Unemployment and its natural rate. Section Five. Flashcard Example #49542

Two unemployment categories:
long-run problem (the natural rate of unemployment) and short-run problem (cyclical rate of unemployment).
Define natural rate of unemployment.
unemployment that doesn’t go away on its own even in the long run. The amount of unemployment that the economy normally experiences.
Define cyclical unemployment.
year to year fluctuations in unemployment around the natural rate.
Adults are put into one of three employment categories.
employed, unemployed, not in the labour force.
Classified as an adult when over:
15
Classified as employed when:
have spent most of the previous week working at a paid job.
Classified as unemployed when x three:
on temporary layoff, looking for a job or waiting to start a new job.
Classified as not in the labour force when:
not employed or unemployed. e.g. student, homemaker, retiree.
Define labour force.
total number of workers, both unemployed and employed.
Unemployment rate equation.
(number of unemployed/labour force) x 100
Labour force participation rate equation.
(labour force/adult population) x 100
Unemployment and labour force participation rates are broken down to:
demographics.
Define discouraged workers.
people who would like to work but have given up looking for jobs. Don’t show up in unemployment stats.
Most spells of unemployment are:
short.
Most unemployment at any given time is observed as:
long term.
In an ideal labour market:
wages adjust to balance supply and demand, all workers are fully employed.
Define frictional unemployment.
unemployment that results from the time it takes to match workers with jobs.
Define structural unemployment.
unemployment that results because the number of jobs available in some labour markets is insufficient to provide enough jobs.
Explain Job Search
workers find jobs appropriate to their skills.
Changes in composition of demand among industries or regions are called.
sectoral shifts.
Govt policies that affect matching jobs to workers x three.
govt-run employment agencies, public training programs, unemployment insurance.
Govt run employment agencies ___ the:
increase, job finding rate.
Public training programs ____ the:
increase, job finding rate.
Define unemployment benefit/insurance.
ensures a minimum standard for unemployed workers. May actually increase levels of unemployment.
Unemployment benefit ____ the:
decreases job finding rate and increases job separation rate.
Three reasons for structural unemployment.
minimum wage laws, unions, efficiency wages.
When does minimum wage create unemployment?
When it is set above the level that balances supply and demand.
Define a union.
worker association that bargains with employers over wages and working conditions. A cartel that exerts market power.
Define collective bargaining.
unions and firms agree on the terms of employment.
Define a strike.
organised if the union and firm cannot agree. A withdrawal of labour from the firm by the union.
What is the purpose of the Employment Contract Act?
Insiders are employees including non-union members, and outsiders are unemployed workers only. Prevents non union members suffering from union actions such as strikes.
When unions act as a cartel and strike they tend to achieve:
above equilibrium wages.
Two critiques of unions.
Wages above competitive level reduce Q of labour demanded and cause unemployment.
Some workers benefit at the expense of others (not so much after ECA)
Two positives of unions.
Antidote to the market power of firms that hire workers.
Important for helping firms respond efficiently to workers concerns.
Define efficiency wages.
Above equilibrium wages paid to increase worker productivity. Firms operate more efficiently above the equilibrium level.
Four reasons for efficiency wages.
Worker health, worker turnover, worker quality, worker effort.
Define worker health.
better paid workers eat a better diet and thus are more productive.
Define worker turnover.
a higher paid worker is less likely to look for another job.
Define worker quality.
higher wages attract a better pool of workers to apply for jobs.
Define worker effort.
higher wages motivate workers to put forward their best effort.

Leave a Reply

Your email address will not be published. Required fields are marked *