Chapter 3 - Unemployment_1

Chapter 3 - Unemployment_1 - Unemployment Unemployment The...

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Unformatted text preview: Unemployment Unemployment The two major macroeconomic The two major macroeconomic problems are: Unemployment Inflation (see book, but not a learning objective, so not on any exam) What is unemployment? What is unemployment? The inability of labor force participants to find paid employment Unemployment Labor Force: All non­institutionalized people over the age of 16 who are either working for pay or are actively seeking paid employment Unemployment Population Working-age Population Labor-force Employed Not in Labor-force Young; Institutionalized Unemployed Unemployment Unemployment Unemployment Rate: The proportion of the labor force that is unemployed NOTE: The unemployment rate likely understates the true extent of unemployment— Those working part­time who wish to work full­time Discouraged workers­­by definition, those not seeking employment are not unemployed Some unreported occupations offset this somewhat Four Basic Facts Four Basic Facts Even in the tightest labor markets some minimum amount of unemployment always exists. Unemployment is related to the business cycle. Unemployment is unevenly distributed across demographic groups in the labor force. It is a long­term trend. Costs of unemployment Costs of unemployment Unequal Burdens of Unemployment Occupation Age Race Gender Duration Who is considered unemployed? Who is considered unemployed? A person must satisfy three criteria: He or she is without a job He or she would be able to take a job if it were offered. He or she has looked for work in the preceding four weeks. The numbers for the US, January 2011 Source: Bureau of Labor Statistics Civilian Non­institutional population (working age population) Civilian labor force (Participation rate) Employed Unemployed (Unemployment rate) 237,830 153,186 (64.2%) 146,140 (95.5%) 13,863 (9.0%) Unemployment Rates Unemployment Rates Arkansas vs. U.S. Reasons for Unemployment Reasons for Unemployment (US, 2007) Source: Bureau of Labor Statistics Reason On temporary layoff Not on temporary layoff Job leavers Reentrants New entrants TOTAL: Number of People (1000s) 976 2539 793 2142 627 7077 Percent of Total Unemployment 13.8% 35.9% 11.2% 30.3% 8.8% 100% Reasons for Unemployment Reasons for Unemployment Source: Bureau of Labor Statistics (US, 2011) Types of unemployment: Types of unemployment: Seasonal Frictional Structural Cyclical Types of unemployment: Types of unemployment: Seasonal: The result of a decrease in the demand for labor due to the changing of the season E.g., many agricultural and construction jobs; resort/holiday jobs Types of unemployment: Types of unemployment: Frictional: Arises because of the constant flow of people between jobs and into and out of the labor force Characteristics of frictional unemployment: Affects a relatively large number of people across all groups of the labor force Usually temporary Often voluntary Tends to be relatively short in duration Is unavoidable May be beneficial Types of Unemployment Types of Unemployment Structural: The result of major industrial or technological changes A mismatch of skills to labor needs E.g., when a major industry is in decline and lays off many of its workers Characteristics of structural unemployment: Tends to be concentrated among certain groups of workers Tends to be long­lasting Types of unemployment: Types of unemployment: Cyclical: The result of movement through the business cycle; during expansions, unemployment is low, while during recessions, unemployment is high Costs of unemployment Costs of unemployment Economic cost Lost output Potential GDP is not realized GDP Gap = Potential GDP – Actual GDP Okun’s Law—For every 1% unemployment exceeds the natural rate, a 2.5% GDP gap occurs Non­economic costs Loss of income Scarring effect Psychological and emotional costs Quick Quiz Quick Quiz 1. To be defined as unemployed a person must: a. not have a job. b. not have a job and must have looked for work at some time. c. not have a job and must be actively looking for work. d. have a job but be looking for a different job. e. be working less than their desired amount of time. Quick Quiz Quick Quiz 2. People who are only working part­time, but want to be working full­time, are classified officially as: a. unemployed and in the labor force. b. unemployed and out of the labor force. c. employed and in the labor force. d. employed and out of the labor force. e. None of the above. Quick Quiz Quick Quiz 3. If Sally quits her job to move to Seattle and actively searches for work, she is considered: a. structurally unemployed. b. cyclically unemployed. c. frictionally unemployed. d. not to be unemployed. e. None of the above is correct. ...
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