Chapter 10 - Unemployment

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Bureau of Labor Statistics

- produces data on unemployment, length of the avg workweek, and duration of unemployment every month (survey of 60,000 households)

Employed

work as paid employees, in own business, unpaid worker in family business (part time full time, were not working but had jobs that they were temporarily absent from)

Unemployed

those who were not employed, were available for work, and had tried to find employment during the previous 4 week

Not in labor force

full time student, homemaker, or retired

Labor force

total number of workers

Labor force =

number employed + number unemployed

Unemployment rate =

# of unemployed/labor force

Labor force participation rate =

labor force/adult population

Natural rate of unemployment

the normal rate of unemployment around which the unemployment rate fluctuates

Cyclical unemployment

the deviation of unemployment from its natural rate

Does unemployment rate measure what we want it to?

hard to distinguish b/w a person who is unemployed and a person not in the labor force, more than 1/3 of unemployed are recent entrants into the labor force, almost 50% leave labor force because they cannot find employment

Unemployment statistics difficult to prove:

unemployed may not be trying hard to get a job, calling themselves unemployed to qualify for government programs, working but paid "under the table" to avoid taxes

Discouraged workers

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

Ideal labor market

wages would adjust to balance the quantity of labor supplied and demanded

Frictional unemployment

results because it takes time for workers to search for the jobs that are best suited for them

Structural unemployment

when a quantity of labor supplied exceeds quantity of labor demanded (often thought to explain longer spells of unemployment)

Job search

the process by which workers find appropriate jobs given their tastes and skills

Sectoral shifts

changes in the composition of demand among industries or regions

Unemployment insurance

a government program that partially protects workers' incomes when they become unemployed (increases frictional unemployment, 50% of former wages for 26 weeks)

Minimum wage laws

surplus of labor because minimum wage is greater that equilibrium

Unions

worker associations that bargain with employers over wages, benefits, and working conditions (wages are not determined by equilibrium)

Collective bargaining

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

Strike

an organized withdrawal of labor from a firm by a union (reduced production, sales, and profit)

Wagner Act of 1935

prevents employers from interferring in unions and bargain with unions in good faith

NLRB

enforces workers right to unionize

Efficiency wages

above equilibrium wages paid by firms to increase worker productivity

Worker health

better paid workers eat a more nutritious diet, making them healthier and more productive

Worker turnover

the more a firm pays its workers, the less often they will choose the leave, reducing turnover

Worker quality

when a firm pays a high wage, it attracts a better pool of workers to apply for its jobs and increases the quality of workforce

Worker effort

higher wages make workers more eager to keep their jobs and thereby give workers an incentive to put forward their best effort

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