U2-C30: Unemployment and Labor Force Participation

Unemployed people are

Adults, not institutionalized, a civilian, and willing and able to work but cannot find a job.

Employed people are

Adults, not institutionalized, civilian, who have a job.

The Unemployment Rate is

the percentage of the labor force without a job.

What is the equation for the unemployment rate?

(Unemployed/Labor force) x 100

Discouraged workers are

Jobless individuals who have given up looking for work but who would still like to find a job.

Underemployment rate is

A measure that includes part-time workers who would rather have a full-time position and people who would like to work but have given up looking for a job.

Frictional employment is

Short-term unemployment caused by the ordinary difficulties of matching employee to employer.

What causes frictional unemployment?

Scarcity of information. Workers don’t know job opportunities available and employers don’t know available candidates.

What are separations?

People who quit, were laid off, or other forms of not working somewhere

The Amount of new jobs is

New jobs created - job separations

Structural unemployment is

Persistent, long-term unemployment

What causes structural unemployment?

Economy wide shocks that occur relatively quick that can create long lasting unemployment as the economy takes time to restructure.

Unemployment benefits

Can increase the unemployment rate and reduce the incentive for workers to search for and take new jobs.

Benefit Replacement Rates are

The % of money given to an unemployed worker. It is the difference of the pay cut the worker took.

Minimum wage

Raises the price of labor from the market wage to the minimum wage as labor becomes more expensive, firms reduce employment from market to minimum wage.

What happens at minimum wage?

The number of workers looking for work exceeds the number of jobs.