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22 Cards in this Set
- Front
- Back
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Cyclical Unemployment
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The deviation of unemployment from its natural rate.
Refers to the year to year fluctuations in unemployment around its natural rate (the amount of unemployment the economy normally experiences) and it is closely associated with the short-run ups and downs of economic activity. |
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Labor Force
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The total number of workers, including BOTH employed and unemployed (not those outside of the labor force however).
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Unemployment Rate
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The percentage of the labor force employed:
UR= (# employed/labor force)x100 |
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Labor-force participation rate
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The percentage of the adult population that is in the labor force:
LFPR= (Labor Force/Adult Population)x100 |
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Natural Rate of Unemployment
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The normal rate of unemployment around which the employment rate fluctuates.
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Discouraged Workers
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Individuals who would like to work but have given up looking for a job.
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Trend Shift in Workforce Gender
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Women's participation in the workforce has increased due to increased equal opportunities.
Men's participation has declined slightly due to: Men stay in school longer than fathers and grandfathers, older men retire earlier and live longer, and with more women in the workforce more fathers now stay at home to raise their children. |
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The length of Unemployment in the short-term and long-term
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Most unemployment spells are short, however most unemployment observed at any given time is long-term.
Example: You may go to an unemployment office and find that 95% of unemployment spells end in one week, 75% of unemployment is attributable to those individuals who are unemployed for a full year. |
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Frictional Unemployment
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Unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills.
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Structural Unemployment
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Unemployment that results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one. Often thought to explain longer spells of unemployment.
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Job Search
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The process by which workers find appropriate jobs given their tastes and skills.
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Why is some frictional unemployment inevitable?
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The market often has changes in the demand for labor among different firms. For example, if people decide they like company B better than A, some workers in company A may get laid off while company B begins to hire workers. This transition period is a result of unemployment.
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Sectoral Shifts
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Changes in the composition of demand among industries or regions.
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Unemployment Insurance
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A government program that partially protects workers' incomes when they become unemployed. Benefits are paid only to the unemployed who were laid off because their previous employers no longer needed their skills. However this program tends to increase frictional unemployment unintentionally because when people are paid this insurance after being laid off they devote less time and effort to searching for a new job.
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Minimum-Wage effect on Unemployment
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If the wage if kept above the equilibrium level for any reason, the result is unemployment due to a surplus of workers (the combination of people wanting to work and companies not wanting as many employees).
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Union
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A worker association that bargains with employers over wages, benefits, and working conditions.
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Collective Bargaining
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The process by which unions and firms agree on the terms of employment.
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Strike
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The organized withdrawal of labor from a firm by a union.
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Union Conflicts: Insiders vs. Outsiders
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If the minimum wage is raised and some workers are laid off while others keep their jobs, unions face a tough dilemma.
The Insiders (those who keep their jobs and benefit from high union wages) vs. The outsiders (those who do not get union jobs). |
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Efficiency Wages
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Above-equilibrium wages paid by firms to increase worker productivity, which is another reason why economies feature unemployment because it is sometimes more profitable for a firm to keep wages high even in the presence of a surplus of labor.
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Reasons for Efficiency Wages
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Efficiency Wages is the concept that it is profitable for industries to pay wages above the equilibrium level. Here are some reasons why:
Worker Health: Workers who are paid more eat a better diet and are healthier and more productive. (Tends to be true in poorer countries) Worker Turnover: The better paid a firms' workers are, the less likely they are to leave the firm for another job. Worker Quality: When a firm pays a high wage, it attracts a better (more talented, intelligent) pool of workers to apply for its jobs and thereby increases the quality of its workforce. Worker Effort: The better paid workers are, the more motivated they will be to work hard. |
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The problem with unions
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When unions push for higher wages in unionized industries, the wages can go above the equilibrium level and thereby create a surplus of labor.
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