Chapter 28: Unemployment

Term
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employed
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Terms in this set (26)
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
full time students, homemakers, retirees, etc.
unemployment rate
the percentage of the labor force that is unemployed
unemployment rate formula
number of unemployed/labor force x 100
labor force participation rate
the percentage of the adult population that is in the labor force
labor force participation rate formula
labor force/adult population x 100
cyclical unemployment
unemployment that rises during economic downturns and falls when the economy improves
frictional unemployment
unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills

mainly short-term
structural unemployment
unemployment that results because the number of jobs available in some labour markets is insufficient to provide a job for everyone who wants one

mainly long-term
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.