03 14 2013 Chapter 15 Vocab Labor Force unemployed Unemployment Rate The total number of workers including both the employed and the The percentage of the labor force that is unemployed Labor force Participation Rate The percentage of the adult population that is in the labor force Natural Rate of Unemployment The normal rate of unemployment around which the unemployment rate fluctuates Cyclical Unemployment Discouraged Workers Fictional Unemployment The deviation of unemployment from its natural rate Individuals who would like to work but have given up looking for a job Unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills Structural Unemployment Unemployment that results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one Job Search skills Unemployment Insurance become unemployed Union working conditions Collective Bargaining The process by which workers find appropriate jobs given their tastes and A Government program that partially protects workers incomes when they A worker association that bargains with employers over wages benefits and The process by which unions and firms agree on the terms of employment Strike The organized withdrawal of labor from a firm by a union Efficiency Wages Above equilibrium wages paid by firms to increase worker productivity BLS divides population into 3 groups Employed This category includes those who worked as paid employees worked in their own business or worked as unpaid workers in a family member s business Both full time and part time workers are counted This category also includes those who were not working but who had jobs from which they were temporarily absent because of for example vacation illness or bad weather Unemployed This category includes those who were not employed were available for work and had tried to find employment during the previous four weeks It also includes those waiting to be recalled to a job from which they had been laid off Not in the labor force This category includes those who fit neither of the first two categories such as a full time student homemaker or retiree Paid Employees self employed and unpaid workers in a family business People who are not working who have looked from work during the previous Employed Unemployed 4 weeks Not in the Labor Force Everyone else The Labor force is the total of workers including the employed and unemployed Employed Unemployed Unemployment Rate u rate of the labor force that is unemployed of Unemployed u rate 100 x Labor Force Labor force participation rate of the adult population that is in the labor force labor force Labor Force participation Rate 100 x adult population What does the U Rate really Measure The u rate is not a perfect indicator of joblessness or the health of the labor market Excludes Discourages Workers Does not distinguish between full time and part time work or people working part time because full time jobs are not available Also some people may misreport their work status in the BLS survey Despite these issues the u rate still is a very useful barometer of the labor market and economy Types of Unemployment Seasonal Unemployment supply Is the unemployment due to seasonal changes in employment or labor Frictional Unemployment The brief periods of unemployment experienced by people moving between jobs or into the labor market Demand and Skill are present Structural Unemployment Unemployment caused by a mismatch between the skills or location of job seekers and the requirements or location of available jobs Cyclical Unemployment The unemployment attributable to the lack of job vacancies i e to an inadequate level of aggregate demand Government Employment Agencies Give out information about job vacancies to speed up the matching of workers with jobs Notes Unemployment occurs when not enough jobs to go around Occurs when wage is kept above equilibrium Higher the wage Higher the Unemployment When a country keeps its workers as fully employed as possible it achieves a higher level of GDP than it would if it left many of its workers standing idle Unemployment is usually divided into 2 categories Long term and Short term Natural Rate of Unemployment refers to the amount of unemployment that the economy normally experiences Cyclical Unemployment refers to the year to year fluctuations in unemployment around its natural rate and it is closely associated with the short run ups and downs of economic activity The 4 explanations from the economy s natural rate of unemployment Job Search Minimum wage Laws Unions working conditions than a nonunion worker unemployment results The min wage may exceed the equilibrium wage for the least skilled or experienced workers causing unemployment A worker association that bargains with employers over wages benefits and Unions exert their market power to negotiate higher wages for workers The average union worker ears 20 higher wages and gets more benefits When unions raise above equilibrium quantity of labor demanded falls and Insiders Workers who remain employed they are better off Outsiders Workers who lose their jobs they are worse off The difference between union and nonunion wages are higher in industries that are more heavily unionized than in less heavily unionized industries Efficiency Wages Worker Health Better paid workers eat a more nutritious diet and workers who eat a better diet are healthier and more productive Worker Turnover The more a firm pays its workers the less often its workers will choose to leave Gives workers an incentive to stay Worker Quality When a firm pays a high wage it attracts a better pool of workers to apply for its jobs and thereby increases the quality of its workforce Worker Effort High wages make workers more eager to keep their jobs and thereby give workers an incentive to put forward their best effort Bureau of Labor Statistics BLS at any given time is long term Most spells of unemployment are short and most unemployment observed Unemployment rate never falls to 0 instead it fluctuates around the natural rate of unemployment 4 ways to explain unemployment in the long run It takes time for workers to search for the jobs that are best suited for them The next 3 suggest that the number of jobs available in some labor markets may be insufficient to give a job to everyone who wants one This occurs when the quantity of labor supplied exceeds the quantity
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