Ch 15 Unemployment 1 Employed Identifying Unemployment Paid employees Workers in their own business Unpaid workers in a family member s business Full time and part time workers o Temporarily absent Vacation illness bad weather Natural rate of unemployment 5 5 5 Unemployed Those who were not employed o Not available for work o Tried to find employed in the previous 4 weeks Those waiting to be recalled to a jab laid off Not in the labor force Full time students Neither employed nor unemployed Homemakers Retirees Labor force Total number of workers employed unemployed Unemployment rate Percentage of labor force that is unemployed Ch 15 Unemployment 2 Unemployment Number of Unemployed Labor Force x 100 Labor Force Participation Rate of the total adult population that is in the labor force fraction of the population that has chosen to participate in the labor market labor force adult population x 100 Labor Market Experiences of Various Demographic Groups U S pop 2012 Labor Market Experience Women of prime working age 25 54 yrs old o lower rates of labor force participation than men Once in the labor force men women have similar rates of unemployment Blacks of prime working age Teenagers o similar rats of labor force participation as prime age whites o much higher rates of unemployment o Lower rates of labor force participation o Much higher rates of unemployment than older workers Unemployment Rate Since 1960 Ch 15 Unemployment 3 Natural Rate of Unemployment Normal rate of unemployment around which the unemployment rate fluctuates 2012 5 5 below actual unemployment rate of 8 1 Cyclical Unemployment deviation of unemployment from its natural rate Labor Force Participation of Men and Women in the U S Economy Women s Role in American Society new technologies increased time efficiency for household tasks improved birth control reduced of children in a typical family changing political social attitudes Labor Force Participation Rates for Men and Women since 1950 Ch 15 Unemployment 4 1950 33 of women were working looking for work o 87 of men were working looking for work 2012 58 of women were working looking for work o 70 of men were working looking for work Fall in men s labor force participation young men stay in school longer older men retire earlier and live longer with more women employed o more stay at home dad s Counted as being out of the Labor Force full time students retirees stay at home dads Identifying Unemployment Cont Official unemployment rate imperfect measure of joblessness Movements into and out of the labor force Common More than 1 3 of unemployed o Recent entrants into the labor force fresh graduates Unemployment Not all unemployment ends with the jobseeker finding a job o Half of all spells of unemployment end when the unemployed leaves the labor force Some of those who report being unemployed May not be trying hard to find a job Ch 15 Unemployment 5 o Want to qualify for govt help o Working but paid under the table Some of those who are out of Labor Force Individuals who would like to work Have given up looking for a job Discouraged Workers Out of the labor force Individuals who want to work but have given up looking for a job How long are the unemployed without work Most spells of unemployment are short most unemployment observed at any given time is long term Most people who become unemployed will soon find jobs Most of the economy s unemployment problem o Attributable to the relatively few workers who are jobless for long periods of time Unemployment rate Never falls to zero Frictional unemployment Fluctuates around the natural rate of unemployment Ch 15 Unemployment 6 Takes time for workers to search for the jobs that best suit their tastes and skills Not lack of jobs it takes time to worker to fill vacancy Explains relatively short spells of unemployment Structural Unemployment Number of jobs available in some labor markets o Insufficient to provide a job for everyone who wants one Explains longer spells of unemployment Results when wages are set above the equilibrium o Min wage laws unions efficiency wages Increased wages S D surplus labor unemployed Job Search Job Search Process by which workers find appropriate jobs given their tastes and skills o Workers differ in their tastes and skills o Jobs differ in their attributes o Information about job candidates and job vacancies to disseminated slowly Some frictional unemployment is inevitable Changes in demand for labor among different firms Changes in composition of demand among industries or regions sectoral shifts Ever changing economy o Jobs created in some firms destroyed in other firms Reduce time for unemployed to find jobs Reduce natural rate of unemployment Public Policy Job Search Government Programs to facilitate job search Government run employment agencies Public training programs Unemployment insurance Government program Partially protect workers incomes when they become unemployed Qualify only the unemployed who were laid off because their previous Increases frictional unemployment employers no longer needed their skills 50 of former wages for 26 weeks Reduces the hardship of unemployment Increases the amount of unemployment Ch 15 Unemployment 7 o Unemployment benefits stop when a worker takes a new job Unemployed o Devote less effort to job search o More likely to turn down unattractive job offers o Less likely to seek guarantees of job security Minimum Wage Laws Structural Unemployment Insufficient number of jobs Minimum wage laws Can cause unemployment Forces the wage to remain above equilibrium o Higher quantity of labor supplied o Smaller quantity of labor demanded o Surplus of labor unemployment Wages may be kept above equilibrium level Min wage laws Unions Efficiency wages If the wage is kept above the equilibrium level Result unemployment Unions Collective Bargaining Union Worker assoc Bargains with employers over o Wages benefits working conditions 11 of U S workers Ch 15 Unemployment 8 Cartel organization in which members contribute with a common goal Collective Bargaining Process by which unions and firms agree on the terms of employment Strikes Organized withdrawal of labor from a firm by a union Reduces production sales and profit Union Workers Earn 10 20 more than similar workers who do not belong to unions Union raises the wage above the equilibrium level Smaller quantity of labor demanded Higher quantity of labor supplied Unemployment Better off employed workers insiders Worse off