Chapter 15 - Unemployment
Chapter 15 - Unemployment Econ 110
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This 5 page Class Notes was uploaded by Erin Payne on Friday April 22, 2016. The Class Notes belongs to Econ 110 at Kansas State University taught by Dr. Al-Hamdi in Spring 2016. Since its upload, it has received 29 views. For similar materials see principles of Macroeconomics in Economcs at Kansas State University.
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Date Created: 04/22/16
Week 11 April 6th April 11th Spring 201 Chapter 15 Notes Unemployment ● Employed ○ Those who worked. ■ Paid employees. ■ In their own business. ■ Unpaid workers in family member’s business. ○ Fulltime and parttime workers. ○ Temporarily absent. ■ Includes vacations, illness, bad weather, maternity leave, etc. ● Unemployed ○ Those who were not employed. ■ Available for work. ■ Tried to find employment during the previous four weeks. ○ Those waiting to be recalled to a job. ■ Laid off. ● Not in the Labor Force ○ Not employed and not unemployed. ○ Fulltime students. ○ Homemakers. ○ Retirees. ● Labor Force ○ The total number of workers, employed and unemployed. ○ ∴Labor Force = # of Employed + # of Unemployed ● Unemployment Rate ○ Percentage of labor force that is unemployed. Number of Unemployed ○ Unemployment rate = Labor Force X 100 ● LaborForce Participation Rate ○ Percentage 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 ○ Laborforce participation rate = Adult Population00 ● LaborMarket Experiences ○ Women of prime working age (2554) ■ Lower rates of laborforce participation than men. ○ Once in the labor force ■ Men and women similar rates of unemployment. ○ Blacks of prime working age Notes Key Bolded texts = most important facts stressed by professor. ∴ symbol = “Therefore” or “In other words”. “ ” = Specific definition or word choice provided y instructor. Week 11 April 6th April 11th Spring 201 ■ Similar rates of laborforce participation as primeage whites. ■ Much higher rates of unemployment. ○ Teenagers ■ Lower rates of laborforce participation. ■ Much higher rates on unemployment than older workers. ● Natural Rate of Unemployment ○ Calculated by Congressional Budget office ○ Normal rate of unemployment around which the unemployment rate fluctuates. ● Cyclical Unemployment ○ Deviation of unemployment from natural rate. ● Official Unemployment Rate ○ Useful. ○ Imperfect measure of joblessness. ● Movement into and out of the labor force ○ Common. ○ More than onethird of unemployed. ■ Recent entrants into the labor force. ● Unemployment ○ Not all unemployment ends with the job seeker finding a job. ■ Half of all spells of unemployment and when the unemployed leaves the labor force. ● Some of those who report being unemployed ○ May not be trying to find a job. ■ Want to qualify for government help. ■ Working but paid “under the table”. ● Some of those who are out of labor force ○ May want to work. ■ Discouraged workers. ● Discouraged Workers: ○ Individuals who would like to work. ○ Have given up looking for a job. ● How long are they unemployed without work? ○ Most spells of unemployment are short. ○ Most unemployment observed at any given time is longterm. ○ Most people who become unemployed will soon find jobs. ● Unemployment never reaches zero. ● Unemployment Rate ○ Fluctuates around the natural rate of unemployment. Notes Key Bolded texts = most important facts stressed by professor. ∴ symbol = “Therefore” or “In other words”. “ ” = Specific definition or word choice provided y instructor. Week 11 April 6th April 11th Spring 201 ● Frictional Unemployment ○ It takes time for workers to search for the jobs that best suit their tastes and skills. ○ Explain relatively short spells of unemployment. ● Structural Unemployment ○ Results because the number of jobs available in some labor markets. ■ Is insufficient to provide a job for everyone who wants one. ○ Explains longer spells of unemployment. ○ Results when wages are set above the equilibrium. ■ Minimumwage laws, unions, and efficiency wages. ● Job Search ○ Process by which workers find appropriate jobs given their tastes and skills. ■ Workers differ in their tastes and skills. ■ Jobs differ in their attributes. ■ Information about job candidates and job vacancies is disseminated slowly. ● Some frictional unemployment is