Quiz 3 Part One

Labor-force participation rate

(Labor force) / (Adult Population) x 100 Uses Current Population Survey to do this

Unemployment rate

(Number of unemployed) / (Labor Force) X 100 Percentage of the labor force that is unemployed

How unemployment is measured

1. BLS every month 2. types of employment, length of average workweek, duration of unemployment 3. data from Current Population Survey (60,000 houses)

Three BLS Categories

1. employed: those who worked as paid employees, worked in their own business, or worked as unpaid workers in a family member's business, including those not working but had jobs they were absent from because vacation, illness, etc. Full-time and part-time counted 2. unemployed: those who were not employed, were available for work, and had tried to find employment during the previous four weeks, and those waiting to be recalled from a lay off 3. not in labor force: not employed or unemployed like full-time students, housemakers, and retirees

Natural rate of unemployment

1. the amount of unemployment that the economy normally experiences 2. natural != desireable 3. long run (comes from multiple related problems)

cyclical unemployment

1. year to year fluctuations in unemployment around its natural rate, closely associated with the short-run ups and downs of economic activity 2. deviation from natural unemployment

unemp in france vs us

2 times as big

Household survey: unemployment RATES

2008: 5.0 unemp. 2009: 10.0 unemp. 2011: 9.1

Short term long term unemployment

36% of unemployed had been unemployed for less than 5 weeks Another 30 between 5 and 14 27 weeks or more was 20%

percent of frictional vs. structural

5% of unemployment will be frictional + structural if we get to 12% and the rest is cyclical

Normal rate of unemployment for US

51/2 - 6 percent

What category or group or person has the lowest unemployment rate in the United States?

Asian women who is not married

What happens with high minimum wage and whats the solution

Benefit of higher minimum wage goes to families with incomes who are higher Every 5 dollar increase in wages means 1 dollar to poor families Higher minimum wage reduces employment for least skilled workers. (labor-labor substitution) Solution: using the tax system EITC: provide government subsidies to low-income families

Two Surveys

Current Population Survey vs. Establishment Survey Establishment survey: not for unemployment, more for data on jobs Household survey: only one giving information about people without jobs trying to find them

What component of the unemployment rate was responsible for most of that increase of unemployment from financial crisis

Cyclical

Unemployment rates education

December 2019 No High school diploma: 5.2% High school graduates: 3.7% BA/BS or higher: 1.9% March and April with BA: from 1.9 to 2.5 Teens last month: 11% this month 14.3% Racial Categories all went up about the same Married Men over 25: unemp. 1.7% Married women over 25: unemp. 1.8%

Why unemployment rate not accurate measurement

Easy to tell full-time job from not working at all - hard to tell between unemployed and not in labor force Movement into and out of labor force More than ⅓ of unemployed are recent entries into employed 1. Older workers who left but now returning 2. Young workers with first jobs About ½ unemployment ends with unemployed leaving labor force Some may not be trying hard for job - just want unemployment benefits Discouraged workers: individuals who would like to work but have given up looking for job

are you in the labor force

Family business with no pay: yes Student: no 16 or older: yes Military: no Prison population: no Mental institutes: no Farmer: no

"Ban the box"

Fill out forms for unemployment and there is a box "have you ever been arrested" and it was not a good thing of course to check it Disproportionately affected young black males more than other categories Reduce discrimination → get rid of those unemployment forms Turns out: instead of reducing unemployment rate of young black males, it increased it WHYYY Ceiling Issue: not checking the box tells people you are not a bad guy, employers had no way to tell if the person was good or bad

fixing different types of unemployment

Frictional problem - might want government to increase amount of information Maybe subsidize someone's housing or travel Structural problem - provide money towards tuition for students who went back to community college to learn a skill Cyclical Problem - want to spend money

Why Some Frictional Unemployment Is Inevitable

Frictional unemployment often happens from changes in demand for labor among different firms Consumers like Ford → Ford increases employment and Toyota lays off workers Different regions produce different goods / sectoral shifts Changing patterns of international trade Economy is always changing

Reason you can't get a job is similar to why you cannot get a date

Frictional: it takes time - have to meet them and go on dates and interact Structural: don't speak English → hard time cuz do not have right skill Cyclical: exam week - no one is looking for a date during exam week

household survey vs. establishment survey

Household survey: unemployment RATES Establishment Survey: actual job creation

workers benefit and dont from unions

Insiders: benefit from high union wages Outsiders: do not get the union jobs Wait for chance to be an insider Take jobs in firms not unionized where wages are reduced because supply of labor has gone up from unions

Internet and Public Policy on Frictional

Internet can help reduce amount of frictional unemployment via spread of information on opening of jobs Public policy: policy can reduce time it takes unemployed workers to find new jobs Information about job vacancies Public training programs

newspaper clippings

January 5, 2018: Black Unemployment all time Low Fell to 6.8% lowest since 1972 when Labor Market tracked Next one was US military veterans unemployment reached all time low Fell below four to 3.8 percent for first time April 2019: US Payrolls Grow by 196,000 in March - unemployment rate historic low Hiring in us sprang back in march and unemployment rate stayed at historically low levels - stead around 3.8 percent May: falls to 3.6 January 2020: US adds jobs for 10th straight year January: women overtake men as majority of US workforce Corona: CNN: unemployment claims soar to 3.3 million - most in history Normal week: claims about 200,000 (here, jumped from 282,000 to 3 mil)

Unemployment rate in Chicago is higher than the nation as a whole?

