Unemployment Flashcards
Unemployment
You must be part if the labor force and must have been looking for work in the last four weeks to be counted as unemployed.
Some unemployment can be good:
Frictional unemployment allows for workers to move to new more satisfying jobs for the employer and worker.
High employment can tear apart communities and hurt growth.
Labor Force
Includes employed and unemployed adults.
Labor Force Participation Rate
Labor force divided by working age population
Categories of Unemployment
Frictional unemployment
Structural unemployment
Cyclical unemployment
Seasonal unemployment
Frictional Unemployment
Occurs as unemployed and firms search for best available matches. Includes:
1) New entries into work force
2) workers who just to a new location of occupation
Structural Unemployment
Is the result of mismatched skills. Car is invented… Blacksmiths out of work. Especially affects low skill workers
Cyclical Unemployment
Results from downturns in business cycle.
Seasonal Unemployment
Result of changes in hiring practice due to time of year. For example: lifeguards, ski instructors
Discouraged Workers
Those who are willing and able to work but stop trying to find a job due to consistent failed attempts. They are not included in unemployment.
Dishonest Workers
They claim to be unemployed in order to receive benefits when they actually have a job.
Natural Rate of Unemployment
Is generally around 5% in the USA. Thought of as the sum of frictional ad structural unemployment.
Full Employment
This is not 100% employment. This corresponds with the natural rate of unemployment. This is when there is no cyclical unemployment.
Okun’s Law
For every percentage point increase in unemployment above the natural rate, output falls by 2-3 points.
