ECON 202 Chapter 10

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.

Labor-market experiences: Teenagers

-Lower rates of labor-force participation -Much higher rates of unemployment than older workers

Some of those who report being unemployed

-May not be trying hard to find a job. -Want to qualify for government help -Working but being paid "under the table"

The bureau of labor statistics: 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.

Frictional unemployment is inevitable

-Changes in demand for labor among different firms -Changes in composition of demand among industries or regions (sectoral shifts) -Changing patterns of international trade (workers need to move among industries) -the economy is always changing

Movements into and out of the labor force

-Common -More than one-third of unemployed, recent entrants into the labor force

Worker turnover

-Firm can reduce turnover among its workers by paying them a high wage

Who is counted to be out of the labor force?

-Full-time students, retirees -Stay-at-home dads

Unemployment insurance

-Government program -Partially protects workers' incomes when they become unemployed -Increases frictional unemployment without intending to do so -Qualify - only the unemployed who were laid off because their previous employers no longer needed their skills -50% of former wages for 26 weeks -Reduces the hardship of unemployment -Increases the amount of unemployment Unemployment benefits stop when a worker takes a new job Unemployed Devote less effort to job search More likely to turn down unattractive job offers Less likely to seek guarantees of job security

Government programs to facilitate job search

-Government-run employment agencies -Public training programs

1950 data on labor force participation

-33% of women were working or looking for work -87% of men were working or looking for work

2015 data on labor force participation

-57% of women were working or looking for work -69% of men were working or looking for work

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)

Worker effort

-High wages make workers more eager to keep their jobs -Give workers an incentive to put forward their best effort.

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. -Most of the economy's unemployment problem is attributable to the relatively few workers who are jobless for long periods of time.

Why have women's roles in American society changed dramatically over the past century?

-New technologies (reduce 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

Natural rate of unemployment

-Normal rate of unemployment around which the unemployment rate fluctuates

Unemployment

-Not all unemployment ends with the job seeker finding a job. -Half of all spells of unemployment end when the unemployed leaves the labor force.

Not in the labor force

-Not employed -Full-time students -Homemakers -Retirees

Strike

-Organized withdrawal of labor from a firm by a union -Reduces production, sales, 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/Adult population x100

Job search

-Process by which workers find appropriate jobs given their tastes and skills -Workers differ in their attributes, tastes, and skills -Information about job candidates and job vacancies is disseminated slowly.

Structural unemployment

-Results because 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.

Labor-market experiences: Blacks of prime working age

-Similar rates of labor-force participation as prime-age whites. -Much higher rates of unemployment.

Unemployed

-Those who were not employed (available for work, tried to find employment during previous four weeks) -Those waiting to be recalled to a job (laid off)

Official employment rate

-Useful -Imperfect measure of joblessness

Labor-market experiences

-Women of prime working age (25 to 54 years old)(Lower rates of labor-force participation than men) -Once in labor force, men and women have similar rates of unemployment.

union

-Worker association -Bargains with employers over wages, benefits, and working conditions -Only 11% of U.S. workers today are in unions (about 33% in 1940s-50s) -Type of cartel

What has caused the change 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 stay at home to raise their children.

Worker quality

-firm pays a high wage which attracts a better pool of workers -increases the quality of its workforce

Wages may be kept above equilibrium level

-minimum-wage laws -Unions -Efficiency wages

Employed

-those who worked (paid employees, have their own business, unpaid workers in a family business) -Full and part-time workers -Temporarily absent (vacation, illness, bad weather)

Unemployment rate never falls to

-zero -Fluctuates around the natural rate of unemployment.

Efficiency wages

Above-equilibrium wages paid by firms to increase worker productivity -Worker health; worker turnover -Worker quality; worker effort

Workers not in unions

Bear some of the cost

Worker health

Better paid workers -Eat a more nutritious diet -Healthier and more productive

Cyclical unemployment

Deviation of unemployment from its natural rate.

Union workers

Earn 10-20% more than similar workers who do not belong to unions.

Supply of labor in industries not unionized will

Increase, lower wages

Discouraged workers

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

What does a union do to the wage?

It raises it above the equilibrium level. -higher quantity of labor supplied -smaller quantity of labor demanded -unemployment -better off: insiders (employed workers) -worse off: outsiders (unemployed) may stay unemployed, take jobs in firms that are not unionized

Unemployment rate

Percentage of labor force that is unemployed Number of unemployed/Labor force x100

Collective bargaining

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

If the wage is kept above the equilibrium level

Results in unemployment

Labor force

Total number of workers, employed and unemployed. Labor force=employed+ unemployed

Structural unemployment says that the number of jobs is

insufficient

The bureau of labor statistics: Discouraged workers

marginally attached workers who have given a job-market related reason for not currently looking for a job

Workers in unions

reap the benefit of collective bargaining

Reduced time for unemployed to find jobs

reduces the natural rate of unemployment

The bureau of labor statistics: 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.