Unformatted text preview: abor Market Minimum Wage and Economic Surplus (Figure 5.13)
Structural rigidities in the labor market will result in wages set above
equilibrium and high levels of unemployment. Figure : Changes in Economic Surplus from Minimum Wage Laws
Ryan W. Herzog (GU) Labor Market February 5, 2014 27 / 40 Explaining Trends in the Labor Market Reducing Inequality(Figure 5.14)
Reducing the supply of low skilled labor needs to come through
education. Figure : Closing the Wage Gap
Ryan W. Herzog (GU) Labor Market February 5, 2014 28 / 40 Unemployment Measuring Unemployment
How do we measure unemployment? We ask a few basic questions.
1 2 3 Employed: A person is employed if he or she is working full or
part-time. This includes individuals on vacation or sick leave.
Unemployed: A person is unemployed if he or she did not work during
the preceding week but made some eﬀort to ﬁnd work in the past four
Out of the Labor Force: A person is considered to be out of the
labor force if he or she did not work in the past week and did not look
for work in the past for weeks. These individuals are not employed or
unemployed. Examples include full-time students, unpaid homemakers,
retirees, those institutionalized, and people unable to work because of
disabilities. An individual is unemployed if they are working age and have been
actively searching for employment in the last four weeks. Ryan W. Herzog (GU) Labor Market February 5, 2014 29 / 40 Unemployment Two Key Measures of Unemployment Unemployment Rate = Number of Unemployed / Labor Force.
Labor Force Participation Rate = Labor Force / Working Age
For the United States:
Unemployment Rate = 7.5%
Total Unemployed = 11.6 million
Total Employed = 143.5 million
Labor Force Participation Rate = (11.6 + 143.5) / 239.6 = 63.3% Ryan W. Herzog (GU) Labor Market February 5, 2014 30 / 40 Unemployment Example Calculated the unemployment rate if the labor force is 150 million
people and 120 million are employed?
First ﬁnd the number of unemployed (labor force less employed)
Find the unemployment rate = (150 - 120) / 150 = 20%. Ryan W. Herzog (GU) Labor Market Febru...
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