Terms in this set (54)
What is the BLS and what do they do?
Bureau of Labor Statistics
Conducts the Current Population Survey (CPS)
Working Age Population is...
Total Population - Young (less than 16 yrs old) - Military - Institutionalized People
OR Labor Force - Not in Labor Force
Working-age people who are either employed or unemployed
= Employed + Unemployed
When talking about unemployment, economists used (percentage points or percents)?
Percentage points because you never know how bad unemployment rate is from a percent
If the unemployment rate has increased by 4.1 percentage points...
41 our of every 1,000 in the labor force have lost their job
Everyone who during the week of the survey had worked at least 1 hour as a paid employee or 15 hours as an unpaid employee in a family business OR a person on temporary absence (sick leave, maternity leave, vacation)
Situation where someone wants to work but cannot find job in the current market OR
Persons aged 16 years and older who had no employment during the survey week
Were available for work, except for temporary illness
Had made specific efforts to find employment sometime during the 4-wk period ending with the reference week
People who do not have jobs and are not actively looking for work or are not available for work are....
Not counted as unemployed because they are NOT in the labor force
Who's not in the labor force?
Homemakers, full-time students, retirees who choose not to or cannot work, those that cannot work from a disability or those who choose not to work
Marginally attached workers and discouraged workers
Unemployment rate equation
= (Number of unemployed / labor force) x 100
= Number of unemployed / (Employed + Unemployed) x 100
Labor-Force Participation Rate Definition
Indicates what fraction of the population wants to be working, regardless of whether or not they actually have a job
Also usually falls during the recession because some of the unemployed drop out of the labor force
Limitations of the Unemployment Rate
Does not give a good indication of how many people are marginally attached workers or underemployed workers
The unemployment rate may (understate or overstate) the effect of a recession.
During the most recent US recession, ____% of the working-age population stopped participating in the labor force.
Marginally Attached Workers
People not in the labor force who want to and are available for work and who have looked for a job in the prior 12 months but not in the 4 weeks preceding the survey
NOT counted in LF
Unemployment on a Labor Market Curve is shown as...
A triangle ABOVE the equilibrium point
Subset of Marginally Attached Workers
Persons not in the labor force who are not currently looking for a job because they believe there are no jobs available or there are none for which they would qualify
NOT counted in LF
The labor curve shows the relationship between...
Total quantity of labor supplied in the economy and the wage rate
People who are either working less than they would like or in jobs below their skill level
COUNTED as Employed
Unemployment rate _______________ as LFRP decreases.
Unemployment rate INCREASES as LFRP decreases.
When the market is at equilibrium there is or isn't unemployment?
There isn't unemployment
BUT there's always some unemployment
Unemployment occurs when the wage rate is ____________ than the equilibrium wage.
Workers are willing to provide more labor than firms are willing to hire
Labor market has a surplus of workers
Unemployment that persists in an economy in the long run
Also, rate of unemployment that occurs when the economy is operating at its potential
Frictional unemployment, Structural unemployment, Real-Wage / Classical unemployment
Caused by workers who are changing location, job or career
Takes time to search for jobs, submit applications, depends on how picky / how informed
Caused by a mismatch between the skills workers can offer and the skills in demand
Happens because of technological change, change in tastes or reallocation of jobs
Real-Wage or Classical Unemployment
Results from wages being higher than the market-clearing level (equilibrium level)
Minimum wage, unions and bargaining, effective wage
Provides basic standards of living but when wages are fixed above equilibrium wage unemployment happens
Also creates illegal jobs because people hire undocumented migrants at below-minimum wage
Nonbinding Minimum wage
Minimum wage that is set below the equilibrium wage, having no effect on equilibrium
Unions and Bargaining
Labor unions groups bargain with their employers over salaries and work conditions
Results from Real-Wage / Classical unemployment
Wages deliberately set above the market rate to increase productivity, to reduce turnover and to keep workers interested in their jobs
Unemployment caused by short-term economic fluctuations (phases of a business cycle)
Why doesn't the market come to a new equilibrium at a lower price when a recession causes the demand for labor to decrease?
Because wages are "sticky" so they are slow to respond to shifts in the economy
Why are wages sticky?
Because of minimum wage, unions and effective wage
Also, contracts are often for a year or more and wages cannot be changed as a recession starts
Employers also usually prefer to lay-off workers instead of discouraging them by cutting their wage
What effect does a recession have on Frictional Unemployment?
Ambiguous effect, may increase because it will take longer time to find a job or may decrease because labor force participation decreases (older workers retire early or young workers go back to school)
What effect does a recession have on Structural Unemployment?
No effect in the short run but in the long run there is an increase because skills of long-term unemployed workers deteriorate and some jobs move overseas during recessions and never come back
During the recession, many industries were outsourced to other countries.
True - Billing, information services and manufacturing are taken care of by workers in other countries
During the recession, many clerical and administrative jobs were created.
False, they were eliminated or automated
Factors that affect Unemployment?
Government policies, job search technologies
What government policies affect unemployment?
Minimum wage laws, unemployment insurance, taxes and workers rights, professional training programs, government-run unemployment agencies
Affects frictional unemployment
Money paid by the government to people who are unemployed
Can cause people to not look as hard for a job but if people don't rush they'll find the "right" job
Taxes on wages...
Increase unemployment because people have less incentive to find a job if they know they won't be keeping as much of their income
The degree of difficulty for firing employees can affect unemployment
Employers may be reluctant to hire people if they know it will be difficult to get rid of those people
Causes natural unemployment to rise but cyclical to decrease because of smaller fluctuations during the recession
Public Training Programs do what?
Decrease structural unemployment
Public Unemployment Agencies do what?
Decrease frictional unemployment
Technologies do what?
Decrease frictional unemployment
Counting only people who have been unemployed for a long time
Those who have recently lost their jobs or done temporary work
When someone wants to work but cannot find a job
Unemployed + Discouraged workers (workers who have looked for work in the past year but have given up looking because of the condition of the labor market)
Unemployed, discouraged & marginally attached workers (would like to work and have looked for work at some point in the last year but they don't meet the definition of unemployed because they haven't looked fro a job in the last four weeks)
Unemployed, discouraged workers, marginally attached workers and underemployed workers (unemployed people with part-time work who seek full-time jobs)
The BLS surveys approximately __________________ US households per (week, month, year)
60,000 per month
The survey is collected and analyzed (weekly, monthly, yearly) and (does or does not) adjust for seasonal changes.
Year round and IS seasonally adjusted
Countries that have more generous unemployment benefits tend to have a higher natural unemployment rate than countries with less generous unemployment benefits.