Labor Markets Flashcards
Define the Labor force
Employed + unemployed
Define Employed
Working for pay
Define unemployed
Not working and not looking for work in 4 weeks
Define those not in the Labor force
Not working and not looking for work
State the equation for unemployment rate
unemployed/labor force
State the equation for Labor Force Participation
Labor force/ population
State the equation for Employment - population ratio
Employed/population
State the trend with women’s employment rates
25-54 women’s employment rates peaked in 2000s
State the trend with men’s employment rates
25-54 Men’s employment rates have been declining since 1990s
Describe how to raise employment rates
Reduce unemployment rates
Labor force participation rates go up
Describe some ideas on how to raise employment rates
Improve education
Expand Childcare
Increase work incentives
reduce work incentives
Describe it’s effect in developing countries
Less effective
Hard to tell employment vs Unemployed
Informal sector makes it hard to measure and interpret unemployment rates
Define Frictional unemployment
Unemployment resulting from imperfect information bout available jobs and from the time consuming process of job searching
Define Structural unemployment
When the quantity of labor supplied persistently exceeds the quantity of labor demanded - wage rigidity is a key part
Define Natural rates
The rate of unemployment around which a healthy economy fluctuates
Define Cyclical unemployment
Actual unemployment rate - natural rate
State the issue with the natural rate
Hard to know what precisely it is
Not actually natural
Describe the increase in structural unemployment and natural rate
Overly rigid labor markets
Insufficiently supportive labor markets
Less effective education
Excessively high minimum wage
State an effect of recession
Higher cyclical unemployment
Explain why part of the labor supply curve is vertical
Higher wages are a reason to work more but offset by a reason to work less
Describe what shifts the labor demand curve
Prices for goods/services rise
Demand for goods/services rise
Changing technology
Input prices fall
Describe what shifts the Labor supply curve
Workers tastes shift towards more work
Falling opportunity cost of time spent working
Increased population
Describe what occurs when demand for labor falls
Wages and prices fall
Describe Nominal wages
Wages measured in a currency , can only be lowered by reducing a pay check
Describe Real wages
Wage adjusted for inflation, can be lowered via pay check or by keeping pay the same while prices rise
Describe the supply view of GDP
Y = a * F(K,H)
Downturn if K and H are going down - people are unemployed and factories are idle
Describe the demand view of GDP
Y = C + I + G + (X-M)
Downturn would be if C and I are less, People and businesses are spending less
Describe how the labor market is linked with the supply and demand curve
Whenever any part of the demand function is lowered then labor demand is reduced and the quantity of labor in the production function is reduced
State the two rules of Okun’s law
Movement in unemployment rate is closely linked to movements in output
Reflects both direct and indirect effects of changes in unemployment on GDP
