Econ 201 ch 30

The overall population for Region A is 89 million people. The labor force contains 41 million people, 35 million people are employed, and 6 million are unemployed. What is the unemployment rate?

14.63%- divide unemployed by labor force (6 million/41 million)

*Part 2* Suppose 286 of the 462 unemployed people have been unemployed for so long that they stop looking for work. What is the new labor force? What is the new labor force participation rate? What is the new unemployment rate?

What is the new labor force?- 6,081 [Employed(6367)+ New Unemployed(462-286=176)] What is the new labor force participation rate?- 87.52% [New Labor Force(6,081)/Population(6948)] What is the new unemployment rate?- 2.89% [New Unemployed(176)/New Labor Force(6,081)]

employment at will doctrine

decreases unemployment rate- says an employee may quit and an employer may fire an employee at any time and for any reason. The introduction of the doctrine makes the job market more flexible

take-home pay

the amount of income left after taxes and other deductions are taken out of your gross pay

Creative Destruction

the creation of new products and production methods completely destroys the market positions of firms that are wedded to existing products and older ways of doing business

median wage

the middle wage when wages of all workers are ranked from lowest to highest

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

Employed- Those who have worked in the previous week, those temporarily away from a job due to illness or on vacation Unemployed- those who don't have a job but have been actively looking in the past 4 weeks Not in the labor force- people in prison, retirees, mentally institutionalized, actively hooked, military, student, homemaker, those who have been looking for a job in the past 12 months but not in the past 4 weeks

Assume there is a global recession and millions of workers are laid off, yourself included. 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

[Hardest to find a job] Bolivia Spain Austria Denmark United Kingdom United States [Easiest to find a job]

Which of the choices is most directly related to cyclical unemployment? a. recessions b. the age distribution of the country c. an increase in the number of new college graduates looking for work d. an increased use of the Internet for job searches

a. recessions

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 categorized under a. structural unemployment. b. cyclical unemployment. c. frictional unemployment.

a. structural unemployment. (The typewriter industry is no longer used for word processing by most if not all companies in the world today. As such, the workers lose their jobs as a result of structural unemployment due to the permanent shift in the economy.)

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: a. increase as the baby boomers will continue to work while in the influx of young workers will drive up the participation rate. b. decrease since the baby boomers will opt for more leisure. c. not change since every retiree will have a new worker replace them. d. increase since the baby boomers will opt for more leisure.

b. decrease since the baby boomers will opt for more leisure.

The natural rate of unemployment equals a. frictional unemployment plus cyclical unemployment. b. frictional unemployment plus structural unemployment. c. structural unemployment minus cyclical unemployment. d. cyclical unemployment plus structural unemployment. e. frictional unemployment plus discouraged workers.

b. frictional unemployment plus structural unemployment.

How does a country's rigidity of employment index correspond to the amount of long-term unemployment for that nation? a. the smaller the index number, the greater the short-term unemployment b. the larger the index number, the greater the long-term unemployment c. the larger the index number, the greater the short-term unemployment d. The smaller the index number, the greater the long-term unemployment

b. the larger the index number, the greater the long-term unemployment

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. A country where the minimum wage is set at 1% of the median wage. b. A country where the minimum wage is set at 10% of the median wage. c. A country where the minimum wage is set at 60% of the median wage. d. A country where the minimum wage is set at 95% of the median wage.

d. A country where the minimum wage is set at 95% of the median wage. (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 unmemployment than the other option)

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

cyclical unemployment

unemployment that rises during economic downturns and falls when the economy improves

After a financial crisis hits the country of Barbaria, 7 million people become unemployed. If 25 million individuals are lucky enough to keep their jobs, what is the unemployment rate?

21.88%- divide unemployed by labor force 7 million + 25 million = labor force (32 million) 7 million/32 million = 21.88%

frictional unemployment

A type of unemployment caused by workers voluntarily changing jobs and by temporary layoffs; unemployed workers between jobs.

The hypothetical data in the table below displays the percentage that unemployment benefits replace take-home pay for workers in different countries. Belgium75%70%61% Finland70%60%55% Italy54%50%22% Australia40%25%10% Which country would you expect to have the lowest long-term unemployment rate? Finland Australia Italy Belgium

Australia (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.)

