ECON201 Chapter 11: Unemployment

Vocabulary flashcards covering labor market concepts, formulas, types of unemployment, and labor market dynamics from Chapter 11.

Working-age population

Noninstitutionalized civilians aged $16$ and older who are not on active duty in the military.

Employed

Working-age individuals who currently have a job, which includes those who worked at least $1$ hour for pay in the past week, are self-employed, or are temporarily absent from work.

Unemployed

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

Labor force

The total number of people in the working-age population who are either employed or unemployed and available to produce goods and services.

Not in the labor force

Individuals in the working-age population who are neither employed nor unemployed, such as retirees, students, those caring for family members, or those who have stopped looking for work.

Labor force participation rate

The percentage of the working-age population that is in the labor force, calculated as: $\text{Labor force participation rate} = \frac{\text{Labor force}}{\text{Working-age population}} \times 100$

Unemployment rate

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

Equilibrium unemployment rate

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

Marginally attached workers

Individuals who want a job and have looked for work in the past year, but are not currently searching and therefore are not counted as unemployed.

Discouraged workers

A subset of marginally attached workers who have stopped actively searching for work because they believe no jobs are available.

Underemployed

Individuals who are employed part-time but want full-time work, or whose jobs do not adequately utilize their skills.

Involuntary part-time workers

Workers who desire full-time employment but are working part-time hours because they could not find a full-time position.

Long-term unemployment

A period of unemployment that lasts for $6$ months or more.

Frictional unemployment

Unemployment resulting from the time it takes for employers to search for qualified workers and for workers to search for suitable jobs.

Structural unemployment

Unemployment that occurs because wages do not fall to bring labor demand and labor supply into equilibrium, leaving a surplus of workers at the prevailing wage.

Cyclical unemployment

Unemployment attributable to a temporary economic downturn or contraction in the business cycle.

Efficiency wages

Above-equilibrium wages paid voluntarily by employers to boost worker productivity, encourage effort, and reduce costly employee turnover.

Hysteresis

The phenomenon where prolonged periods of high unemployment raise the natural or equilibrium unemployment rate, leading to a slower recovery in the labor market.