Chapter15UnemploymentLectureNotesI LaborForceStatisticA ProducedbyBureauofLaborStatistics BLS intheU SDept ofLabor B Basedonregularsurveyof60 000households C Basedon adultpopulation 16yrsorolder D BLSdividespopulationinto3groups 1 Employed paidemployees self employed andunpaidworkersinafamilybusiness 2 Unemployed peoplenotworkingwhohavelookedforworkduringtheprevious4weeks 3 Notinthelaborforce everyoneelse Thelaborforceisthetotal ofworkers includingtheemployedandunemployed Formulas4 Unemploymentrate u rate ofthelaborforcethatisunemployed 100 01 2 31 4 5 5 Laborforceparticipationrate oftheadultpopulationthatisinthelaborforce1 4 5 0 6560 6 100 1 4 5 3 1 0 0 1 6 II Learning CalculatelaborforcestatisticsComputethelaborforce u rate adultpopulation andlaborforceparticipationrateusingthisdata AdultpopulationofU S bygroup September2014 ofemployed146 6million ofunemployed9 3millionNotinlaborforce92 6millionTogetthelaborforce Chapter15UnemploymentLectureNotesLaborForce employed unemployed 146 6 9 3 155 9millionU rate III LaborForceStatisticsforWhites Blacks September2013Adults 20yrs older Urate LFpart Rate White male6 172 6White Female5 558 1Black male14 067 9Black female10 061 2Teens 16 19yrs Adults 25yrs older U rate LFpart Rate White19 336 7Black35 129 4U rateLFpart Rate Lessthanh s10 344 5H sdiploma7 659 0Somecollegeorassocdegree6 067 2Bachelor sdegreeormore3 775 3 Chapter15UnemploymentLectureNotesAnalysis Maleshavebeendecreasingandfemalehasbeenincreasingovertimefrom1950 2012Example Ineachofthefollowing whathappenstotheu rate Doestheu rategiveanaccurateimpressionofwhat shappeninginthelabormaker A Suelostherjobandbeganlookingforanewone a U raterises arisingrategivestheimpressionthatthelabormarketisworsening anditis B Jon asteelworkerwhohasbeenoutofworksincehismillclosedlastyear becomesdiscouragedandgivesuplookingforwork a Discouragedworker i Hewouldliketoworkbuthasgivenuplookingforjobs ii Classifiedas notinthelaborforce ratherthan unemployed iii theu ratefallsbecauseJonisnolongercountedasunemployed C Sam thesoleearnerinhisfamilyof5 justlosthis 80 000jobasresearchscientist Immediately hetakesapart timejobatMc Donald suntilhecanfindanotherjobinthefield U rateunchangedbecauseapersonis employed whethertheyworkfullorparttime Thingsareworse buttheu ratefailstoshowit IV WhatDoestheU ratereallymeasure A Theu rateisnotaperfectindicatorofjoblessnessorthehealthofthelabormarket a Itexcludesdiscouragedworkers b Itdoesnotdistinguishbetweenfull timeandpart timework orpeopleworkingparttimebecausefull timejobsnotavailable Chapter15UnemploymentLectureNotesc SomepeoplemisreporttheirworkstatusintheBLSsurvey B Despitetheseissues theu rateisstillaveryusefulbarometerofthelabormarket economy V TheDurationofUnemploymentMostspellsofunemploymentareshort Typically oftheunemployedhavebeenunemployedunder5weeks havebeenunemployedunder14weeks Only20 havebeenunemployedover6months Yet mostobservedunemploymentislongterm VI ExplainingtheNaturalRate AnOverviewEvenwhentheeconomyisdoingwell thereisalwayssomeunemployment including VII There salwayssomeunemployment thoughtheu ratefluctuatesfromyeartoyear Naturalrateofunemployment Thenormalrateofunemploymentaroundwhichtheactualunemploymentratefluctuates Cyclicalunemployment Thedeviationofunemploymentfromitsnaturalrate Associatedwithbusinesscycles whichwe llstudyinlaterchapters VIII Naturalrateofunemployment overviewandtypesofunemploymentFrictionalunemployment Chapter15UnemploymentLectureNotes Occurswhenworkersspendtimesearchingforthejobsthatbestsuittheirskillsandtastes Short termformostworkersStructuralunemployment Occurswhentherearefewerjobsthanworkers Usuallylonger term IX JobSearch Workershavedifferenttastes skills andjobshavedifferentrequirements Jobsearchistheprocessofmatchingworkerswithappropriatejobs Sectoralshiftsarechangesinthecompositionofdemandacrossindustriesorregionsofthecountry Suchshiftsdisplacesomeworkers whomustsearchfornewjobsappropriatefortheirskills taste Theeconomyisalwayschanging sosomefrictionalunemploymentisinevitable HowdoesPublicpolicyandJobsearchhelptheGOV T Gov temploymentagenciesprovideinformationaboutjobvacanciestospeedupthematchingofworkerswithjobs Publictrainingprogramsaimtoequipworkersdisplacedfromdecliningindustrieswiththeskillsneededingrowingindustries X UnemploymentInsurance Unemploymentinsurance UI agovtprogramthatpartiallyprotectsworkers incomeswhentheybecomeunemployed UIincreasesfrictionalunemployment Toseewhy recalloneoftheTenPrinciplesofEconomics PeoplerespondtoincentivesUIbenefitsendwhenaworkertakesajob soworkershavelessincentivetosearchortakejobswhileeligibletoreceivebenefits Chapter15UnemploymentLectureNotesBenefitsofUI Reducesuncertaintyoverincomes Givestheunemployedmoretimetosearch resultinginbetterjobmatchesandthushigherproductivity XI ExplainingStructuralUnemploymentXII EfficiencyWagesFourreasonswhyfirmsmightpayefficiencywages 1 WorkerHealth Inlessdevelopedcountries poornutritionisacommonproblem Payingahigherwageallowsworkerstoeatbetter makesthemhealthier moreproductive 2 Workerturnover Hiring trainingnewworkersiscostly Payinghighwagesgivesworkersmoreincentivetostay reducingturnover Thereforeisnotincreasingtheworkerturnover butviceversa 3 Workerquality Offeringhigherwagesattractsbetterjobapplicants increasingthequalityofthefirm sworkforce 4 Workereffort Workerscanworkhardorshrink Shirkersarefiredifcaught Isbeingfiredagooddeterrent InConclusion Thenaturalrateofunemploymentconsistsof1 Frictionalunemployment Ittakestimetosearchfortherightjobs Occursevenifthereareenoughjobstogoaround Chapter15UnemploymentLectureNotes2 Structuralunemployment Whenwagesareaboveeq m therearenotenoughjobs Duetomin Wages laborunions efficiency Inlaterchapters wewilllearnaboutcyclicalunemployment theshort termfluctuationsinunemploymentassociatedwithbusinesscycles
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