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Macroeconomics > Unemployment > Flashcards

Unemployment Flashcards

1
Q

What are the Labor Force Statistics produced by?

A

Bureau of Labor Statistics (BLS) in the U.S Department of Labor

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2
Q

What are the Labor Force Statistics based on? (2)

A

Based on:

  1. regular survey of 60,000 households
  2. “adult” population (16+)
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3
Q

What are the 3 groups that the BLS divides Civilian Noninstitutional population in?

A

Employed

Unemployed

Not in the Labor Force

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4
Q

Employed

A

A person who works at least 1 hour per week for pay or at least 15 hours per week as an unpaid worker in a family buisness

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5
Q

Unemployed

A

a person who is not currently employed but is actively looking for work

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6
Q

Not in the Labor Force

A

a person who is not looking for work, and who is not employed

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7
Q

Unemployment Rate

A

% of the labor force that is unemployed

u-rate= 100% x (Unemployed/ Total Labor Force)

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8
Q

Labor Force Participation Rate

A

% of the adult population that is in the labor force

Labor Force Participation Rate= 100% x [(Employed+ Unemployed) / Working Age Non-Institutionalized Population]

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9
Q

What is the Labor Force composed of?

A

employed and unemployed

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10
Q

Labor Force Statistics for different groups

A

The BLS publishes these statistics for demographic groups within the population
These data reveal widely different labor market experiences for different groups

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11
Q

For every $_ that a man makes a woman makes $_

A

$1; $0.78

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12
Q

What does the U-rate exclude or not measure very well?

A

• excludes discouraged workers • does not distinguish between full-time and
part-time work, or people working part time
because full-time jobs not available • some people misreport their work status in the
BLS survey

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13
Q

1/3 of the unemployed have been unemployed

A

< 5 weeks

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14
Q

2/3 of the unemployed have been unemployed

A

<14 weeks

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15
Q

20% of the unemployed have been unemployed

A

> 6 months

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16
Q

Which group of the unemployed is the most observed?

A

The long term group

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17
Q

There is always some unemployment, though the U-rate fluctuates from

A

year to year

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18
Q

The natural rate of unemployment

A

the normal rate of unemployment around which the actual unemployment rate fluctuates

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19
Q

Cyclical Unemployment

A

• the deviation (difference) of actual

unemployment from its natural rate • associated with business cycles

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20
Q

Explaining the natural rate: Frictional unemployment

A
  • occurs when workers spend time searching for the jobs that best suit their skills and tastes
  • Short- term for most workers
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21
Q

Explaining the natural rate: Structural Unemployment

A
  • occurs when there are fewer jobs than workers

- Usually longer-term

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22
Q

Job search

A

the process of matching workers with appropriate jobs

23
Q

Sectoral shifts

A

changes in the composition of

demand across industries or regions of the country

24
Q

Government employment agencies

A

give out information about job vacancies to

speed up the matching of workers with jobs

25
Q

Public Training Programs

A

aim to equip workers displaced from declining
industries with the skills needed in growing
industries.

26
Q

Unemployment insurance (UI)

A

a govt program that partially protects workers’

incomes when they become unemployed

27
Q

What does UI increase?

A

Frictional unemployment. People respond to incentives

28
Q

UI benefits end when…

A

a worker takes a job, so workers have less incentive to search or take jobs while eligible to receive benefits.

29
Q

The benefits of UI

A

 reduces uncertainty over incomes
 gives the unemployed more time to search,
resulting in better job matches and thus higher
productivity.

30
Q

Structural unemployment occurs when

A

there are not enough jobs to go around

when wage is kept above equilibrium

31
Q

What are the three things that regulate structural unemployment?

A
  1. Minimum wage laws
  2. Unions
  3. Efficiency Wages
32
Q

Minimum Wage Laws

A

The minimum wage may exceed the eq.m wage for the least skilled or experienced workers causing structural unemployment.

33
Q

What is bad about minimum wage?

A

Makes small businesses fire employees, keep a few also raises the prices of goods

34
Q

What is good about minimum wage?

A

With higher wages people go and buy more, therefore helps the economy

35
Q

Which component has a small part in the labor force and therefore cannot explain most unemployment?

A

Minimum wage laws

36
Q

What is a union?

A

a worker association that bargains with employers over wages, benefits, and working conditions

37
Q

What does the typical union worker earn?

A

20% higher wage and gets more benefit than a nonunion worker for the same type of work

38
Q

What happens when unions raise the wage above equilibrium?

A

quantity of labor demanded falls and unemployment results
“Insiders”= workers who remain employed,
they are better off
“Outsiders”= workers who lose their jobs,
they are worse off
Some outsiders go to non-unionized labor
markets, which increases labor supply and
reduces wages in those markets

39
Q

What do critics of unions say?

A

 Unions - a type of cartel
 Allocation of labor
• Inefficient - high union wages reduce
employment in unionized firms below the efficient level
• Inequitable - some workers benefit at the
expense of other workers.

40
Q

Advocated of unions say

A

 Unions - necessary antidote to the market power
of the firms that hire workers
• In the absence of a union, firms pay lower wages and offer worse working conditions
 Unions - help firms respond efficiently to
workers’ concerns
• Keep a happy and productive workforce.

41
Q

What is the theory of efficiency wages

A

firms voluntarily pay above-equilibrium wages to
boost worker productivity
 Different versions of efficiency wage theory
suggest different reasons why firms pay high
wages.

42
Q

What are the four reasons why firms might pay efficiency wages?

A

Worker health
Work turnover
Worker Quality
Worker Effort

43
Q

Worker Health

A

In less developed countries, poor nutrition is a
common problem. Paying higher wages allows
workers to eat better, makes them healthier,
more productive

44
Q

Worker Turnover

A

Hiring & training new workers is costly.
Paying high wages gives workers more
incentive to stay, reduces turnover.

45
Q

Worker Quality

A

Offering higher wages attracts better job applicants,

increases quality of the firm’s workforce

46
Q

Worker Effort

A

Workers can work hard or shirk. Shirkers are fired
if caught. Is being fired a good deterrent?
Depends on how hard it is to find another job.
If market wage is above eq’m wage, there aren’t
enough jobs to go around, so workers have more
incentive to work not shirk.

47
Q

What is shirking?

A

if you aren’t doing your job

48
Q

In which of the following cases do firms voluntarily choose to keep wages above the equilibrium level?

A

When there are efficiency wages

49
Q

What happens to unemployment when: The govt eliminates the minimum wage

A

It goes down

Structural

50
Q

What happens to unemployment when: The govt increases unemployment insurance benefits

A

It goes up

Frictional

51
Q

What happens to unemployment when: A new law bans labor unions

A

It goes down

structural

52
Q

What happens to unemployment when: More workers post their resumes at Monster.com,
and more employers use Monster.com to find
suitable workers to hire.

A

It does down

Frictional

53
Q

What does the natural rate of unemployment consist of?

A

Frictional Unemployment
• it takes time to search for the right jobs
• occurs even if there are enough jobs to go around
Structural Unemployment
• when wage is above eq’m, not enough jobs
• due to min. wages, labor unions, efficiency
wages.

Macroeconomics (3 decks)

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