macro exam 2- unemployment and labor force participation

unemployed workers definition

adult non institutionalized civilians who do not have a job but who are looking for work

non institutionalized civilian definition

16 years of age or older, not institutionalized (not in prison, health institution, etc), a civilian (not in the military)

labor force definition

the number of civilians who are both unemployed and employed in a population

unemployment rate equation

unemployed / labor force (unemployed + employed) x 100

labor force participation rate equation

labor force (unemployed + employed) / adult population x 100

discouraged workers definition

workers who have given up looking for work but who would still like a job

underemployment definition

emphasizes that the unemployment rate doesn’t measure the quality of the jobs or how well workers are matched to their jobs

frictional unemployment definition

short term unemployment caused by the ordinary difficulties of matching employee to employer, cause: scarcity of information, potential remedy: technological innovation that increases the spread of information

structural unemployment definition

persistant, long term unemployment caused by long lasting shocks or permanent features of an economy that make it more difficult for some workers to find jobs, cause: large, economy wide shocks (such as oil shocks)

unemployment in europe

unemployment compensation is more generous in terms of length and money, minimum wage rate is higher, labor unions are a greater share of labor force, and employment laws differ

creative destruction definition

innovations, new ideas, and new products imply that competition among firms will result in some companies growing and other companies shrinking or going out of business, demand for some products or occupations decline and some will increase

labor union definition

an association of workers that bargains collectively with employers over wages, benefits, and working conditions, often act to raise the wage for the people that have union jobs

employment protection laws summary

create valuable insurance for workers with full time jobs, make labor markets less flexible and dynamic, increase the duration of unemployment, and increase unemployment rates among young, minority, or otherwise riskier workers

cyclical unemployment definition

correlated with the business cycle, short term unemployment that increases during recessions and decreases during expansions, expected to see a negative relationship between economic growth and the unemployment rate

natural unemployment rate definition

the rate of structural plus frictional unemployment (does not include cyclical unemployment), changes only slowly through time and the actual rate of unemployment varies around the natural rate

2 main factors that affect the labor force participation rate

1. lifecycle effects and demographics

2. incentives