unemployment Flashcards
what is the working-age population?
those age 15 or older who are not a full-time member of the Canadian Armed Forces or institutionalized
who is counted as employed?
people in the working-age population who are working at least one house during the week (under an employer or self-employed, or people who are temporarily absent from their job)
who is counted as unemployed?
people in the working-age population without jobs who are trying to get jobs. To be counted as unemployed, you must be:
1) Part of the working-age population
2) Not currently working
3) Actively searching for work
4) Able to accept a job if it were offered
what is the labour force?
the part of the working-age population that is employed or unemployed - people who are available to produce goods and services (employed + unemployed)
who is considered not in the labour force?
those in the working-age population who are neither employed nor unemployed due to some reason (retired, in school, taking care of children/ family members, etc)
what is the labour force participation rate?
the percentage of the working-age population that is either employed or unemployed
what is the formula for labour force participation rate?
Labour force participation rate = ((employed + unemployed)/ working-age population)* 100
what is the unemployment rate?
the share of the labour force who are unemployed
what is the formula for unemployment rate?
unemployment rate = (unemployed / labour force) * 100
what is the equilibrium unemployment rate?
the long-run unemployment rate to which the economy tends to return. The unemployment rate tends to fluctuate around this level
what are the alternate measures of unemployment?
1) marginally attached
2) underemployed
3) involuntarily part-time
what does marginally attached mean?
someone who wants a job, has looked in the past year, but isn’t actively seeking work
what does underemployed mean?
someone who is working but wants more hours or whose job isn’t adequately using their skills
what does involuntarily part-time mean?
someone who is working part-time but wants full-time work
is the labour market an input or an output market?
input market
businesses demand labour, households supply labour
the market price is the wage rate
what does the equilibrium in the labour market represent
the equilibrium is where the supply of labour equals the demand for labour
what are the three types of unemployments?
1) frictional
2) structural
3) cyclical
what is frictional unemployment?
unemployment that is due to the time it takes for employers to search for jobs
what causes frictional unemployment?
1) job-search resources
2) skills mismatch
3) unemployment insurance and other income support
what is structural unemployment?
unemployment that occurs because wages don’t fall to bring labour demand and supply into equilibrium
what causes structural unemployment?
structural unemployment occurs when wages are unable to fall to the market-clearing wage. this creates a labour surplus
efficiency wages
institution
what are the three steps of structural unemployment?
1) when wages can easily adjust to market conditions, equilibrium occurs at the market-clearing wage, where the supply curve meets the labour demand curve and there is no unemployment
2) sometimes, the bargained wage gets stuck above the market-clearing wage
3) as a result, there is a persistent gap between the supply of labour and the demand for it. this causes structural unemployment
what are efficiency wages?
a higher wage paid to encourage greater worker productivity
efficiency wages cause structural unemployment but can also lower total labour costs
what are the institutional causes of structural unemployment?
1) unions keep wages high for some workers
2) job protection regulations make it hard to fire workers
3) minimum wage laws prevent wages from falling to market-clearing wage
what is cyclical unemployment?
Occurs when there is a temporary downturn in the economy
Reflects the fact that during a downturn there are lots of unused resources in the economy, including workers
what are the economic costs of unemployment?
- the unemployed often end up with lower wages and worse career opportunities
- hysteresis
- high unemployment means that the government receives lower tax revenues but spends more
what is hysteresis?
occurs when a period of high unemployment leads to a higher equilibrium unemployment rate
what are the social costs of unemployment?
- unemployment is isolating and painful
- long-term unemployment is associated with worse outcomes
- children whose parents experience unemployment suffer
