Unit 15 definitions and knowledge

Technology

A process taking a set of materials and other inputs, including the work of people and machines, to produce an output.

Unemployment

A situation in which a person who is able and willing to work is not employed.

Population of working age

A statistical convention, which in many countries is all people aged between 15 and 64 years.

Inclusive trade union

A union, representing many firms and sectors, which chooses not to exercise its maximum bargaining power because it takes into account the consequences of wage increases for job creation in the long run.

Taylorism

Innovation in management, seeking to reduce labour costs by dividing once skilled jobs into separate less skilled tasks so as to lower wages, and by other means. Named after the American engineer Frederick Taylor, author of the 1911 book The Principles of Scientific Management.

Capital goods

Machinery, equipment and structures used in the production of goods or services.

Capital productivity

Output per unit of capital good.

Inactive population

People neither employed nor actively looking for paid work. Those working in the home raising children, for example, are not considered as being in the labour force and therefore are classified in the labour force statistics as "inactive".

Innovation rents

Profits in excess of economic profits that an innovator gets by introducing a new technology, organisational form or marketing strategy. Also known as: Schumpeterian rents.

Countercyclical

Tending to move in the opposite direction to aggregate output and employment over the business cycle. Opposite to: Procyclical.

Procyclical

Tending to move in the same direction as aggregate output and employment over the business cycle. Opposite to: Countercyclical.

Profit curve

The curve showing the real wage in the economy as a whole such that firms receive the economic rate of profit.

Wage curve

The curve showing the real wage in the economy as a whole that has to be paid at a given level of employment or employment rate to secure adequate worker effort.

Gross unemployment benefit replacement rate

The proportion of a worker's previous gross (pre-tax) wage that is received (gross of taxation) when unemployed.

Employment rate

The ratio of the number of employed to the population of working age. See also: Population of working age.

The Beveridge curve

The relationship between the unemployment rate and the job vacancy rate (each expressed as a fraction of the labour force). The inverse relationship was named after the British economist William (Lord) Beveridge.

Long run

The term does not refer to a period of time, but instead to what aspects of the problem under study are assumed to remain unchanged, and which ones change. In the short run, most things are assumed to be unchanging. In the context of unemployment, long run means a period long enough so that new firms can enter an industry and old firms can leave, the stock of capital goods in the economy can grow or decline and new technologies can be introduced. See also: Short-run equilibrium.

Labour productivity

Total output divided by the number of hours of labour input.