Chapter 11 Unemployment and Labor Force Participation
True or False: finding a job with a good employer and wage takes time
True
True or False: hiring and firing costs increase long-term unemployment
True
True or False: some unemployment is a necessary consequence of economic growth?
True
Are new jobs being created?
Yes like software and engineering
Who are unemployed workers?
an adult who does not have a job but is looking for work
What is a union?
association of workers that collectively bargain with employer over wages and benefits, provide value for workers and employers
What three things do you have to add to adult non-institutionalized civilians to get the total population?
children, military, and institutionalized people
Is structural unemployment better or worse in Europe compared to the US and why?
it is worse because of its labor regulations (unemployment benefits, high minimum wage, unions, and employment protection laws)
What two things can affect labor force participation?
life cycle effects and demographics
What are some effects of structural unemployment?
loss of economic output, high stress, suicide, and low happiness
________ discourage work while ____________ and ____________ encourage it
taxes, benefits and incentives
What is a discouraged worker?
they have given up look for work but still want a job, have looked in the past year but not the last month for a job
What are four requirements to be considered unemployed?
16 years or older non-institutionalized (not in prison) civilian looking for work
Is frictional unemployment a large or small share of total unemployment?
Large
What does unemployment say about the economy?
Means the economy is under performing
What is the underemployment rate?
includes part-time workers who would rather be full time
What two things drive progress by creating and destroying jobs?
innovation and competition
What are two difficulties in measuring the underemployment rate?
it doesn't measure the quality of jobs or how well the workers are matched to their jobs It is difficult to measure and define partial employment
How do you calculate the unemployment rate?
it is the percentage of labor force without a job divide the number of unemployed workers by the labor force times 100
Who makes up adult non-institutionalized civilians?
Adults in the labor force and adults not in the labor force
What is Keynesian persuasion on cyclical unemployment?
Believed cyclical unemployment is caused by deficiencies in AD
Does the US or Europe have a higher minimum and median wages and what is the effect of this?
Europe's are higher and these create unemployment because it is expensive to hire workers
True or False: long-term unemployment cannot be financially and psychologically devastating
False
True or False: cyclical unemployment increases and decreases slowly within months
False- increases and decreases dramatically
Does the unemployment rate increase or decrease during a recession? Explain what happens
Increase GDP is falling and firms lay people off Idle labor and capital hurt ability to make jobs cyclical unemployment occurs
Is unemployment a complete or incomplete indicator of the economy and why?
It is an incomplete indicator because it doesn't include discouraged or underemployed workers
What effects can excessively strong unions have?
Similar to min wage, cause more unemployment because hiring is risky
What is happening to certain jobs like farming or blacksmiths?
Some are declining and others are disappearing
How do you calculate labor force participation rate?
divide the labor force number by the amount of adult non-institutionalized civilians
What are some causes of structural unemployment?
economy-wide shocks, globalization, and new technology
Who makes up the labor force?
employed and unemployed adults
What is employment at will doctrine?
employee may quit or can be fired at any time for any reason (there are some exceptions)
What decreases unemployment?
faster growth in real GDP
What is the labor force participation rate?
percentage of adults in labor force and is measured to determine the labor resource base for a country
What is structural unemployment?
persistant, long-term unemployment caused by lasting shocks of an economy that makes it hard to find jobs
What is the natural unemployment rate?
rate of structural plus frictional unemployment
What is frictional unemployment?
short-term unemployment caused by difficulties of matching employee to employer
Is the number of discouraged workers small or large in comparison to unemployed workers?
small
What are four effects of the employment at will doctrine?
valuable insurance for full-time workers labor markets are less flexible and dynamic increase duration of unemployment increase unemployment in young and minorities
What are active labor market policies?
work tests, job assistance, job retraining that focus on getting the unemployed back to work
