

Question 3

Employed

Answer 3

When a person has spent most of their previous week working at a paid job

Question 4

Unemployed

Answer 4

If the person is on temporary layoff, looking for a job, waiting to for the start date of a new job

Question 5

Not in the labour force

Answer 5

everyone else that is not classified as employed or unemployed

Question 6

Labour force

Answer 6

Total number of workers, including the employed and unemployed

Question 7

Unemployment rate

Answer 7

• % of the labour force that is unemployed

U-Rate = 100 x (# of unemployed/ Labour force)

Question 8

Labour force participation rate

Answer 8

• % of the adult population that is in the labour force

- LFPR = 100 x = (labour force/ adult population)

Question 9

Who does NOT show up in unemployment statistics?

Answer 9

People who would like to work but have given up looking for jobs after an unsuccessful search (Discouraged Searchers)

Question 10

Policy solutions directed toward fixing the unemployment problems should be directed to who?

Answer 10

Towards those suffering prolonged spells of unemployment

Question 11

Natural rate of unemployment

Answer 11

• rate of unemployment to which the economy tends to return in the long run
• in canada = 6-8%

Question 12

Cyclical unemployment

Answer 12

• Deviation of unemployment from its natural rate

- Associated with business cycles

Question 13

Frictional unemployment

Answer 13

• Occurs when workers spend time searching for the jobs that best suit their skills and tastes
• usually short-term
• Can still occur even if there are enough jobs to go around

Question 14

Structural unemployment

Answer 14

• When there are fewer jobs than workers
• usually long-term
• when wage is above equilibrium ( not enough jobs)
• Caused by min wages, labour unions, efficiency wages

Question 15

Job search

Answer 15

The process of matching workers with appropriate jobs

Question 16

Sectoral shifts

Answer 16

Changes in the composition of demand across industries or regions of the country

Question 17

How do sectoral shifts affect workers?

Answer 17

Can displace workers, who must then search for new jobs appropriate for their skills & tastes

Question 18

Is frictional unemployment inevitable?

Answer 18

Yes, because the economy is always changing

Question 19

Government employment agencies

Answer 19

They provide information about job vacancies to speed up the matching of workers and jobs

Question 20

Public training programs

Answer 20

Aim to equip workers displaced from declining industries with the skills needed in growing industries

Question 21

Employment insurance (EI)

Answer 21

A government program that partially protects workers’ incomes when they become unemployed

Question 22

Why does Employment Insurance increase frictional unemployment?

Answer 22

Cause people respond to incentives

Question 23

What determines when and for how long someone can collect EI?

Answer 23

Depends on the hours worked and the region of residence

Question 24

What causes structural unemployment?

Answer 24

When the minimum wage exceeds the equilibrium wage for the least skilled or experienced workers

Question 25

Why can’t min wage explain most unemployment in the economy?

Answer 25

Cause the least skilled and the experienced workers make up a smal part of the labour force

Question 26

The _____ unemployment that arises from an above equilibrium wage is, in an important sense, different from
the _____ unemployment that arises from the process of job search

Answer 26

Structural, Frictional

Question 27

What does it mean when job search is the explanation for unemployment?

Answer 27

That workers are searching for the jobs that best suit their tastes and skills

Question 28

When the minimum wage is ____ the equilibrium level, the quantity of labour supplied _____ the quantity of labour demanded, and workers are unemployed because ______

Answer 28

Above, Exceeds, they are waiting for jobs to open up ***View chart

Question 29

Union

Answer 29

A worker association that bargains with employers over wages, benefits, and working conditions

Question 30

What are the benefits of being a union worker?

Answer 30

• Earning 20% higher wages

- Gets more benefits than a nonunion worker for the same type of work

Question 31

Collective barganing

Answer 31

Process by which unions and firms agree on the terms of employment

Question 32

Strike

Answer 32

• When the union organizes a withdrawal of labour from the firm
• will be done if the union and firm cannot reach an agreement

Question 33

When unions raise the wage above equilibrium, quantity of labour _____ falls and _____ results

Answer 33

Demanded, unemployment

Question 34

Insiders

Answer 34

Workers who remain employed, they are better off

Question 35

Outsiders

Answer 35

Workers who lose their jobs, they are worse off

Question 36

Some outsiders go to non-unionized labour

markets, which increases _____ and reduces ______ in those markets

Answer 36

Labour supply, wages

Question 37

Critics argue that unions..?

Answer 37

The allocation of labour to be inefficient and inequitable

Question 38

Economists disagree : Wages above the _______ level reduce the quantity of labour _____ and cause ________

Answer 38

Competitive, demanded, unemployment

Question 39

Advocates of unions contend that unions are a necessary _____ to the market power of firms that _______ and that they are important for helping firms _____________

Answer 39

Antidote, hire workers, respond efficiently to workers’ concerns

Question 40

Efficiency wages

Answer 40

Firms voluntarily pay above equilibrium wages to boost worker productivity

Question 41

Four reasons firms pay efficiency wages..

Answer 41

Worker health, Worker turnover, Worker quality, Worker effort

Question 42

Worker health

Answer 42

Paying higher wages allows workers to eat better, which makes them healthier, along with more productive

Question 43

Worker turnover

Answer 43

Paying high wages gives workers more incentive to stay, which reduces turnover
(Hiring & Training new workers is costly)

Question 44

Worker quality

Answer 44

Offering higher wages attracts better jobs applicants, and increases the quality of the firm’s workforce

Question 45

Worker effort

Answer 45

Workers can work hard of shirk (avoid work)
-If market wage is above eq’m wage, there aren’t enough jobs to go around, so workers have more incentive to work not shirk.