Participation rates than the overall population o

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participation rates than the overall population o Teenagers have lower rates of labour participation and higher rates of unemployment than the overall population Underutilisation Rate: number of unemployed plus the under employed as a percentage of the labour force Cyclical unemployment: deviation of unemployment from its natural rates (usually 5%) Is employment measured correctly? Movements in and out of the labour force are very common It consists of young workers looking for their first job, older workers that have previously left the labour force and when an unemployed person leaves the labour force Discouraged workers: individuals who would like to work but have given up looking for a job How long are the unemployed without work? Workers unemployed for many months are more likely to suffer economic and psychological hardships Most spells on unemployment are short and most unemployment observes at any given time is long term Why is there unemployment? Unemployment level never falls to zero it fluctuates around the natural rate of unemployment 2 types of unemployment that explain why unemployment can never be 0: o Frictional unemployment: when people are temporary unemployed while they search for a new job o Structural unemployment: results from the mismatch between the skills that business require and the skills that workers have Four reasons why the actual labour markets depart from the ideal of full employment: minimum wage, unions, efficiency and job search Minimum wage laws
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When a minimum wage laws forces the wage to remain above the value that balance demand and supply, it raises the quantity of workers but the quantity of demand reduces = surplus of labour However, minimum wages are not the predominant reason for unemployment as most workers in the economy earn more than the award It is usually only binding on least skilled experienced members of the labour force Unions and collective bargaining Union: worker association that bargains with employers over wages and working conditions Collective bargaining: process by which unions and firms agree on the terms of employment The economics of unions If unions and firms do not reach an agreement, the union can organise a withdrawal of labour from the firm known as a strike Strike: organised withdrawal of labour from a firm by a union When union raises wages above equilibrium results in surplus of labour as firms will reduce their quantity demanded Unions are often thought to cause conflict between different groups of workers- between insiders who benefit from higher union wages and outsiders who do not get the union job Outsiders respond in 2 ways- they remain unemployed and wait for the change to become insiders o take jobs in firm that are not unionized When union raise wages in one part of the economy, the supply of labour increases in other part of the economy Theory of efficiency wages
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Christopher Reinemann
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