Unemployment

Question 1

Cyclical unemployment

Answer 1

year-to-year fluctuations in unemployment around its natural rate, and it is closely associated with the short-run ups and downs of economic activity.
Cyclical employment gives economists the best picture of the state of the economy. To determine cyclical unemployment, the natural rate of unemploymenet (structural and frictional) must be subtracted from total unemployment.

Question 2

Who measures unemployment? How often?

Answer 2

Bureau of Labor Statistics (BLS) of the Department of Labor, every month.

Question 3

What are the categories BLS places people 16 and older

Answer 3

Employed: Those who worked as paid employees, in their own business, or as unpaid workers in a family member’s business. Both full-time and part-time workers are counted… includes those not working but who had jobs which they were temporarily absent from.

Unemployed: Those not employed but available for work and tried to find employment during the previous four weeks

Not in labor force: Neither of the first 2 categories (full time student, homemaker, retiree).

Question 4

Who is the labor force?

Answer 4

All the employed and unemployed categories of the BLS. Excludes those not in the labor force (students, homemakers, and retirees).

Question 5

Unemployment rate

Answer 5

Number of employed/Labor force * 100

Question 6

Labor force participation rate

Answer 6

(employed + seekers)/Adult population 16 and older.

Question 7

Defining characteristic of recession

Answer 7

decrease in output followed by unemployment

Question 8

Natural rate of unemployment

Answer 8

normal rate of unemployment around which the unemployment fluctuates (usually 5% ish)

Question 9

Discouraged workers

Answer 9

individuals who would like to work but have given up looking for a job

Question 10

Most spells of unemployment are ___, and most unemployment observed at any given time is _____

Answer 10

short, and long-term

Question 11

Why isn’t the natural unemployment rate zero?

Answer 11

Frictional employment–Job Searches between jobs

Structural–Mismatch of skills or job location…. like seasonal effects, technological change, and personal characteristics, minimum wage laws, unions and collective bargaining, and efficiency wages.

Cyclical–Due to decline in total spending.

Question 12

Where does unemployment number come from? Where does the jobs number come from?

Answer 12

Unemployment= survey of 60,000 households that yields the unemployment rate

Jobs number=survey of 160,000 business establishments with over 40 million on payrolls.

Question 13

frictional unemployment

Answer 13

short spells of employment because it takes time for workers to search for the jobs that best suit their tastes and skills

Question 14

Structural unemployment

Answer 14

Longer spells of unemployment that Results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants it. Can result when wages are set above the level that brings supply and demand into equilibrium wage: minimum wage laws, unions, and efficiency wages

Question 15

Unemployment insurance and unemployment

Answer 15

Increases frictional employment without intending to. It offers workers partial protection against job loss. A typical worker covered here receives 50% of his or her former wages for 26 weeks. It reduces hardship of unemployment but increases amount of unemployment because people respond to incentives.
However, a positive side is that when workers turn down unattractive jobs offers, they have the opportunity to look for jobs that better suit tastes and skills, improving the ability to match workers with most appropriate job.

Question 16

minimum wage laws

Answer 16

Minimum wage laws force the wage to remain above level that balances supply and demand, so it raises the quantity of labor supplied and reduces the quantity of labor demanded compared to equilibrium. There is a surplus of labor, creating unemployment.
Note: this effect affects only the those with minimum wage jobs. If the wage is kept above equilibrium for any reason, the result is unemployment. Whereas frictional employment one is waiting for the job they want, here one is waiting for a job to open up! much scarier.

Question 17

Union

Answer 17

Worker association that bargains with employers over wages, benefits, and working conditions. 12% of US workers belong to unions but they played a larger role in the past. In Northern Europe, more than half of workers belong to unions. Like a cartel acting together to exert joint power in the market. Unions are exempt from anti trust laws.

Question 18

Collective bargaining

Answer 18

Process by which unions and firms agree on terms of employment. If the union and firm don’t reach agreement, the union organizes a withdrawal of labor (strike), which reduces production, sales, and profit for the firm… When a union raises the wage above equilibrium, it creates unemployment.

Question 19

Wagner Act 1935

Answer 19

Prevents employers from interfering when workers try to organize unions and quires employers to bargain with unions in good faith.

Question 20

NLRB

Answer 20

National labor Relations Board is the government agency that enforces workers’ right to unionize.

Question 21

Are unions good or bad or the economy?

Answer 21

They keep firms in check, but they mess with supply and demand

Question 22

Efficiency wages

Answer 22

Above equilibrium wages paid by firms to increase worker productivity through better health, lower worker turnover, and general quality/effort.