Econ Chapter 28: Unemployment

Unemployment Rate

the percentage of the labor force that is unemployed # of unemployed/ Labor Force X 100

Unemployed

Those who are not employed, were available for work, and had tried to find employment during the previous four weeks

Not in the Labor Force

Those who fit neither of the other 2 categories,. - Students - Homemakers - Retirees

Minimum Wage Laws

- Matters most for least skilled and least experienced workers - If the wage is kept above equilibrium level for any reason, the result is unemployment - Wage is above equilibrium= people are unemployed because they are waiting for jobs to open up

How long does unemployment last?

- Most spells of unemployment are short, and most unemployment observed at any given time is long term - most of the economies unemployment problem is attributable to the relatively few workers who are jobless for long periods of time

Public Policy and Job Search

- The internet helps facilitate job search and decreases frictional unemployment because it speeds up the information process Governments help facilitate job search with job agencies and public training programs

Are Unions good or bad?

- They are inefficient because high union wages reduce employment in unionized firms below efficient - Some workers benefit at the expense of others

Union Workers

- Union workers tend to earn 10%-20% more than non union workers - Unions can raise wage above equilibrium which leaves some workers unemployed - as a result when unions raise wages in one part of the economy, supply of labor increases in other parts of the economy- which lowers wages in that part of the economy

Benefits of efficiency wages

- Worker health - Worker Turnover - Worker Quality - Worker Effort

Unemployment Insurance

A government program that partially protects workers incomes when they become unemployed - increases frictional unemployment - Causes unemployed to put less effort into finding a job and turn down attractive jobs

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 - states firms may be better off keeping wages above equilibrium

Wagner Act

Prevents employers from interfering when workers try to organize unions and requires them to negotiate in good faith

Why some Frictional Unemployment is Inevitable

Sectorial shift- changes in the composition of demand among industries or regions - Frictional unemployment is inevitable because the economy is always changing

Strike

The organized withdrawal of labor form a firm by a union - if strike happens employers usually end up paying higher wages than they normally would

Labor Force Participation Rate

The percentage of the adult population that is in the labor force Labor force/ Adult population X 100

Collective Bargaining

The process by which unions and firms agree on the terms of employment

Labor Force

The total number of workers, including both employed and unemployed # of employed + # of unemployed

Employed

Those who worked as paid employees, worked in own business,or worked as unpaid workers in a family members business - both full time and part time - includes those who were not working but have jobs and are temporarily absent (illness, vacation)

Frictional Unemployment

Unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills

Structural Unemployment

Unemployment that results because the number of jobs available in some labor markets is insufficient to provide a job to everyone who wants one - thought to explain long unemployment - when wages are set above the level that brings supply and demand into equilibrium - Happens because of minimum wage laws, unions, and efficiency wages

Discouraged Workers

individuals who would like to work but have given up looking for a job

Natural rate of unemployment

amount of unemployment that the economy naturally experiences

Cyclical Unemployment

the deviation of unemployment from its natural rate

Job Search

the process by which workers find appropriate jobs given their tastes and skills - One reason why economies always have unemployment