HW30: Homework - Ch. 30: Unemployment and Labor Force Participation

Suppose that a baby boom occurs between the years 2025-2030, similar to the baby boom following World War II. What do you expect to happen to the labor force participation rate in the year 2090-2100, holding all else constant? The labor force participation rate will

decrease since the baby boomers will opt for more leisure.

The natural rate of unemployment equals

frictional unemployment plus structural unemployment.

Employment laws can vary significantly by country. For instance, in the United States, many jobs are governed by the principle of employment at-will. Employment at-will is rarer in certain countries in Europe, such as Portugal. Regulation and collective bargaining impact labor markets to a larger extent in Europe than in the United States. How do European labor markets compare to the labor market in the United States as a result of these varying labor laws?

The labor market in Europe is less flexible than in the United States.

After a financial crisis hits the country of Barbaria, 10 million people become unemployed. If 45 million individuals are lucky enough to keep their jobs, what is the unemployment rate? Please specify your answer to two decimal places.

unemployment rate: 18.18% Reason: The unemployment rate is the percentage of people in the labor force who are willing and able to work, actively seeking work, but are not yet working. It is given by the formula, where U is the number of people unemployed, and E is the number of people employed. unemployment rate= (U/U+E) ×100% In this example, the unemployment rate is unemployment rate=(10 million/10 million+45 million)×100% =18.18%

Assume there is a global recession and millions of workers are laid off, yourself included. 1. Rank the countries in the order of how easy it would be to find a job (ceteris paribus) using the rigidity of employment index data presented in the corresponding table (2009). Country Rigidity of employment index Bolivia 77 Spain 49 Austria 24 Denmark 7 United States 0 United Kingdom 10 2. How does a country's rigidity of employment index correspond to the amount of long-term unemployment for that nation?

1. Easiest to find a new job United States Denmark United Kingdom Austria Spain Bolivia Hardest to find a new job 2. the larger the index number, the greater the long-term unemployment

1. Which of the choices is the best example of creative destruction? 2. The typewriter industry goes bankrupt and lays off all its workers. In sharp contrast, the burgeoning electronic word processing industry hires 10,000 workers that same year. This type of unemployment resulting from the shift in industries would best be catagorized under

1. In the past month, there were 20,000 layoffs but 22,000 new hires. 2. structural unemployment.

1. Which of the factors would decrease the rate of frictional unemployment? 2. When the economy is doing well, a significant share of unemployment is frictional.

1. the advent of the Internet, which makes finding available jobs easier 2. true

The overall population for Region A is 112 million people. The labor force contains 49 million people, 32 million people are employed, and 17 million are unemployed. What is the unemployment rate? Round your answer to two decimals.

34.69% The formula for calculating the unemployment rate is the number of unemployed people divided by the total labor force. unemployment rate=17 million people/49 million people×100% =34.69%

The hypothetical data in the table below displays the percentage that unemployment benefits replace take-home pay for workers in different countries. Country First year Second year After five years Belgium 75% 70% 61% Finland 70% 60% 55% Italy 54% 50% 22% Australia 40% 25% 10% Which country would you expect to have the lowest long-term unemployment rate?

Australia Reason: Australia will likely have the lowest long-term unemployment rate based on the data given. Unemployed individuals in Australia receive a smaller portion of their lost income in unemployment benefits and it is reduced dramatically over time. As such, Australian citizens would have the most incentive to find a job as soon as they are laid off. Italy would be the next lowest, as the benefits do not last too long and drop substantially. Belgium would likely have the highest rate, since a greater portion of their income is replaced.

Please classify the given groups of people as either employed, unemployed, or not in the labor force.

Employed: - those who worked during the previous week - people temporarily away from their jobs due to illness - people temporarily away from their jobs due to vacation Unemployed: - people who do not have a job but actively looked in the last four weeks Not in the labor force: - full-time students - people in active military service - full-time home-makers - people in prison - retirees who neither have a job nor are looking for a job - mental patients confined in institutions - people who actively looked for a job during the last 12 months, but not the last four weeks

Firms in the country of Merka, which experiences varying levels of unemployment over time, face a very competitive labor market. Classify the given events according to how each would affect Merka's unemployment rate.

