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GWU / Economics / ECON 1012 / Why are discouraged workers not included in the unemployment rate?

Why are discouraged workers not included in the unemployment rate?

Why are discouraged workers not included in the unemployment rate?


School: George Washington University
Department: Economics
Course: Principles of Economics II
Professor: John volpe
Term: Spring 2016
Cost: 25
Name: Macroeconomics Notes Week 4
Description: Notes for February 2 and 4, 2016.
Uploaded: 02/04/2016
2 Pages 184 Views 1 Unlocks

Macroeconomics Week 4  

Why are discouraged workers not included in the unemployment rate?

∙ Measuring Unemployment  

o Labor Force  The sum of employed and unemployed workers in  the economy  

o Unemployment rate  the percentage of the labor force that is  unemployed  

 (Number of unemployed/Labor force) x 100 =  

unemployment rate  

∙ Discouraged workers  

o People available for work, but not looking for a job because they  believe no jobs are available for them

o Haven’t looked for a job for four weeks

∙ Labor Force Participation Rate  

o 16 yrs of age or older considered available for work 


o Number of people looking and people actually working  (unemployed + employed)  nominator  

How do you calculate work force participation rate?

o Rate going down in US

 Number currently is low  

 Getting lower because the baby boomers are retiring  

 Also getting lower because younger people are not working as much as they used to be  

∙ More people are in school  

∙ Some young people do not have the  


o How to get the rate up:

 Induce people to get back into the workforce by making  them healthier

∙ Small increase in number of people that work

 Increase birth rates  

∙ Family sizes are getting smaller and smaller  

 Import people  

∙ Number of illegal immigrants is presumably 11  

How do you encourage employees to participate?

million people  

o Number has stayed the same for 6-7 years  

∙ Developing countries with large population sizes and  

not enough employment  

o They go to countries where they can find this  


∙ Frictional unemployment  short term unemployment that arises from  the process of matching workers with jobs  Don't forget about the age old question of Why movement songs make people unified and more powerful?

o Occurs mostly because of job search or being between jobs  o Also occurs because of seasonal unemployment If you want to learn more check out Who is the vice president under lincoln for about a month?

o Some frictional unemployment actually increases economic  efficiency by allowing for better job matches

∙ Structural Unemployment  unemployment that arises from a  persistent mismatch between skills and attributes of workers and  requirements of jobs

o Associated with longer unemployment spells  

∙ Cyclical unemployment  caused by a business cycle recession o When all unemployment is due to frictional and structural factors  full employment

o There will always be some unemployment in the economy  ∙ Some government policies probably increase unemployment  o Unemployment insurance  If you want to learn more check out What is the difference between society and culture?

o Minimum wage laws

∙ Okun’s Law  

o If you reduce the unemployment rate by 1%, you can get a 2 and a half % increase in the nations gross domestic product (GDP).  ∙ Inflation  

o Everyone is impacted by inflation  

o Inflation is a steady persistent increase in the general level of  prices

 Deflation is the opposite  

o Disinflation is when the inflation rate falls  

∙ Efficiency wages  

o An above-market wage that a firm pays to increase workers’  productivity  

o The idea that paying workers a relatively high wage will make  them motivated to perform well in order to keep their job  o These wages are probably another reason why unemployment  exists  

 Even when cyclical unemployment is zero  

∙ Consumer price index  measure of the average change over time in  prices of typical urban family of four pays for goods or services o (Expenditures in the current year/Expenditures in the base year)  x 100

∙ Nominal interest rate  

o Stated interest rate on a loan  

∙ Real interest rate We also discuss several other topics like What are the two common family units?
If you want to learn more check out What did ancient people think the brain was for?
If you want to learn more check out Are state supreme courts appellate courts?

o Nominal interest rate minus the inflation rate

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