The Labor Market, Wages, and Unemployment

Flashcards covering key vocabulary and concepts related to the labor market, wages, and unemployment.

Unemployment

The situation where individuals who are willing and able to work are unable to find employment opportunities.

Economic Downturns

A cause of unemployment where economic recessions lead to decreased consumer demand, causing businesses to reduce production and lay off workers.

Technological Changes

A cause of unemployment where advancements in technology lead to automation and the replacement of human labour with machines or software.

Structural Shifts in Industries

A cause of unemployment where changes in the structure of industries, like globalization, lead to the decline of certain sectors and the growth of others.

Skill Mismatches

A cause of unemployment where mismatches between the skills possessed by workers and the skills demanded by employers contribute to unemployment.

Geographic Location

A factor affecting unemployment where areas with limited economic opportunities experience higher unemployment rates.

Policy Factors

Government policies such as minimum wage laws and unemployment benefits that influence unemployment rates.

Frictional Unemployment

Unemployment due to the normal turnover in the labour market and the time it takes for workers to find new jobs that match their skills and preferences.

Structural Unemployment

Unemployment arising from fundamental changes in the economy, such as shifts in industries or technological advancements, that lead to mismatches between worker skills and job requirements.

Cyclical Unemployment

Unemployment closely tied to fluctuations in the business cycle, arising during economic downturns or recessions.

Sticky Wages

An economic concept describing how wages adjust slowly to changes in labour market conditions, often remaining above equilibrium.

Natural Rate of Unemployment

The level of unemployment that would exist in the absence of cyclical unemployment.

Marginal Product of Labour (MPL)

The increase in a firm's revenues resulting from hiring additional labour used to determine wage.

Labour Demand

The quantity of labour that firms are willing to hire at different wage rates.

Labour Supply

The quantity of labour that individuals are willing to offer at varying wage rates.

Wage Rigidity

The phenomenon where wages do not adjust to clear the labour market, potentially leading to inefficiencies in resource allocation.

Bathtub Model of Unemployment

A framework for understanding the dynamics of employment and unemployment rates, drawing an analogy between the unemployment rate and the water level in a bathtub.

Skill-Biased Technical Change

New technologies like computers and the internet disproportionately benefit highly skilled workers, leading to a shift in demand in favor of these workers.

Globalization

Trade opens up the U.S. economy to a world where highly educated workers are scarcer, driving up their wages, while exposing low-skilled workers to global competition.