Chapter 7 Unemployment
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When a worker who is not currently employed is searching for a job without success
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What is unemployment?
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is the percentage of the LABOR FORCE that is unemployed.
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What is unemployment rate?
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Unemployment from a healthy and growing economy- Structual and frictional unemployment
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What is natural unemployment?
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1. Structural 2. Frictional 3. Cyclical
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What are the three types of unemployment
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If you're not looking for a job, you're not counted as unemployed. If you start looking again, you're unemployed.
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How unemployment is measured
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unemployment caused by changes in the industrial makeup of the economy -New industries are created, and old ones are destroyed ex. Borders Bookstore
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What is structual Unemployment?
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occurs when the introduction of new products and technology leads to the end of other industries and jobs
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Creative destruction
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1. Undesirable to save obsolete or inefficient jobs 2. Workers must retrain, reeducate, relocate, or change expectations about work and pay 3. Government can help with training programs or relocation subsidies
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What can structurally unemployed people do?
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Unemployment caused by time delays in matching available jobs and workers
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What is Frictional Unemployment?
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1. People don't instantly take a new job, and they might not want to take the first available job 2. Firms don't always hire the first applicant 3. Government Regulations (eg.Unemployment insurance)
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What are reasons for frictional unemployment?
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unemployment caused by economic downturns such as recessions. -The "worst" kind of unemployment -Occurs for an unknown length of time
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what is Cyclical Unemployment?
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Occurs for an unknown length of time ex. 2008: 18 months, 10% unemployed
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How much time does Cyclical Unemployment last?
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is the typical rate of unemployment that occurs when the economy is growing normally.
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Natural rate of unemployment (u*)
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the output level produced in an economy when the unemployment rate is equal to its natural rate (when no cyclical unemployment exists) t is
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Full employment output (Y*)
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u = u* Y = Y* Cyclical unemployment is zero
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Healthy Economy
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u ; u* Y ; Y* Cyclical unemployment is positive
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Recession
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u Y* Cyclical unemployment is negative
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Super-Normal Expansion (Temporary)
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people that are willing and able to work
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Labor force
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The portion of the population that is in the labor force Tells us the fraction of people who are working or looking for work
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Labor force participation rate
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LFPR = Labor Force/ Population *100
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Labor force participation rate formula
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unemployment rate = u = number unemployed/labor force x 100
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the unemployment rate formula
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( # empl./LF) x 100
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Employment rate formula
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- Retirees - Homemakers/ Stay at home parents - People in Jail -Military Personnel - Children under the age of 16 -Discouraged workers - Full time students
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Examples of the population who are not part of the labor force
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people who are willing and able to work that give up looking for work after a certain time not part of the labor force
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Discouraged workers
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Have looked for a job in the past 12 months and are willing to work but have not sought employment in the past 4 weeks
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when are you classified as a Discouraged workers?
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workers who have a part time jobs but who would like to have full-time jobs.
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underemployed workers
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About 6%
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What is the average unemployment rate in the US since the 1960's?
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1. Part-time workers who want full-time jobs or Workers who are very overqualified at their job 2. Considered employed
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Underemployed workers
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A. Alfred the VCR repairman is unemployed because there are very few people that still own VCRs B. Bernie the construction worker is unemployed because no one is building houses right now C. Carl the restaurant chef is unemployed because he and his wife recently moved to a new city
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Which of the following is an example of structural unemployment?
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A. Alfred the VCR repairman is unemployed because there are very few people that still own VCRs B. Bernie the construction worker is unemployed because no one is building houses right now C. Carl the restaurant chef is unemployed because he and his wife recently moved to a new city
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Which of the following is an example of frictional unemployment?
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A. Jean, a college student who is currently not working B. Zoe, a recent college graduate who sent out job application, but has yet to hear back from the businesses C. Michael, a stay-at-home dad D. All of the above
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Who is considered unemployed?
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A. Go down because our economy is on the right track with more people wanting to work B. Stay the same because the number of people with jobs didn't change C. Stay the same because the worker isn't counted in the labor force until he finds a job again D. Increase because the percentage of labor force participants with jobs decreased
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If a discouraged worker re-enters the labor force and begins searching for jobs but doesn't find one, the unemployment rate will:
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A. It hurts the unemployed by giving them benefits B. It may increase the length of unemployment since it decreases the cost of being unemployed C. It angers hard-working people D. It lasts as long as you want it to, so you can get paid and never have to work
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What is a possible unintended consequence of unemployment insurance?
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8.1%
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What was the overall unemployment rate in 2012 ?
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Labor Force - Employed
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how do you find unemployment?
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employed + unemployed persons
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how do you find Labor Force?
