Chapter 28: Unemployment

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sectoral shiftschanges in the composition of demand among industries or regionsBenefits of Unemployment InsuranceReduces uncertainty over incomes Give the unemployed more time to search, resulting in better job matches and thus higher productivitygovernment employment agenciesprovide information about job vacancies to speed up the matching of workers with jobspublic training programsaim to equip workers displaced from declining industries with the skills needed in growing industriesWhy does unemployment insurance increase frictional unemployment?UI benefits end when a worker takes a job, so workers have less incentive to search or take jobs while eligible to receive benefits.What happens when the minium wage rise above equilibrium wage?Structural unemployment occursWhat happen when unions raise wage above equilibrium wage?Quantity of labor demanded decreases, causing unemployment in the market Labor supply increases and wage reduces in other marketsThe theory of efficiency wagesfirms voluntarily pay above-equilibrium wages to boost worker productivityWhy firms pay efficiency wagesImprove worker's health Reduce workers' turnovers Attract better applicants Boost workers' productivityIf the minimum wage was currently above the equilibrium wage, than a decrease in the minimum wage wouldincrease the quantity of labor demanded and decrease the quantity suppliedThere will be structural unemployment ifsome wages are kept above the equilibrium levelThe labor force equals thenumber of people employed plus the number of people unemployedAnna has just finished school and started looking for a job, but has not yet found one. As a result, the unemployment rateincreases, and the labor-force participation rate increasesIf an unemployed person quits looking for work, ceteris paribus, the unemployment ratedecreases, and the participation rate decreasesCurtis is a stockbroker. He has had several job offers, but he has turned them down because he thinks he can find a firm that better matches his tastes and skills. John is an accountant. He has looked for work for some time, but no accounting firms are hiring.Curtis is frictionally unemployed, and John is structurally unemployed.We would predict that the more generous unemployment compensation a country has,the longer the duration of each spell of unemployment, and the higher the unemployment rate.