Increase in the unemployment rate: -increase in the minimum wage -increase in unions' influence Decrease in the unemployment rate: -decreased unemployment benefits -introduction of employment-at-will doctrine

Consider the table, which shows the annual salary for several workers. Worker Salary Chuck $34580 Ade $28860 Gwen $62890 Sophie $14690 Tony $273320 a. Calculate the median wage. b. Comparison of the minimum wage and the median wage can be used to estimate the extent to which unemployment results from minimum wage laws. All else equal, which scenario would result in the most unemployment?

a. $34580 b. A country where the minimum wage is set at 95% of the median wage. Reason: In general, the median can be thought of as the middle number. Here, if the incomes of each worker are ranked from highest to lowest, the median wage is the observation that corresponds with the person who both makes more than two other people and less than two other people. This is Chuck's wage, $34580. Minimum wage laws can lead to unemployment by artificially increasing workers wages above the equilibrium wage. Not all workers are affected by minimum wage laws though. For example, suppose that a minimum wage is set at $8 per hour. Your professor likely makes much more than $8 per hour so is unaffected by this law. However, the person taking your order for lunch or making your morning coffee might not make more than $8 an hour. These people are affected by minimum wage laws. As a minimum wage is set higher, it impacts an increasingly larger percentage of the population. Here, a minimum wage set at 95% of the median wage will impact the largest percentage of the labor market and therefore lead to more unemployment than the other options.

Suppose the civilian noninstitutionalized working-age population is 35.9 million in Italy. Of these, 4.4 million are working part-time and 13.19 million are working full-time. Assume the Bureau of Labor Statistics (BLS) definitions are used for calculating unemployment data. Among those not working, the most recent job-search activity for 3.40 million happened less than two weeks ago, while 1.72 million most recently looked for work between two and four weeks ago. An additional 0.86 million most recently looked for work five weeks ago, and the remaining 12.33 million who do not have jobs have not looked for work in the past six weeks. Round your answers to two decimal places. a. What is the size of the total labor force? b. How many people are unemployed? c. What is the labor force participation rate? d. What is the unemployment rate?

a. 22.71 million b. 5.12 million c. 63.26 % d. 22.55% Reason: The labor force of includes people who are employed in addition to those who are unemployed. Employed workers are those with gainful employment, regardless of the number of hours worked. That is, employed=4.4+13.19=17.59 million Total unemployment includes those that are in the labor force but are not working a job for pay or profit. Using the BLS rules, all those who do not have a job and have actively sought work within the last four weeks are considered unemployed. That is, unemployed=3.40+1.72=5.12 million Using our calculations for unemployed and employed, the total labor force is labor force=17.59+5.12=22.71 million The labor force participation rate is the percentage of the civilian noninstitutionalized working-age population currently in the labor force. According to the BLS, the working-age population is defined as those individuals 16 years of age or older. Given that the civilian noninstitutionalized working-age population is 35.9 million, the labor force participation rate is (labor force/working-age population)×100=(22.71/35.9)×100 = 63.26% Finally, the unemployment rate is defined as the percentage of the total number of people in the labor force who are unemployed. (number of unemployed workers/labor force)×100 =(5.12/22.71)×100=22.55%

The table shows employment statistics for a fictional country. Use the information to answer the questions. Round your percentages to two decimal places. Category Number of people Employed 5505 Unemployed 492 Not in the labor force 591 a. What is the total labor force? b. What is the labor force participation rate? c. What is the unemployment rate? Suppose 246 of the 492 unemployed people have been unemployed for so long that they stop looking for work. d. What is the new labor force? e. What is the new labor force participation rate? f. What is the new unemployment rate?

a. 5997 b. 91.02% c. 8.20% d. 5751 e. 87.29% f. 4.27%

Classify each scenario according to whether it is an example of an active employment at-will doctrine. a. A tenured organic chemistry professor who cannot be fired despite being a horrible teacher. b. Cathy quits her job as a babysitter despite having only been hired three weeks ago, because she feels watching over eight toddlers at once will cause her to lose too much sleep. c. Katherine, a waitress, gets fired from her job after spilling a hot bowl of French onion soup on a customer's shoe. d. Alex has a clause in his worker's contract stating that if he gets fired during a recession, he gets a severance package of half his salary paid for up to six months. e. Brian, who works for an educational software company, quits. He is not allowed to work for a competing software company for six months due to a clause in his contract. f. Wei-Cheng gets fired from his company for no reason other than that he is the only Asian worker.

a. Not an example of employment at-will b. Example of employment at-will c. Example of employment at-will d. Not an example of employment at-will e. Not an example of employment at-will f. Not an example of employment at-will

Which of the choices is most directly related to cyclical unemployment?

recessions

Please match each scenario with the term it best identifies. a. The government implements a new policy where people receiving unemployment benefits must provide proof that they are searching for work. Otherwise, they will lose their benefits in 1 month. b. The government decides to give all unemployed workers a free account on a federal job bank, allowing workers to find jobs easier than ever before and hopefully expediting re-employment. c. Chelsea recently lost her job as an accountant. However, thanks to her stellar resume, she is able to quickly find a new job after two weeks. Much to her pleasure, she receives a tax credit because she was able to quickly find a new job. d. Simon is a junior chef at a three-star Michelin-renowned restaurant, Sur La Table. He loses his job and applies for, and is accepted into, a state funded program that allows unemployed individuals to take medical technician courses at their local community colleges for free.

a. work test b. job-search assistance c. early employment bonus d. job retraining