inevitable. ○ Changes in demand for labor among different firms. ○ Changes in composition of demand among industries or regions (sectional shifts). ○ The economy is always changing. ■ Jobs created in some firms. ■ Jobs destroyed in other firms. ● Reduce time for unemployed to find jobs. ○ Reduce natural rate of unemployment. ● Government programs facilitates job search. ○ Government run employment agencies. ○ Public training programs. ● Unemployment Insurance ○ Government program. ○ Partially protects workers’ incomes when they become unemployed. ○ Increases frictional unemployment without intending to do so. ○ Qualify only the unemployed who were laid off because their previous employers no longer needed their skills. ○ 50% of former wages for twentysix weeks. ○ Reduces the hardship of unemployment. ○ Increase the amount of unemployment. ■ Unemployment benefits stop when a worker takes a new job. ■ Unemployed ● Devote less effort to job search. ● More likely to turn down unattractive job offers. Notes Key:Bolded texts = most important facts stressed by professor. ∴ symbol = “Therefore” or “In other words”. “ ” = Specific definition or word choice provided b instructor. Week 11 April 6th April 11th Spring 201 ● Less likely to seek guarantees of job security. ● Structural Unemployment ○ Number of jobs insufficient. ● Minimumwage laws. ○ Can cause unemployment. ○ Forces the wage to remain above the equilibrium level. ■ Higher quantity of labor supplied. ■ Smaller quantity of labor demanded. ■ Surplus of labor = unemployment. ● Structural unemployment: Q = Labor > Qd Labor. ● Surplus of workers created by minimum wage = unemployment. ● Wages may be kept above equilibrium ○ Minimumwage laws. ○ Unions. ○ Efficiency wages. ● If the wage is kept above the equilibrium level ○ Result: Unemployment. ● Union ○ Worker association. ○ Bargains with employers over. ■ Wages, benefits, and working conditions. ○ 11% of U.S. workers. ○ Type of cartel. ● Collective bargaining ○ Process by which unions and firms agree on the terms of employment. ● Strike ○ Organized withdrawal of labor from a firm by a union. ○ Reduces production, sales, and profit. ● Union Workers ○ Earn 1020% more than similar workers who do not belong to unions. ● Union raises the wage above the equilibrium level. ○ Higher quantity of labor supplied. ○ Small quantity of labor demanded. ○ Unemployment. ○ Better off: employed workers (insiders). ○ Worse off: unemployed (outsiders). ■ May stay unemployed. ■ Take jobs in firms that are not unionized. ○ Supply of labor in industries not unionized will increase, lower wages. Notes Key Bolded texts = most important facts stressed by professor. ∴ symbol = “Therefore” or “In other words”. “ ” = Specific definition or word choice provided y instructor. Week 11 April 6th April 11th Spring 201 ● Workers in Unions ○ Reap the benefit of collective bargaining. ● Workers not in Unions ○ Bear some of the cost. ● Are unions good or bad for the economy? ○ Critics ■ Unions type of cartel. ■ Allocation of labor. ● Inefficient high union wages reduce employment in unionized firms below the efficient level. ● Inequitable some workers benefit at the expense of other workers. ○ Advocates ■ Unions necessary antidote to the market power of the firms that hire workers. ● In the absence of a union, firms pay lower wages and offer worse working conditions. ■ Unions help firms respond efficiently to workers’ concerns. ● Keep a happy and productive workforce. ● Efficiency Wages ○ Aboveequilibrium wages paid by firms to increase workers productivity. ■ Worker health; Worker turnover. ■ Worker quality; Worker effort. ■ Ex. Henry Ford, founder of Ford Motor Company ● Worker Health ○ Better paid workers. ■ Eat a more nutritious diet. ■ Healthier and more productive. ● Worker Turnover ○ Firm can reduce turnover among its workers by paying them a high wage. ● Worker Quality ○ Firm pays a high wage ■ Attracts a better pool of workers. ■ Increases the quality of its workforce. ● Worker Effort ○ High wages make workers more eager to keep their jobs. ■ Give workers an incentive to put forward their best effort. Notes Key:Bolded texts = most important facts stressed by professor. ∴ symbol = “Therefore” or “In other words”. “ ” = Specific definition or word choice provided b instructor.
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