econ 202 chapter 10
If an unemployed person quits looking for work, then, eventually the unemployment rate
and the labor-force participation rate both decrease.
The invention of the telegraph led to the loss of jobs for those who had delivered mail by horse but created jobs for telegraph operators and delivery persons. This is an example of
frictional unemployment created by sectoral shifts.
Unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills is called
frictional unemployment.
Who of the following is counted as "unemployed" by the Bureau of Labor Statistics?
someone on temporary layoff
Persons employed part-time for economic reasons
want and are available for full-time work but have had to settle for a part-time schedule
The natural rate of unemployment is the
amount of unemployment that the economy normally experiences.
Strike
- Organized withdrawal of labor from a firm by a union - Reduces production, sales, and profit
Labor-force participation rate
- Percentage of the total adult population that is in the labor force - Fraction of the population that has chosen to participate in the labor market - Labor−force participation rate = (labor force / Adult Population) x 100
Blacks of prime working age
- Similar rates of labor-force participation as prime-age whites - Much higher rates of unemployment
2014, minimum wage
$7.25 per hour
Efficiency wages
- Above-equilibrium wages paid by firms to increase worker productivity - Worker health; Worker turnover - Worker quality; Worker effort
Minimum-wage workers
- Are more likely to be female - Tend to be young - Tend to be less educated - Are more likely to be working part-time - Over half of all workers paid at or below the minimum wage were employed in leisure and hospitality (earn tips)
Unemployment insurance
- Government program - Partially protects workers' incomes - When they become unemployed - Increases frictional unemployment -may improve the ability of the economy to match workers with appropriate jobs. - reduces the job search efforts of the unemployed. - increases the amount of frictional unemployment in the economy.
Frictional unemployment
- It takes time for workers to search for the jobs that best suit their tastes and skills - Explain relatively short spells of unemployment
Teenagers
- Lower rates of labor-force participation - Much higher rates of unemployment than older workers
How long are the unemployed without work?
- Most spells of unemployment are short - Most unemployment observed at any given time is long-term - Most people who become unemployed Will soon find jobs
Union
- Worker association - Bargains with employers over -Wages, benefits, and working conditions - Only 11% of U.S. workers today - About 33% in the 1940s and 1950s - Type of cartel - raises the wage above the equilibrium level - raise the wages of unionized workers and raise unemployment
Which of the following causes of unemployment is associated with a wage rate above the market equilibrium level?
- efficiency wages - minimum-wage laws - unions
Who of the following is not counted as "unemployed" by the Bureau of Labor Statistics?
- someone working without pay for a family member's business - someone who is absent from their job due to illness
who is not eligible for unemployment insurance benefits
- the unemployed who quit their jobs - the unemployed who were fired for cause - the unemployed who just entered the labor force
Who of the following are included in the Bureau of Labor Statistics' "employed" category?
- those who worked in their own business - those who worked as unpaid workers in a family member's business - those who were temporarily absent from work because of vacation
Frictional unemployment can be the consequence of
- workers leaving existing jobs to find ones they like better. - one industry declining while another is growing. - changes in the working conditions offered by competing firms.
Worker health
Better paid workers Eat a more nutritious diet Healthier and more productive
Minimum-wage laws
Can cause unemployment Forces the wage to remain above the equilibrium level -Higher quantity of labor supplied - Smaller quantity of labor demanded - Surplus of labor = unemployment
Women's role in American society
Changed dramatically over the past century New technologies - Reduced the amount of time required to complete routine household tasks Improved birth control - Reduced the number of children born to the typical family Changing political and social attitudes
sectoral shifts
Changes in composition of demand among industries or regions
Cyclical unemployment
Deviation of unemployment from its natural rate - has a different explanation than does the natural rate of unemployment. - refers to the year-to-year fluctuation in unemployment around an economy's natural rate of unemployment. - is closely associated with short-run ups and downs of economic activity.
