Chapter 11: Unemployment and Labor Force Participation (Vocabulary)

Vocabulary flashcards covering key terms from Chapter 11 on unemployment and labor force participation, including definitions of labor force, unemployment types, rates, and related concepts.

Labor Force

The total number of people who are employed or unemployed; equals Employed + Unemployed.

Employed

Adults who have a job; an adult non-institutionalized civilian who is working.

Unemployed

Adults who do not have a job but are actively looking for work.

Adult non-institutionalized civilian

An individual aged 16 or older who is not institutionalized and is a civilian.

Unemployment Rate (UR)

The percentage of the labor force that is unemployed: UR = Unemployed ÷ Labor Force × 100.

Labor Force Participation Rate (LFPR)

The percentage of the adult non-institutionalized civilian population that is in the labor force: LFPR = (Unemployed + Employed) ÷ Adult Population × 100.

Frictional Unemployment

Short-term unemployment arising as workers search for jobs that fit their skills and preferences; caused by information frictions.

Structural Unemployment

Long-term unemployment due to structural changes in the economy (e.g., tech, globalization, shifts in industries) causing skills or location mismatches.

Cyclical Unemployment

Unemployment tied to the business cycle; rises in recessions and falls in expansions.

Natural Unemployment Rate

The rate comprising frictional plus structural unemployment; excludes cyclical unemployment.

Okun’s Law

Rule of thumb: for every 1 percentage point rise in unemployment, real GDP falls by about 2 percent.

Discouraged Workers

Workers who want to work but have given up looking for a job.

Underemployment

A situation where workers are not fully utilized for their skills or want more hours (e.g., part-time workers who want full-time work).

Creative Destruction

The ongoing process of job creation and destruction within the economy, which can produce frictional unemployment as workers move to new jobs.

Lifecycle Effects

Demographic and aging patterns that influence the likelihood of participating in the labor force.

Incentives

Taxes, benefits, and policies that affect the incentive to work; can raise or lower the labor force participation rate.

Three Broad Categories of Unemployment

Frictional unemployment, Structural unemployment, and Cyclical unemployment.

Frictional Unemployment Duration

Typically short in duration; many spells last only a few weeks, with most under about 26 weeks.

Aging and LFPR

As the population ages, the labor force participation rate tends to fall.

Female Labor Force Participation Rate

The share of women in the labor force; rose from the mid-20th century onward due to cultural and economic factors.

The Pill and Female LFPR

Access to birth control (e.g., the Pill) lowered the costs of pursuing education and careers, boosting female LFPR.

Labor Force Measurement Limitations

Unemployment rate is informative but incomplete because it excludes discouraged workers and some underemployed individuals.