Chapter 15: Unemployment and It’s Natural Rate Flashcard Example #17131

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What three categories does the Bureau of Labor Statistics classify adults in to measure unemployment?
Employed, Unemployed, Not in the Labor Force
How does the BLS categorize those employed?
Includes those who worked as paid employees, those who worked in their own businesses, or worked as unpaid workers in a family member’s business. Includes:
-full-time and part-time workers are counted
-those working but temporarily absent
How does the BLS categorize those unemployed?
Those who were not employed, were available for work, and had tried to find employment during the previous four weeks. Includes:
– those waiting to be recalled to a job from which they had been laid off.
How does the BLS categorize those not in the labor force?
Those who don’t fit as employed or unemployed, such as full- time students, homemakers, and retirees.
How does the BLS define the labor force?
the number of people working or seeking work- the sum of the employed and the unemployed. Labor force= number of employed + number of unemployed.
How doe the BLS define the unemployment rate?
as the percentage of the labor force that is unemployed: number of unemployed/ labor force * 100
What is the labor-force participation rate?
measures the percentage of the total adult population of the US that is in the labor force. Labor-force participation rate= labor force/ adult population * 100
What is the natural rate of unemployment?
the amount of unemployment that an economy usually experiences, the long run average rate of unemployment. 5.7%
What is cyclical unemployment?
deviations in the unemployment rate from the natural rate, fluctuations in unemployment due to business cycles. This kind of unemployment rises during recessions and falls during expansions.
What are marginally attached workers?
persons who currently neither working nor looking for work but indicate that they want and are available for a job and have looked for work some time in the near past.
What are discouraged workers?
workers that really want to find a job but have given up actively seeking work and therefor are counted as not in the labor force rather than as unemployed. Also marginally attached workers who give a job-market-related reason for giving up on their job search
What are some reasons the reported rate of unemployment may not accurately reflect the true rate of unemployment?
discouraged workers are not being counted as unemployed, some individuals may claim to be unemployed when they are not
Why does the unemployment rate never fall to zero?
Even when the overall economy is doing well, there are always some workers without jobs. Instead, it fluctuates around the natural rate of unemployment.
What is frictional unemployment?
caused by job search time, individuals have transferable skills they just need to locate an open job, this process takes some time.. explains longer spells of unemployment.
What is structural unemployment?
there are not enough jobs, individuals do not have transferable skills, they are not needed and must get training for employment in another field.. explains short unemployment time.
What does offering higher unemployment benefits do to search time for the unemployed?
more generous unemployment benefits increase search time, people will spend more time looking for a job that best fits them if the benefits paid during unemployment are higher.
What is the effect of an increase in the minimum wage on the number of workers demanded?
decreases_ The number of workers supplied? __increases__ The amount of unemployment? __increases
What is a labor union and collective bargaining?
A labor union is an association of workers. Collective bargaining refers to the idea that the workers in a union bargain together for wages and benefits as a group for better leverage
How do unions affect the unemployment rate if they raise union wages?
Higher union wages increase the quantity of labor supplied, decrease the quantity of labor demanded, and create a larger surplus of workers which means a higher unemployment rate
What is efficiency wage theory?
Efficiency wage theory refers to paying a slightly higher than equilibrium wage to workers to increase profits
What are the reasons that explain why a firm may want to pay efficiency wages?
Improved worker health, better quality, increased effort, less turnover
How does the efficiency wage theory emphasize worker health?
Better-paid workers eat a more nutritious diet, and workers who eat a better diet are healthier and more productive.
How does the efficiency wage theory emphasize worker turnover?
The more a firm pays its workers, the less often it’s workers will choose to leave.
How does the efficiency wage theory emphasize worker quality?
When a firm pays a high wage, it attracts a better pool pf workers to apply for it’ jobs and therefore increases the quality of its workforce.
How does the efficiency wage theory emphasize worker effort?
High wages make workers more eager to keep their jobs and thereby, give workers an incentive to
What is total unemployment?
The sum of cyclical, frictional, and structural unemployment. If there is no cyclical unemployment, the economy is at it’s natural rate of unemployment, equal to the sum of frictional and structural unemployment.
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