Worker effort
High wages - make workers more eager to keep their jobs Give workers an incentive to put forward their best effort
Women of prime working age (25 to 54 years old)
Lower rates of labor-force participation than men
Natural rate of unemployment
Normal rate of unemployment around which the unemployment rate fluctuates 4.9% in 2015 (close to the actual unemployment rate of 5.3%)
Not in the labor force
Not employed and not unemployed Full-time students Homemakers Retirees
Unemployment rate
Percentage of labor force that is unemployed -Unemployment rate = (# of unemployed / Labor force) x100 - Never falls to zero - Fluctuates around the natural rate of unemployment
Collective bargaining
Process by which unions and firms agree on the terms of employment
If the wage is kept above the equilibrium level
Result: unemployment
Structural unemployment
Results because the number of jobs available in some labor markets - Is insufficient to provide a job for everyone who wants one - Explains longer spells of unemployment - Results when wages are set above the equilibrium - Minimum-wage laws, unions, and efficiency wages
Tatiana is waiting to be recalled to a job from which she was laid off. Ivan was fired but has not looked for work during the last two months. Who does the Bureau of Labor Statistics count as "unemployed"?
Tatiana but not Ivan
Unemployed
Those who were not employed - Available for work - Tried to find employment during the previous four weeks Those waiting to be recalled to a job - Laid off
Employed
Those who worked - Paid employees -Have their own business - Unpaid workers in a family member's business Full-time and part-time workers Temporarily absent - Vacation, illness, bad weather
Labor force
Total number of workers, employed and unemployed - 𝐿𝑎𝑏𝑜𝑟 𝐹𝑜𝑟𝑐𝑒=𝑒𝑚𝑝𝑙𝑜𝑦𝑒𝑑+𝑢𝑛𝑒𝑚𝑝𝑙𝑜𝑦𝑒𝑑
Fall in men's labor-force participation
Young men stay in school longer Older men retire earlier and live longer With more women employed more fathers now stay at home to raise their children
Olga owns her own business. Sven is an unpaid worker in his family's business. Who is included in the Bureau of Labor Statistics' "employed" category?
both Olga and Sven
When a union raises the wage above the equilibrium level,
both the quantity of labor supplied and unemployment rise.
Marginally attached workers
currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the recent past.
To be counted as "employed" in the U.S. labor force statistics, a person
does not have to be working for pay if they are working for a family business and does not have to be working full time
Jamarcus works part-time as a pizza delivery person in a college town. The Bureau of Labor Statistics counts Jamarcus as
employed and in the labor force.
. The labor-force participation rate tells us the fraction of the population that
has chosen to participate in the labor market.
Teenagers have more frequent unemployment spells so, on average, they spend more time searching for jobs. Other thing the same, this means that teenagers have a
higher unemployment rate. If a larger portion of the adult population were teenaged, the natural rate of unemployment would be higher.
Which of the following causes of unemployment is not associated with a wage rate above the market equilibrium level?
job search
Discouraged workers
marginally attached workers who have given a job-market related reason for not currently looking for a job.
Unemployment that results because the number of jobs available in some labor markets may be insufficient to give a job to everyone who wants one is called
structural unemployment.
Unions contribute to
structural unemployment.
Who of the following is not included in the Bureau of Labor Statistics' "employed" category?
those waiting to be recalled to a job from which they had been laid off
who is eligible for unemployment insurance benefits
the unemployed who were laid off because their previous employers no longer needed their skills
Suppose that some people report themselves as unemployed when, in fact, they are working in the underground economy. If these persons were counted as employed, then
the unemployment rate would be lower, and the labor-force participation rate would be unaffected.
To maintain their standard of living, most people rely on
their labor earnings.
Worker turnover
Firm - can reduce turnover among its workers By paying them a high wage
Worker quality
Firm - pays a high wage Attracts a better pool of workers Increases the quality of its workforce
Unemployment data are collected
through a regular survey of about 60,000 households.