ECON CH23: Unemployment

working-age population

those aged 16 or older who are not in the military or institutionalized

employed

working-age people who are working

unemployed

working-age people without jobs who are trying to get jobs

part of the working-age pop, not currently working, actively searching for work and able to accept a job if it were offered

To be unemployed, you must be:

labor force

the employed plus the unemployed

not in the labor force

those in the working-age population who are neither employed nor unemployed

• retired, in school, taking care of a family member etc.

labor force participation rate

the percentage of the working-age population that is either employed or unemployed

employed + unemployed/working age population x 100

labor force participation rate equation

unemployment rate

the percentage of the labor force that is unemployed

unemployed/labor force x 100

unemployment rate equation

zero

The unemployment rate fluctuates over time, but it is never ____.

equilibrium unemployment rate

the long-run unemployment rate to which the economy tends to return

• between 4 and 5 percent

a dynamic labor market

makes it easy for new people to enter the market and find a job quickly

shrink, expand

Some sectors ____ while others ____.

already employed

Most people seeking jobs are ____ ____.

long-term unemployed

people who have been unemployed for six consecutive months or longer

discrimination and skill loss

What factors make it hard for the long-term unemployed to find work?

marginally attached

someone who wants a job and has looked for a job within the past year, but who isn’t counted as unemployed because they aren’t currently searching for a job

underemployed

someone who has some work, but wants more hours or whose job isn’t adequately using their skills; ex: involuntarily part-time

involuntarily part-time

someone who wants full-time work, and is working part time because they haven’t found a full-time job

follow

Alternative measures of unemployment tend to ____ movements in unemployment.

labor supply

workers supply their labor for a price (their wage)

labor demand

employers are the buyers of labor

equilibrium

where the quantity of labor demanded is equal to the quantity of labor supplied

frictional unemployment

unemployment due to the time it takes for employers to search for workers, and for workers to search for jobs

structural unemployment

unemployment that occurs because wages do not fall to bring labor demand and supply into equilibrium

cyclical unemployment

unemployment that is due to a temporary downturn in the economy

frictional, structural

_____ and _____ unemployment can persist even when the economy is doing well.

information problem

Frictional unemployment reflects an _____ ____.

more efficient

The ____ ____ the resources available for workers and managers to find each other, the lower the frictional unemployment will be.

find a match

Workers all differ in skills and personalities, can jobs differ in their attributes, so it can be difficult to ______.

skills mismatch

the skills workers have are not the skills that employers want

changing mix

The _____ ___ of occupations and industries can increase frictional unemployment.

last longer

When the government financially supports people during unemployment, it is likely to ____ ____.

unemployment insurance

can increase unemployment durations because it reduces the opportunity cost of searching for a job

structural unemployment

the gap between the number of available obs and the number of available workers

employers demand fewer workers and the quantity of labor supplied is higher

When the wage is above equilibrium:

efficiency wages

____ ____ create structural unemployment

efficiency wage

a higher wage paid to encourage greater work productivity

unions

organizations representing workers who band together to negotiate jointly with their employer

job protection

____ ____ regulations make it hard to fire workers.

minimum wage

keeps wages from falling below the set minimum wage

hire fewer workers

The higher wage means employers want to ____ ____ ____, but more workers want to work.

negligible changes in overall unemployment

raising the minimum wage leads to…

lower wages and worse career opportunities

big costs of unemployment:

hysteresis

when a period of high unemployment leads to higher equilibrium unemployment rate