Larger cities tend to have smaller unemployment rates, so not here Chicago has a higher minimum wage, so YES Higher percent of unions Minorities have significantly higher unemployment rates than whites or asians Unemployment rates relate to education Higher education → lower unemployment rate Chicago has more people with not so great education

unemployment myths

MYTH: There is a finite number of jobs and if someone takes one, that pool is smaller MYTH: dislike of big business in favor of small business who are job creators Small: job creators but job destroyers because they go out of business more rapidly (yes they'll hire you but then they'll fire you) Big: better chance of long term

Public Policy advocates

Make economy operate more efficiently (keep labor force more fully employed) Reduce inequities inherent in changing economy

why women have slightly less unemployment rates

Men have seasonal layoffs cuz they do construction

Minimum Wage Profile

Minimum wage only affects about 2% of all workers Most likely to be women (among hourly paid workers 5% vs. 3% of men) Tend to be young (15% 16-19 vs 3% over 25) Less educated (7% without high school diploma, 4% with no college but has high school diploma, 2% with college) Likely to be working part-time (10% of part time workers paid minimum compared to 2% of full time workers) Working in Leisure and Hospitality (18%)

Is Unemployment Short Term or Long Term

Most spells of unemployment are short, but most unemployment observed at any given time is long-term Ex. say you have four people unemployed - 1 changed every week but the rest stay there for a year 95 total is short vs 75 at moment is long

Advocates of Unions

Necessary antidote to market power of firms Extreme example of company town Unions important for helping firms respond efficiently to workers concerns Unions represent workers' views Keep happy and productive workforce

not eligible for unemployment insurance vs. eligible

Not eligible: Unemployed who quit, were fired for cause, or just entered labor force Eligible: Benefits for unemployed laid off because employers don't need their skills anymore

Public Policy critics

Question if government should be involved with job search Private market match workers and jobs is better Most job search is like this Worker education is done privately (schools or on job) Government is no better and probably worse at getting right information to right workers and what worker training is most valuable

sanderson thoughts on length of unemployment benefits

Sanderson thinks there is an argument that period of unemployment benefits is too low at 26 weeks → there are few people who are unemployed for 26 weeks which means there are less people taking advantage of these benefits (most people unemployed are in the short term looking)

Why unemployment insurance has adverse effects and why its not necessarily bad policy and what economists think

TEN PRINCIPLES: people respond to incentives Less likely to seek not so great job Why the policy is not necessarily bad: Reduces income uncertainty workers face Incentive to turn down unattractive jobs → better jobs Some economists argue unemployment insurance allows for a better fit between worker and job Economists agree no unemployment insurance → less unemployment, but do not agree on which would be better for economic well-being

Why is there Always Unemployment

Takes time for workers to search for jobs that are best suited to them Frictional unemployment: unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skill Finite number of jobs not enough to everyone that wants one Occurs when quantity of labor supplied > quantity labor demand Structural unemployment: unemployment that results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one Happens when wages set above level bringing supply and demand to equilibrium

Why are these low wages so low?

Technological changes have increased value of higher skilled work and reduced value of lower skilled work Globalization → lower skilled American workers compete with other countries' competitors

Women increase in labor force reasons

Technology: dishwasher, washing machine help women at home → reduce time to complete routine household tasks Birth Control: reduce number children Changing Political and Social Attitudes After WWII: 33 % women look for work, 2015 rose to 57%

Job search

The process by which workers find appropriate jobs given their tastes and skills

typical benefits for unemployment

Typical worker gets 50% of former wages for 26 weeks

today number of unemployed

US jobless claims hit 6.6million

Critics of Unions

Unions reduce quantity of labor demanded Cause some workers to be unemployed Reduce wages elsewhere Allocation of labor is inefficient and inequitable Inefficient: high union wages reduce unemployment in unionized firms Inequitable: some workers benefit at expense of others

stats on employment and labor force participation

Women: Women from 25-54(prime working age) have lower labor force participation than men, but they have similar rates of unemployment Blacks: prime-age blacks have similar labor participation as whites but higher unemployment rates Teenagers: lower rates of participation and higher rates of unemployment than older workers

Various Measures of unemployment: You 1, 2, 3, 4, 5, 6

You 1: Persons unemployed 15 weeks or longer / labor force 1.3% You 2: completed temporary jobs You 4: You 3 + discouraged workers You 6: Everybody 8.7% Canada uses something close to you 4 Bernie and Donald quote high unemployment which was you 6

men decline in labor force reasons

Young men stay in school longer Older men retire earlier and live longer More stay at home fathers (All these are counted as not in labor force)

Unemployment insurance

a government program that partially protects workers' incomes when they become unemployed (increases amount of frictional unemployment)

union

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

Efficiency Wages

above-equilibrium wages paid by firms to increase worker productivity

Labor force

all employed and unemployed workers

sectoral shifts

changes in the composition of demand among industries or regions

reasons for unemployment

efficiency wages, job search, minimum wages, and unions

right to worker laws

give workers in a unionized firm the right to choose whether to join the union

Costs of Unemployment

loss of dignity loss of output human capital cost unemployment breeds crime and poverty

long term unemployment for US

not a big or serious issue (not a non-issue) For European countries (Italy for example), it is a serious issue Youth unemployment in US - not a big issue (not talking about teenagers necessarily, but early twenties too) Spain, Greece and Italy this is huge problem Minority Unemployment in US Recently: Labor Force Participation rate (LFPR) has been declining

job creation recently

shed 701,000 jobs in March: not only did we not create net of 145,000, but we lost a net of 701 thousand and the unemployment rate for Feb had been 3.5 and today it's 4.4 (pretty nuts for month to month)

Strike

the organizing withdrawal of labor from a firm by a union

Collective bargaining

the process where unions and firms agree on the terms of employment

Why efficiency wages?

worker health, turnover, quality, effort