ch 15: employment, unemployment, and the labor market

what is employed (E)?

people who currently have a job

employed can be a paid employee, ______ your own business, be _________ worker in family business. can be temporarily ______ working and still counted as employed (maternity leave)

own, unpaid, not

what is unemployed

people not working who were available for work (attempting to find a job, waiting for a job)

what does it mean to not be in the labor force

neither employed nor unemployed such as full time students, homemakers, etc.

how do you calculate the labor force and what does it consist of

the total number of workers, including the employed and the unemployed workers, LF=E+U

how do you calculate the labor force participation rate (LFPR) and what is it

the percentage of total adult population that is in the labor force, LFPR = labor force/adult population x 100 = E + U/adult population x 100

how do you calculate the unemployment and what is it

percentage of the labor force that is unemployed, unemployment rate = number of employed / labor force x 100 = U/E+U x 100

what does it mean when the unemployment rate falls

it gives impression that the labor market is improving

who are discouraged workers

those who would like to work but have given up looking for jobs, classified as not in the labor force rather than unemployed

the unemployment rate is ___________________ indicator of joblessness or the health of the labor market. it ______________ discouraged workers, ___________________ distinguish between full time and part time work, and some people _________________ their work status in BLS survey (CPS)

not a perfect, excludes, does not, misreport

what is cyclical unemployment?

the deviation from its natural rate of unemployment, temporary and depends on the length of recession

what is natural rate of unemployment?

long run average rate of unemployment

rate of unemployment that is the _______________________ of unemployment that can be maintained for long periods of times

lowest level

natural unemployment consists of two parts frictional and _____________

structural

what is frictional unemployment

it takes time to search for the jobs and occurs even if there are enough jobs to go around

what is structural unemployment

when wage is above equilibrium, not enough jobs. due to minimum wages, labor unions, and efficiency wages

who are the supplier of the labor?

house hold

who are the demands of the labor?

firms (people who want to hire)

whats the price of labor?

wages

the idea is that there’s always going to be some _____________ of unemployment because people take time to find a job and there is a high supply than demand in the labor market due to some cases

baseline

what is the job search

matching of workers and firms to meet preferences of both the employee and the employer having different tastes, skills, and requirements

what are sectoral shifts

the change in the composition of firms and industries within an economy

what is structural unemployment

more people want to work for higher wages but companies offer fewer positions

3 primary reasons economists consider when discussing why wages in the market may be above the w*

minimum wage laws, unions, and efficiency wages

why is minimum wage laws a reason? wage is force to remain above the equilibrium wage because of a minimum wage law, when wages are ______________, there will not be enough job openings for everyone to find employmentwhy is minimum wage laws a reason?

high

what are unions?

unions protect workers’ rights from a worker association by using collective bargaining to receive higher wages and better benefits

union workers earn between 10-20% ___________ than non-union workers in the same industry

more

when unions raise the wage above the equilibrium, quantity of labor demanded __________ and unemployment __________

falls, results

who are “insiders”

workers who remain employed, are better off

who are “outsiders”

workers who lose their jobs, are worse off

secondary effect, some outsiders go to non-unionized labor markets, which _______________ labor supply and _____________ wages in those markets

increases, reduces

what are some critics of unions

type of a cartel, inefficient allocation of labor (higher wages reduces employment in unionized firms, some workers benefit at expense of others) a

advocates of unions

unions are necessary to combat the power of large firms and industries, in absence of union power to bargain for better wages and living standards, firms would pay less and offer working conditions

what are efficiency wages

when wages set above equilibrium by firms in order to boost worker productivity

what are goals of efficiency wages

increase worker health, quantity, and effort, reduce employee turnover

by increasing wages: workers can be more ______________, firms can attract ___________ quality applicants, and firms can retain workers _____________

productive, higher, longer