Consider the table, which shows the annual salary for several workers. WorkerSalary Chuck$35090 Ade$22690 Gwen$60420 Sophie$14220 Tony$361460 Calculate the median wage.

Chuck $35090- middle wage when wages of all workers are ranked from lowest to highest

Classify each scenario according to whether it is an example of an active employment at-will doctrine.

Employment-at-will: -Cathy decides to quit because she cannot tolerate eight kids at once, and she can do so shortly after starting the job. -Katherine gets fired for a relatively minor mishap, but under employment at will, she can be fired for any reason. Not Employment-at-will: -Tenured professors cannot be fired without the consent of the professor. -Additional clauses can be added to give workers benefits even after they are no longer with the company, or even to restrict workers from pursuing other oppurtunities should they accept a contractural clause -Workers cannot legally be hired or fired on the sole basis of sex, age, religion, sexual orientation, race, or disability status.

Labor union influence on unemployment rate

Increase unemployment rate- Strong unions make labor more expensive

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 unemployment rate- increase in min wage, increase in union's influence Decrease unemployment rate- decreased unemployment benefits, employment-at-will doctrine

*Part 1* The table shows employment statistics for a fictional country. Use the information to answer the questions. Round your percentages to two decimal places. CategoryNumber of people: Employed- 5905 Unemployed- 462 Not in the labor force-581 What is the total labor force? What is the labor force participation rate? What is the unemployment rate?

What is the total labor force?- 6367 [Employed(5905)+ Unemployed(462)] What is the labor force participation rate?- 91.64% [Labor force(6367)/Total Population(6948)] What is the unemployment rate?- 7.26% [Unemployed(462)/Labor Force(6367)]

Please match each scenario with the term it best identifies.

Work tests are when government requires recipients of unemployment benefits to show that they are trying to become employed. Governments do not want to continue paying out money to people who are not actively trying to find work. Governments can also provide job-search assistance in various ways to help the unemployed find jobs. In this example, the government creates a new job bank for people to find job postings. Early employment bonuses are a monetary incentive given by some countries in which unemployed workers get a check from the government if they are able to find another job quickly. Chelsea, despite already trying to get a job, gets an even bigger incentive (money) to find a job early, and does. Job retraining is when the government pays for unemployed workers to become trained in a new field in the hope that they can find new jobs. Simon is retrained as a medical technician in order to get back into the workforce through a government-sponsored program.Please match each scenario with the term it best identifies.

Suppose the civilian noninstitutionalized working-age population is 35.9 million in in a hypothetical economy. Of these, 4.4million 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. What is the size of the total labor force? How many people are unemployed? What is the labor force participation rate? What is the unemployment rate?

a. 22.71 million [Unemployed(5.12)+Part time workers(4.4)+Full time workers(13.19)] b. 5.12 million [Those who have looked for work in the last 4 weeks(3.40+1.72)] c. 63.26% [Labor force(22.71)/Population(35.9)] d. 22.55% [Unemployed(5.12)/Labor Force(22.71)]

Which of the choices is the best example of creative destruction? a. In the past month, there were 20,000 layoffs but 22,000 new hires. b. An antitrust suit is filed in court against a monopolist. c. A chemical plant decides to use a new process in their reactions, which after combustion results in large amounts of pink smoke being emitted to the nearby town and consequent fires in the chemical plant. d. The prime minister signs into law that the minimum wage will go down by 50 cents.

a. In the past month, there were 20,000 layoffs but 22,000 new hires. (Creative destruction is a term coined by economist Joseph Schumpeter that describes how economic development (or in this case employment) can come out of the destruction of a prior economic order. The creation of new industries from old ones and the creation of new jobs while old ones disappear are both examples of this)

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? a. The hiring and firing costs are lower in Europe than the United States. b. During a period of increased demand, European firms are more likely to hire more workers. c. Europe has a lower rate of long-term unemployment than the United States. d. The labor market in Europe is less flexible than in the United States.

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

Which of the factors would decrease the rate of frictional unemployment? a. increased short-term unemployment benefits. b. improvements in technology that make skills which were once valued by employers obsolete c. an increase in the number of jobs available due to an increase in GDP d. the advent of the Internet, which makes finding available jobs easier When the economy is doing well, a significant share of unemployment is frictional: false/true

d. the advent of the Internet, which makes finding available jobs easier True