Econ 2105 - Chpt. 10

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The Bureau of Labor Statistics places people in the "employed" category if they:

are temporarily absent from their jobs.
are self-employed.

work without pay in a family member's business.

All of the above are correct.

For the Bureau of Labor Statistics to place someone in the "unemployed" category, that person must:

have worked 10 or fewer hours during the previous week.
have tried to find employment during the previous year.
not have been laid off.

None of the above is correct.

Who is included in the labor force by the Bureau of Labor Statistics?

Azibo, a homemaker not looking for other work
Kwamie, a full-time student not looking for work
Geroy, who does not have a job, but is looking for work

Geroy, who does not have a job, but is looking for work

Ipo did not work last week because flooding forced an evacuation of her workplace. The Bureau of Labor Statistics counts Ipo as

employed and in the labor force.

Zeeman is a college student who is not working or looking for a job. The Bureau of Labor Statistics counts Zeeman as

neither in the labor force nor unemployed.

In 2004, based on concepts similar to those used to estimate U.S. employment figures, the Canadian adult non-institutionalized population was 25.022 million, the labor force was 16.956 million, and the number of people employed was 15.864 million. According to these numbers, the Canadian labor-force participation rate and unemployment rate were about

67.8% and 6.4%.

Suppose that the adult population is 4 million, the number of unemployed is 0.25 million, and the labor-force participation rate is 75%. What is the unemployment rate?

8.3%

Suppose some country had an adult population of about 50 million, a labor-force participation rate of 60 percent, and an unemployment rate of 5 percent. How many people were unemployed?

1.5 million

Some persons are counted as out of the labor force because they have made no serious or recent effort to look for work. However, some of these individuals may want to work even though they are too discouraged to make a serious effort to look for work. If these individuals were counted as unemployed instead of out of the labor force, then

both the unemployment rate and labor-force participation rate would be higher.

An economy's natural rate of unemployment is:

the economy's long-run target level of unemployment.
the amount of unemployment that the economy normally experiences.
the lowest rate of unemployment the economy can achieve.

All of the above are correct.

Cyclical unemployment:

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.

the amount of unemployment that the economy normally experiences.

When a minimum-wage law forces the wage to remain above the level that balances supply and demand, the result is a

surplus of labor and a shortage of jobs.

Wages in excess of their equilibrium level help explain

both structural unemployment and the natural rate of unemployment.

In Belgium, Norway, and Sweden, the percentage of workers who belong to unions is

greater than it is in the United States.

If minimum-wage laws, unions, efficiency wages, and all other factors that could prevent wages from reaching equilibrium were eliminated, then there would be no

structural unemployment

Suppose that efficiency wages become more common in the economy. Economists would predict that this would

decrease the quantity demanded and increase the quantity supplied of labor, thereby increasing the natural rate of unemployment.

Sectoral changes

it may be in the best interest of firms to offer wages that are above the equilibrium level

The theory of efficiency wages explains why

it may be in the best interest of firms to offer wages that are above the equilibrium level.

Efficiency-wage theory suggests that paying

high wages might be profitable because they raise the efficiency of a firm's workers.

Quinn, the CEO of a corporation operating in a relatively poor country where wages are low, decides to raise the wages of her workers even though she faces an excess supply of labor. Her decision

might increase profits if it means that the wage is high enough for her workers to eat a nutritious diet that makes them more productive.

Labor Force Statistics

Produced by Bureau of Labor Statistics (BLS), in the U.S. Dept. of Labor Based on regular survey of 60,000 households Based on "adult population" (16 yrs or older)

Employed

paid employees, self-employed, and unpaid workers in a family business

Unemployed

people not working who have looked for work during previous 4 weeks

Not in the labor force

everyone else

the Labor Force

the total # of workers, including the employed and unemployed.

Unemployment Rate

Unemployed/Labor Force, the percentage of the work force that is unemployed at any given date

Labor Force Participation Rate

Labor Force/Population, the percentage of the adult population that is in the labor force

Discouraged Workers

people who are available for work but have not looked for a job during the previous four weeks because they believe no jobs are available for them

The Unemplyment Rate has Issues in which

It excludes the discouraged workers, does not distinguish between Full Time & Part Time work or people who work Part time cause Full time is unavailable, and Some people misreport their status in the survey

Natural Rate of Unemployment

normal rate of unemployment around which the unemployment rate fluctuates

Cyclical Unemployment

the deviation of unemployment from its natural rate

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

occurs when there are fewer jobs than workers

Job Search

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

Sectoral Shift

a change in the composition of demand among industries or regions

Unemployment Insurance (UI)

gov't programs that partially protect workers' incomes when they become unemployed. increases frictional unemployment. benefits end when a worker takes a job.

Reason Wages are above equilibrium

Minimum Wage Laws, Unions, Efficiency Wages,

Minimum Wage Laws

May exceed the eq'm wage for the least skilled or experienced workers, causing structural unemployment. But this group is a small part of the labor force, so the min. wage can't explain most unemployment.

Unions

An association of workers, formed to bargain for better working conditions and higher wages.

Efficiency Wages

wages that employers set above the equilibrium wage rate as an incentive for better employee performance,

Four reasons for Efficiency Wages

Worker Health, Worker Turnover, Worker Quality, Worker Health

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