Lesson 5.4: Causes and Calculations of Unemployment

Flashcards made from a presentation segment created as a lesson on unemployment.

Unemployment

The state of not being employed; can be both an individual and nationwide issue

• Tracked by economists to aid economic reccovery or growth

• A zero percent rate is impossible due to the three types of this having at least some people

Structural unemployment

Unemployment created or depleted by changes in the economy, such as those in the telecommunications or healthcare sector

• Results from industrial reorganization or technological change

• Skills, location, or wage demands typically mismatch the requirements of the job

Job training

A way to address structural unemployment, allowing workers to gain skills in response to structural changes

• However, this takes time and does not ensure high-wage jobs

Collective bargaining

Union activity that negotiates on behalf of all workers

Labor strike

Union activity that results in a collective refusal to work

Labor union

Organization within a place of employment that can raise wages or benefits

• While this is good for workers, it can also cause structural unemployment as higher wages create surpluses

Frictional unemployment

Unemployment created by the constant changes in the workforce

• Measured as the time workers spend searching for work — always exists with searches for a first or better job

• Is typically brief in periods of low unemployment

Cyclical unemployment

Unemployment that relates to the trends in growth and production that occur within the business cycle

• Minimized during business peaks as output is maximized

• May grow during recessions where workers are laid off

Natural rate of unemployment

The rate of employment that arises from the effects of frictional and structural unemployment

• Is inevitable as the minimum rate that the actual rate fluctuates around

• Is never zero

Full employment

The rate of unemployment when cyclical unemployment does not exist, ignoring the natural rate of unemployment

Seasonal unemployment

Unemployment that occurs when industries slow or shut down for seasonal shifts in production schedules, such as in harvesting industries or holiday seasons

• Typical part of a healthy economy

Labor force

The total amount of people who are employed and unemployed but looking for a job in a country

Unemployment rate

The percentage of people in the labor force who are unemployed

• Determined by the Bureau of Labor Statistics through a monthly household survey of 60,000 families

• Adjusted for seasonal unemployment for more accurate comparisons across months, but can vary across different demographic groups

• Rises during recessions and falls during expansions

Discouraged workers

Workers who could work but have given up seeking employment due to the state of the job market

• Not counted in the unemployment rate; this may lead to an understatement in the amount of people who want to work but are unable to find jobs

Marginally attached workers

Workers who would like to be employed and have looked for a job in the past but are not currently looking for work

Underemployed workers

People who would like to work more hours than they do or are overqualified for their jobs