ECON 201 1st Edition Lecture 30Outline of Last Lecture I. Labor Force Statisticsa. Definition of labor force statisticsb. Definition of employedc. Definition of unemployedd. Definition of not in labor forcee. Definition of labor forceII. Unemployment Rate and Labor Force Participation Ratea. Definition of unemployment rateb. Definition of labor force participation rateIII. Labor Force Statistics Example ProblemIV. Natural Rate of Unemploymenta. Definition of natural rate of unemployment b. Definition of frictional/search employmentc. Definition of structural unemployment V. Unemployment Insurancea. Definition of unemployment insuranceOutline of Current Lecture I. Reasons for Structural Unemploymenta. Definition of unionsb. Definition of efficiency wagesII. Cyclical Unemployment a. Definition of cyclical unemploymentIII. Labor Market StatisticsIV. Definitions of Workersa. Definition of marginally attached workersb. Definition of discouraged workersV. Example Unemployment Rate ProblemCurrent LectureI. Reasons for Structural UnemploymentThere are three primary reasons for structural unemployment:These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.i. Minimum wage laws (price floors)ii. Unionsiii. Efficiency wagesUnions are worker associations that practice collective bargaining with employers over wages, benefits, and working conditions. Those inside the unions benefit, while those outside do not; unions were their strongest in the 1950s. Efficiency wages occur when firms voluntarily pay above equilibrium wages to boost worker productivity.II. Cyclical UnemploymentCyclical unemployment is the deviation of unemployment from its natural rate and is associated with the short run business cycle. The reason it happens is because there is not enough demand for goods and services (deficient demand). In this situation, the goal for the policy is to boost demand. We want to create the ability for people to buy and for investment totake place. Fiscal and monetary policy can fix this type of unemployment. III. Labor Market StatisticsAmong other things, the BLS publishes the official unemployment rate (U-3), statistics for demographic groups, and the length (duration) of unemployment. These data reveal widely different labor market experiences for different groups. Knowing these facts helps policy makers design better policies to help unemployment. The one caveat is that though these trends inform policymakers, they can sometimes be flawed. IV. Definitions of WorkersMarginally attached workers are those “neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months”. Discouraged workers are workers that would like to work but have given up looking “giving a job-market related reason”. Discouraged workers are classified as “not in the labor force”. V. Example Unemployment Rate ProblemDetermine how the following situations affect the unemployment rate and if they accurately represent the unemployment rate. i. Sue lost her job and is looking for a new one. ii. Jon has been out of work since last year, has become discouraged and has since stopped looking for work.iii. Sam lost his $80,000 job and takes a part time job at McDonald’s until he finds a newone. Answers:i. The unemployment rate increases and accordingly; Sue lost her job and this contributes to unemployment.ii. This decreases the unemployment rate, but it is a false impression; though the rate declines, the labor market has not improved.iii. The unemployment rate remains unchanged; Sam lost a job and has found a new one. However, the unemployment rate fails to show the under-employment here, as Sam is working below his skill
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