Ch10 - Chapter 10 Unemployment and Its Natural Rate The...

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Unemployment and Its Natural Rate The purpose of Chapter 15 is to introduce students to the labor market. We will see how economists measure the performance of the labor market using unemployment statistics. We will also address a number of sources of unemployment and some policies that the government might use to lower certain types of unemployment. By the end of this chapter, students should understand: the data used to measure the amount of unemployment. how unemployment can result from minimum-wage laws. how unemployment can arise from bargaining between firms and unions. how unemployment results when firms choose to pay efficiency wages. You have to know how to calculate unemployment statistics. Note that “N = number of people not in the labor force” does not mean “unemployed”. It refers to people who have voluntarily chosen not to work (stay-at-home mums and dads, the retired, full-time students, the independently wealthy, or are unable to participate in the labor force (mentally disabled, incarcerated, physically disabled). The natural rate of unemployment is also known as the “full-employment rate of unemployment”. A discouraged worker is one who is available for work but has not looked for a job during the previous four weeks because he or she believes there are no jobs available for that person. The US Department of Labor treats discouraged workers as not being in the labor force. The BLS provides seasonally adjusted unemployment rates and rates that are not seasonally adjusted. Seasonally adjusted rates have already accounted for seasonal unemployment in which case the natural rate of unemployment comprises only structural and frictional unemployment . If you’re not given information on seasonal unemployment, you may assume that the unemployment rate is the seasonally adjusted rate. More about Structural Unemployment: The sources identified in the text (1) Government established minimum wage regulations – This affects the unskilled labor market (2) Unions organized by labor – This tends to affect the market for semi-skilled, skilled and some professional labor markets (3) Efficiency wages set by employers – this tends to affect the market for skilled worker, professional workers, and workers in “creative” fields. In addition there is one other source (not in the text): (4) Persistent mismatch between the skills and characteristics of workers and the requirements of jobs. For examples, changes in a countries comparative advantage and technological changes that substitute machines for workers may leave require workers to retrain themselves and acquire new skills or otherwise remain unemployed. 1
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Ch10 - Chapter 10 Unemployment and Its Natural Rate The...

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