Chapter 11: Unemployment

Vocabulary flashcards covering core definitions, formulas, labor market dynamics, alternative measures, and types and causes of unemployment from Chapter 11.

Working-age population

The total number of noninstitutionalized civilians aged 16 and older who are not in the military.

Employed

Working-age individuals who currently hold a job, including those who work at least one hour per week for pay, are self-employed, or are on temporary absence from their job.

Unemployed

Working-age individuals who are not currently working, are actively searching for work, and are able to accept a job if offered.

Labor force

The sum of employed and unemployed individuals in the working-age population who are available to produce goods and services.

Not in the labor force

Working-age individuals who are neither employed nor unemployed, such as retirees, students, those caring for family members, or people who have ceased searching for work.

Labor force participation rate

The share of the working-age population that is in the labor force, calculated as $\frac{\text{Labor force}}{\text{Working-age population}} \times 100$.

Unemployment rate

The percentage of the labor force that is unemployed, calculated as $\frac{\text{Unemployed}}{\text{Labor force}} \times 100$.

Equilibrium unemployment rate

The long-run rate of unemployment to which the economy tends to return, typically ranging between $4\%$ and $5\%$.

Long-term unemployed

Individuals who have been jobless and actively seeking work for six consecutive months or longer.

Marginally attached

Jobless individuals who want a job and have looked for work within the past year, but are excluded from the official unemployment count because they are not currently actively searching.

Discouraged worker

A marginally attached individual who is not currently searching for work specifically because they believe there are no jobs available for them.

Underemployed

Individuals who have work but desire more hours, or whose employment does not fully utilize their skills.

Involuntary part-time

Workers who desire full-time employment but are working part-time because they are unable to find full-time positions.

U-5

An alternative unemployment measure published by the Bureau of Labor Statistics that broadens the official rate by including marginally attached workers.

U-6

The broadest unemployment measure from the Bureau of Labor Statistics, including the officially unemployed, marginally attached workers, and involuntary part-time workers.

Frictional unemployment

Unemployment caused by the time required for employers to find suitable workers and for job seekers to evaluate and secure the right job.

Structural unemployment

Unemployment that occurs when structural barriers prevent real wages from falling to bring labor demand and labor supply into equilibrium.

Cyclical unemployment

Unemployment directly caused by a temporary downturn or recession in the aggregate economy.

Efficiency wage

An above-equilibrium wage offered by an employer to incentivize higher worker productivity, enhance effort, and decrease employee turnover.

Unions

Worker organizations that collectively bargain with employers over compensation, benefits, and workplace terms, often securing wages above market equilibrium.

Job protection regulations

Legal constraints that make dismissing workers difficult, which lowers overall labor demand and can prolong durations of frictional unemployment.

Hysteresis

A phenomenon in which a sustained period of high unemployment permanently or persistently raises the economy's equilibrium unemployment rate.