Mod 12 -13 Flashcards
what happens to the unemployment rate during recessions?
cyclical unemployment rises during recession and
it falls during the expansion
employed
people who are currently holding a job in the economy, either full time or part time
unemployed
people are actively looking for work but aren’t currently employed. *must be able and willing to work and have been searching for past 4 weeks
labor force =
employed + unemployed
unemployment rate
(number of employed workers / labor force) X 100
Discouraged Workers
non-working people who are capable of working but have given up looking for a job due to the state of the job market.
-this group represents a limitation of the unemployment rate because it does not count them as unemployed-
labor force participation rate =
(labor force / population of age 16+) X 100
Marginally Attached Workers
would like to be employed and have looked for a job in the recent past but are not currently looking for work (maybe they are in school, have a kid, disabled or discouraged). (not included in labor force either)
Underemployed
workers who would like to work more hours or who are overqualified for their jobs. (don’t count as unemployed)
Prime working ages
24-54
what are the three categories of frustrated workers?
discouraged, marginally attached, underemployed
When real GDP is falling, what happens to the unemployment rate?
unemployment rate rises
When real GDP is rising, what happens to the unemployment rate?
unemployment rate falls
what could cause more unemployment?
high minimum wage and unemployment benefits
Structural Unemployment
results when workers lack the skills required for the available jobs or there are more people searching for jobs in a labor market than there are jobs available at the current wage rate
*workers skills do not match the economy –college?
Frictional Unemployment
-the one you want the most of-
:unemployment due to the time workers spend in job search
inevitable
*there are always new entrants to the workforce and people leave jobs for a variety of reasons
what happens when the government establishes or raises the minimum wage?
The number of workers wanting to work are greater than the number demanded at the wage rate. = surplus of wage = structural Unemployment b/c price floor
Causes of Structural Unemployment
-mismatch between workers skills and job requirements
-technological change and automation (artificial intelligence)
-geographic migration of people or jobs
-minimum wages: gov mandated Floor on price of labor
-labor unions: win higher wages by process of collective bargaining (labor strike)
-efficiency wages
Efficiency Wages
Wages that employers set above the equilibrium wage rate as an incentive for better employee performance.
Solution to structural unemployment
job training: b/c it increases human capital
employment subsidies: financial incentive to employers
Natural rate of unemployment
aka normal/ minimum feasible unemployment rate/ non-cyclical rate
:unemployment rate that arises from the effects of frictional and structural unemployment
The natural rate of unemployment =
frictional unemployment + structural unemployment
Cyclical unemployment
deviation of the actual rate of unemployment from the natural rate
Actual unemployment =
natural rate of unemployment + cyclical unemployment
