Chapter 9 Flashcards
Identifying unemployment
- Based on the people 15 +
- Based on a survey of 50,000 households (Labour Force Survey)
3 population groups
Employed, Unemployed, Not in the labour force
Employed
When a person has spent most of their previous week working at a paid job
Unemployed
If the person is on temporary layoff, looking for a job, waiting to for the start date of a new job
Not in the labour force
everyone else that is not classified as employed or unemployed
Labour force
Total number of workers, including the employed and unemployed
Unemployment rate
- % of the labour force that is unemployed
U-Rate = 100 x (# of unemployed/ Labour force)
Labour force participation rate
- % of the adult population that is in the labour force
- LFPR = 100 x = (labour force/ adult population)
Who does NOT show up in unemployment statistics?
People who would like to work but have given up looking for jobs after an unsuccessful search (Discouraged Searchers)
Policy solutions directed toward fixing the unemployment problems should be directed to who?
Towards those suffering prolonged spells of unemployment
Natural rate of unemployment
- rate of unemployment to which the economy tends to return in the long run
- in canada = 6-8%
Cyclical unemployment
- Deviation of unemployment from its natural rate
- Associated with business cycles
Frictional unemployment
- 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
Structural unemployment
- 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
Job search
The process of matching workers with appropriate jobs
Sectoral shifts
Changes in the composition of demand across industries or regions of the country
How do sectoral shifts affect workers?
Can displace workers, who must then search for new jobs appropriate for their skills & tastes
Is frictional unemployment inevitable?
Yes, because the economy is always changing
Government employment agencies
They provide information about job vacancies to speed up the matching of workers and jobs
Public training programs
Aim to equip workers displaced from declining industries with the skills needed in growing industries
Employment insurance (EI)
A government program that partially protects workers’ incomes when they become unemployed
Why does Employment Insurance increase frictional unemployment?
Cause people respond to incentives
What determines when and for how long someone can collect EI?
Depends on the hours worked and the region of residence
What causes structural unemployment?
When the minimum wage exceeds the equilibrium wage for the least skilled or experienced workers
Why can’t min wage explain most unemployment in the economy?
Cause the least skilled and the experienced workers make up a smal part of the labour force
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
Structural, Frictional
What does it mean when job search is the explanation for unemployment?
That workers are searching for the jobs that best suit their tastes and skills
When the minimum wage is ____ the equilibrium level, the quantity of labour supplied _____ the quantity of labour demanded, and workers are unemployed because ______
Above, Exceeds, they are waiting for jobs to open up ***View chart
Union
A worker association that bargains with employers over wages, benefits, and working conditions
What are the benefits of being a union worker?
- Earning 20% higher wages
- Gets more benefits than a nonunion worker for the same type of work
Collective barganing
Process by which unions and firms agree on the terms of employment
Strike
- When the union organizes a withdrawal of labour from the firm
- will be done if the union and firm cannot reach an agreement
When unions raise the wage above equilibrium, quantity of labour _____ falls and _____ results
Demanded, unemployment
Insiders
Workers who remain employed, they are better off
Outsiders
Workers who lose their jobs, they are worse off
Some outsiders go to non-unionized labour
markets, which increases _____ and reduces ______ in those markets
Labour supply, wages
Critics argue that unions..?
The allocation of labour to be inefficient and inequitable
Economists disagree : Wages above the _______ level reduce the quantity of labour _____ and cause ________
Competitive, demanded, unemployment
Advocates of unions contend that unions are a necessary _____ to the market power of firms that _______ and that they are important for helping firms _____________
Antidote, hire workers, respond efficiently to workers’ concerns
Efficiency wages
Firms voluntarily pay above equilibrium wages to boost worker productivity
Four reasons firms pay efficiency wages..
Worker health, Worker turnover, Worker quality, Worker effort
Worker health
Paying higher wages allows workers to eat better, which makes them healthier, along with more productive
Worker turnover
Paying high wages gives workers more incentive to stay, which reduces turnover
(Hiring & Training new workers is costly)
Worker quality
Offering higher wages attracts better jobs applicants, and increases the quality of the firm’s workforce
Worker effort
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.
