ECON 222 Ch.15

natural rate of unemployment

refers to the amount of unemployment that the economy normally experiences

cyclical unemployment

refers to the deviation of unemployment from its natural rate → closely associated with ups/downs of economic activity

unemployment rate

(# of unemployed / labor force) * 100

labor force participation rate

(labor force / adult population) * 100

unemployment and time

Most spells of unemployment are short, and most unemployment observed at any given time is long-term → most people who become unemployed will soon find jobs → most of the economy's unemployment problem, however, is attributable to the few who are jobless for long periods of time

unemployment insurance

a gov program that partially protects workers' income when they become unemployed → increases frictional unemployment → gives unemployed more time to search for better job matches and thus results in higher productivity

union

a worker association that bargains with employers over wages, benefits, and working conditions → "insiders" benefit from high union wages → "outsiders" do not get union jobs → when unions raise wages in one part of the economy, the supply of labor increases in other parts of the economy (which in turn reduces wages in industries that are not unionized)

efficiency wages

above-equilibrium wages paid by firms to increase worker productivity theory explanations include: → worker health → worker turnover → worker quality → worker effort

strike

an organized withdrawal of labor from a firm by a union

employed

category of the population includes paid employees, those self-employed, unpaid workers in family businesses

unemployed

category of the population includes those not employed, were available for work, and had tried to find employment during the previous 4 weeks also includes those waiting to be recalled from a job layoff

sectoral shifts

changes in the composition of demand across industries or regions → temporarily cause unemployment

not in the labor force

everyone else not in EMPLOYED or UNEMPLOYED categories

discouraged workers

individuals who would like to work but have given up looking for a job → do not show up in unemployment statistics, tho they are unemployed

collective bargaining

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

job search

the process of matching workers with appropriate jobs → gov employment agencies provide info about job vacancies to speed up the matching process → public training programs aim to equip workers displaced from declining industries with new skills

labor force

the total number of workers, including both the employed and unempoyed

frictional unemployment

unemployment that results because it takes time for workers to search for the jobs that best suit their taste and skills → inevitable because the economy is always changing

structural unemployment

unemployment that results because there a fewer jobs available than workers because wage is above equilibrium wage → minimum wage laws → unions → efficiency wages