Act 5

Employed

people who work

Unemployed

not employed, want to work, looking for a job

Not in the labor force

not employed, not unemployed

Labor Force

total number of workers (employed and unemployed)

Number of employed + Number of unemployed

Unemployment Rate

(Number of unemployed individuals/labor force) x 100%

Employment Rate

(Number of employed individuals/total labor force) x 100%

Labor-force participation rate

Number of employed + Number of unemployed

Structural Unemployment

occurs when there’s a mismatch between the skills of the available workforce and the skills demanded by employers

Frictional Unemployment

refers to the short-term unemployment that occurs

when people are in the process of moving from one job to another.

Cyclical unemployment

a type of unemployment that arises from fluctuations in the overall demand for goods and services in the economy.

Union

- Worker association

- Bargains with employer over wages, benefits and working conditions

The Economics Union

- Collective bargaining

- Strike

The theory of efficiency wages

suggests that paying workers more than the minimum wage necessary to attract them can increase a company’s overall productivity and profitability

Labor Market

The market that allocates workers to jobs and coordinates employment decision.

Adult Working Population

consists of those who are over 16 years of age and are in the labor force and not in the labor force

Labor Force

consists of those above 16 years of age, who are employed and those who are unemployed.

Labor Force

People who are not employed and are neither looking for work are classified as not in ____?

Wage Rate

is the price of labor per working hour, which could be measured in

nominal and /or real terms.

Nominal Wage

what workers get paid per hour in current dollars/peso.

Real Wages

or the real purchasing power of a worker’s earnings – nominal wages

divided by CPI

Wages

refer to the payment for a unit of time/hour worked.

Earnings

refer to wages multiplied by the number of time units/hours worked.

Employee Benefits

can be either payments in kind or deferred.

Total Compensation

consists of earnings plus employee benefits.

Income

received by a family includes earnings, benefits, and unearned income, which

includes dividends or interest received on investment and government transfer

payments.

Scale or output effect

the reduction in the scale of production or output due to the

reduction in employment.

Substitution effect

capital is substituted for labor in the production process.

An increase in wage will lead to:?

Scale or output effect

Substitution effect

Economic rents

defined as the difference between the wage workers are actually

paid on a job and workers reservation wages.

Technology

refers to the creation, use, and knowledge of tools, techniques,

crafts, systems, or methods of organization to solve a problem or serve a

purpose or end.

Technological advancement

refers to the process of developing new and

superior technologies that displace older one, leading to significant

improvement in organizational performance. This process involves cycles of

incremental change technological discontinuities, ultimately leading to the

emergence of dominant designs across industries

solution to avoid technological unemploymenT

invest in

human capital. This term was invented by the economist Theodore Schultz to

reflect the value of human capacities.

Human Capital

Human capacities