Chapter 28: Unemployment §

(F) Day of the week: Sunday Class: IS206 Created Time: April 19, 2020 1:46 PM Database: Class Notes Database Date: April 19, 2020 1:46 PM Days Till Date: Passed Last Edited Time: June 9, 2021 10:39 AM Type: Lecture

I. Unemployment rate §

$UnemploymentRate\%=\frac{NumberofUnemployed}{LaborForce}$

Labor Force: Employed + Unemployed

the natural rate of unemployment the normal rate of unemployment around which the unemployment rate fluctuates (4.9%)

cyclical unemployment the deviation of unemployment from its natural rate

II. Labor Force Participation Rate §

$LaborForceParticipationRate=\frac{LaborForce}{AdultPopulation}\times 100$

The bigger the labor participation rate the better the economy.

Either the employed and unemployed can and will contribute to the economy through their income, spending, labor produced.

Problems §

1. Discouraged workers §

individuals who would like to work but have given up looking for a job

2. Frictional unemployment §

unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills. It explains the small fluctuations in employment data.

• Sectorial Shift: the drop in employment in one field and an increase in employment in another field caused by the same situation (oil price drop, automobile^, oil productionv)
• Public Policy: Government’s program in matching employers with employees and to train the unemployed for a new industry.
  • Employment Agencies
  • Public Training Program
• Non-governmental Employment Opportunities: account for most of job search
  • Internet, Newspapers, Word of mouth, Online Job Sites

3. Structural unemployment §

unemployment that results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one. This explains the more dramatic and longer changes in employment data. (Ls>Ld)

• Shift in technology focus, sectorial focus (garment focus ⇒ industrial focus)

• Unfair wage difference between two jobs with the same requirements will bring the wage down to the same

  Employees moving to the higher wage job ⇒ Supply of labor for higher-wage job increase ⇒ Supply curve shift right ⇒ equilibrium shifts to the same level

  

4. Marginally attached workers §

are people who either have had jobs or searched for jobs in the last year, but have stopped seeking employment. They still want a job in the future.

5. Underemployment §

people who have jobs which they are overqualified for, or aren’t utilized to their full potential.

III. Unemployment Benefits §

💡 unemployment insurance a government program that partially protects workers’ incomes when they become unemployed. Taking the pressure of searching for a suitable job, to avoid underemployment

Problems §

• Increase Unemployment: because people
  • put less effort to getting new jobs
  • are likely to turn down job opportunities
• People are less likely to want guarantee of job security during job search

IV. Union §

Group of workers in the same field demand firms for better wage.

Unionized workers have more impact on firms than non-unionized workers.

Problems §

• Increase in wage will force firms to fire more and hire fewer workers (un-unionized workers impacted the most) ⇒ Supply of Work falls

• The increase in wage of one industry will lead to a decrease in wage in another industry

  Better wage in Industry1 ⇒ unemployment in Industry1 ⇒ more supply of labor in industry 2 ⇒ less wage in Industry2