Module 6 Reading

Question 1

what kind of measurement is the unemployment rate

Answer 1

• a measure of the overall state of the economy and the degree of tightness or slack in the labour market
• tightness = excess demand
• slack = excess supply

Question 2

who are the unemployed generally defined as

Answer 2

those who are not currently employed, are available for work, and indicate by their behaviour that they want to work at good wages and working conditions

Question 3

where is most of the data on unemployment in Canada

Answer 3

• the labour force survey (LFS)
• carried out monthly by statistics Canada

Question 4

how does LFS consider people unemployed

Answer 4

if they didn’t have work in the reference period, but were available and searching for work

Question 5

what are two other ways people can be considered unemployed

Answer 5

• those who were available but didn’t search for work because they got a temporary layoff from a job to which they expect to be recalled
• those with a job to start within the next four weeks

Question 6

what does it mean to be classified as unemployed

Answer 6

that there was some sort of job searching done, like contacting employers or checking job ads

Question 7

how does LFS define job search

Answer 7

having looked for work sometime during the previous 4 weeks

Question 8

who are considered out of the labour force

Answer 8

• those who are not employed and not seeking work
• like students, stay-at-home individuals, those permanently unable to work, and the retired

Question 9

what is considered employed

Answer 9

those who did any sort of work for pay or profit, including unpaid work on a family farm or business, or if they had a job but couldn’t work because of things like bad weather, illness, industrial dispute, or vacation

Question 10

how much did the great depression change the unemployment rate

Answer 10

from about 3% to almost 20%

Question 11

what happened to unemployment during WWII

Answer 11

unemployment fell to very low levels

Question 12

what was the trends of unemployment during the post WWII period

Answer 12

• cyclical variations around a general upward trend until the 1980s
• then a modest downward trend after

Question 13

what is unemployment rate

Answer 13

most commonly used labour market activity and the degree of labour force utilization

Question 14

what are the 2 additional measures of unemployment rate

Answer 14

• employment rate
• labour force participation rate

Question 15

what is the employment rate

Answer 15

the ratio of employment to the source population (rate of those in the labour force that are employed)

Question 16

what is the labour force participation rate

Answer 16

the ratio of the labour force to the population of working age, or source population

Question 17

do the 3 measures of unemployment always move together? why or why not

Answer 17

• no they don’t
• because they focus on somewhat different aspects of labour market activity
• ex. since the mid-1960s, the unemployment rate has risen substantially but the labour force participation rate and employment rate have risen, not fallen

Question 18

what does the measurement of unemployment raise

Answer 18

difficult and controversial issues

Question 19

what is hidden unemployment

Answer 19

• also known as marginal labour force attachment
• when individuals may be without work, desire work, yet they are not officially classified as unemployed because they are not searching for work
• can be when they are attached to the labour force to some degree but not enough to look for work

Question 20

what are examples of hidden unemployment

Answer 20

• discouraged workers; those who only want to work when the wages are good, or those who don’t seek work because they think no work is available
• those who are waiting for potential or promised jobs to become available, like waiting for a recall for more than 6 months
• underemployment; working less hours than they usually do or want to
• those temporarily in jobs they that doesn’t use their skills or training

Question 21

what is the major lesson about the unemployment rate

Answer 21

that its not that the official unemployment rate is a poor measure, but its no single measure of unemployment is likely to be suitable for all purposes

Question 22

what is the labour market like

Answer 22

highly dynamic

Question 23

what are the 3 labour force states

Answer 23

• employment
• unemployment
• out of the labour force

Question 24

what are the gross flows between the 3 labour force states like

Answer 24

• large in comparison to the stocks in each state at any point in time
• huge in comparison to the net flows

Question 25

what does unemployment not mostly consist of

Answer 25

individuals who lost their job, either temporarily or permanently

Question 26

how much of job losers account for the flows into unemployment and when is it the highest

Answer 26

• about 35-45%
• the proportion is highest in recessions

Question 27

what is the rest of unemployment made up of if they are not all job losers

Answer 27

• job leavers (about 10%)
• new entrants and re-entrants (40-45%)

Question 28

what are 2 useful concepts for understanding unemployment dynamics

Answer 28

• incidence
• duration of unemployment

Question 29

what is incidence of unemployment (for any group of workers)

Answer 29

the probability of a member of the group becoming unemployed

Question 30

what is duration of unemployment (for any group of workers)

Answer 30

measures the length of time the individual can expect to remain unemployed on average (before they become employed or leave the labour force)

Question 31

what can the unemployment rate be expressed as in a steady state

Answer 31

incidence x duration

Question 32

what is the comparison of unemployment rates and duration of unemployment between young workers and adults

Answer 32

• Young workers have much higher unemployment rates than adults
• but lower average duration of unemployment

Question 33

what is the cause of high youth unemployment rates

Answer 33

due to the high probability of becoming unemployed in any period

Question 34

what is the cause of low adult unemployment rates

Answer 34

Older workers become unemployed less frequently, but experience longer unemployment spells once they become unemployed

Question 35

what happened to the view of the unemployed during the 1970s

Answer 35

the traditional view was challenged by a “new view”

Question 36

what was the traditional view of the unemployed

Answer 36

the unemployed were regarded as a mainly unchanging stock of individuals without work for a lengthy period

Question 37

what was the new view of the unemployed

Answer 37

it emphasized the importance of employment stability and turnover in the labour market

Question 38

what did research change about the new “turnover” view

Answer 38

• they noted that although the average duration of unemployment is fairly short, much of total unemployment is still accounted for by those experiencing repeated and/or long spells of joblessness
• many unemployment spells also end in labour force withdrawal rather than in employment, suggesting that unavailability of suitable employment is a reality for some workers

Question 39

why is the unemployment rate unwise to be relied on alone

Answer 39

because it is widely used as an indicator of the amount of unutilized labour supply, the state of the labour market and economy, and the degree of hardship in the population