Chapter 9 - Unemployment + Its Natural Rate Flashcards
Employed means…
worked most of previous week at a paying job
Unemployed means…
temporary layoff, looking/waiting to start
Not in labour force means…
neither employed nor unemployed.
unemployed and not in labour force are not difficult to distinguish between (t/f)
f
labour force is…
total number of workers (employed + unemployed)
Unemployment Rate formula…
100 x (number UE/labour force)
labour force participation rate is….
formula…
percentage of population in labour force 100 x (labour force/adult population)
Policy should be directed toward which type of unemployment (LR or SR)? why?
-direct toward LR b/c those UE in SR will become employed soon anyway.
Natural rate of unemployment is…
…about what in Canada (%)
the long run u-rate.
6-8% in Canada
Cyclical Unemployment is…
…also called
deviation from the natural rate.
also called business cycles
Frictional unemployment is…
… SR or LR?
when workers search for the job best suited to their tastes, skills, etc.
SR unemployment.
Structural Unemployment is…
…SR or LR?
when there are fewer jobs than there are workers.
LR unemployment.
Job Search is…
matching of workers with appropriate/best suited jobs.
Sectoral Shifts are…
…result are…
changes in Demand composition across industries.
they displace some workers which causes some frictional UE.
Types of Gov’t Policy (3)?
- Gov’t Employment Agencies
- Public Training Programs
- Employment Insurance
Gov’t Employment Agencies do….
give info about job vacancies to speed up the job search.
Public Training Programs are for….
equipping workers in declining industries with the skills to be effective in growing industries.
Employment Insurance…
partially protects incomes when become unemployed.
Minimum Wage Laws affect UE b/c…
may exceed eq’m wage for least skilled/experienced workers. This causes some structural UE, but is such a small population of the work force that it cannot explain all UE.
Unions are supposed to…
exert market power to negotiate wages, benefits, etc.
Collective Bargaining is…
when Unions + firms negotiate workers’ contracts.
When Unions raise wage…
…causes two kinds of workers…
if above eq’m, Q of labour demanded falls and unemployment results.
…insiders (keep jobs) + outsiders (lose jobs)
A negative view of unions is that they…
make allocation of labour inefficient b/c some ppl benefit at the expense of others.
A positive view of unions is that they…
are an antidote to the firms’ market power b/c they force it to efficiently respond to workers’ needs.
Efficiency Wages are…
when firms voluntarily pay above the eq’m price to boost productivity.
4 reasons for paying Efficiency Wages…
- Worker health
- Worker turnover
- Worker Quality
- Worker Effort
Worker health is benefited by efficiency wages b/c…
especially in less developed nations, a little more money goes a long way to ensuring much better health.
Worker turnover is helped by efficiency wages b/c…
it provides an incentive to stay so the firm avoids training and hiring new employees.
Worker Quality is helped by efficiency wages b/c…
a higher wage attracts better applicants.
Worker effort is helped by efficiency wages b/c…
a higher wage means there is less Q of labour demanded, so there is an incentive to avoid being fired now.
