INTERMEDIATE ECONOMICS 2ND HALF - INTERMEDIATE...

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INTERMEDIATE MACROECONOMICS ECONOMICS 2NDHALFCHAPTER 7-10, 16LABOR MARKETS, INFLATION & CONSUMPTION10/15/15Topic 6: Labor markets, wages, and unemployment(Chapter 7)Definitions: -POPt(Civilian non institutional population) -grows by about 1% per year-Age 16+, non inmates or institutions-Lt(Civilian labor force)-subset of non institutional population-have a job or are seeking a job -Lt/POPt(Labor force participation)-Labor force as a share of non-institutional population-Et(Civilian Employment) -Currently employed or self employed -Et/POPt(Employment population rate)-Ut(Unemployed)-don’t have a job, not actively searching -Ut/POPt(Unemployment rate)Labor Force Participation RateProcyclical (increases in expansions, decreases in recessions)Big Increase in 1960s, due to more women joining the workforce (See PPT graph with gender spiltMain Trends Post 1950s -Women participation more than doubled (feminist movement, cleaning technology, fertility control)-Men- steadily going downward-In 2000’sAfter recession, decline for both males/females can be explained by looking @ labor force by age (younger: more emphasis on school start working later, older: post recession, people working longer)-Composition Effects: As population ages, more people move to older age groups with lower labor force participation -Lt = Lt16-19+ Lt20-24 + L t25-54+ Lt55+POPt = POPt16-19+ POPt20-24 + POPt25-54+ POPt55+L/POP = Lt16-19/POPt16-19 For all Add in Mupltiple L/POP = Lt16-19/POPt16-19 (POPt16-19/POPt)… Repeat for all age groups
L/POP = Lt16-19/POPt16-19 (POPt16-19/POPt) + L/POP = Lt20-24/POPt20-24 (POPt20-24/POPt) + L/POP = Lt25-54/POPt25-54 (POPt25-54/POPt) + L/POP = Lt55+/POPt55+ (POPt55+/POPt)When you split the fractions by groups, you can see that an increase in one group will affect the aggregate as well. “Our population is aging.” -Young and old cohorts are less attached to labor marketCan also look at Labor force by education-Mostly just shows the higher the education, the bigger the participation (80%of college educated)Employment Population Ratio Highly cyclical Incorporates both labor participation as well as effects of unemployment Et/POPt= Et/Lt(Lt/POPt) = (1-ut)Lt/POPtEmployment rate decrease in recessions + labor force participation decreases in recessions = BIG dip. Very volatile Unemployment Rate Counter Cyclical (low in expansions, high in recessions) Unemployment rate jumped in 70s/80s (slow down in productivity, also thought to be due to baby boomers composition effect) Good measure of labor market conditions? -When economic conditions get really bad, people get discouraged and stop looking (& no longer counted as unemployed)-Discouragement actually lowers the unemployment rate (can be seen when employment is not increasing, but unemployment is decreasing) -Some workers have jobs, but work less than they want to (Part-Time)Different types of unemployment -Actual unemployment = natural + cyclical unemployment -Natural unemployment

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