unemployment

Question 1

what is the working-age population?

Answer 1

those age 15 or older who are not a full-time member of the Canadian Armed Forces or institutionalized

Question 2

who is counted as employed?

Answer 2

people in the working-age population who are working at least one house during the week (under an employer or self-employed, or people who are temporarily absent from their job)

Question 3

who is counted as unemployed?

Answer 3

people in the working-age population without jobs who are trying to get jobs. To be counted as unemployed, you must be:
1) Part of the working-age population
2) Not currently working
3) Actively searching for work
4) Able to accept a job if it were offered

Question 4

what is the labour force?

Answer 4

the part of the working-age population that is employed or unemployed - people who are available to produce goods and services (employed + unemployed)

Question 5

who is considered not in the labour force?

Answer 5

those in the working-age population who are neither employed nor unemployed due to some reason (retired, in school, taking care of children/ family members, etc)

Question 6

what is the labour force participation rate?

Answer 6

the percentage of the working-age population that is either employed or unemployed

Question 7

what is the formula for labour force participation rate?

Answer 7

Labour force participation rate = ((employed + unemployed)/ working-age population)* 100

Question 8

what is the unemployment rate?

Answer 8

the share of the labour force who are unemployed

Question 9

what is the formula for unemployment rate?

Answer 9

unemployment rate = (unemployed / labour force) * 100

Question 10

what is the equilibrium unemployment rate?

Answer 10

the long-run unemployment rate to which the economy tends to return. The unemployment rate tends to fluctuate around this level

Question 11

what are the alternate measures of unemployment?

Answer 11

1) marginally attached
2) underemployed
3) involuntarily part-time

Question 12

what does marginally attached mean?

Answer 12

someone who wants a job, has looked in the past year, but isn’t actively seeking work

Question 13

what does underemployed mean?

Answer 13

someone who is working but wants more hours or whose job isn’t adequately using their skills

Question 14

what does involuntarily part-time mean?

Answer 14

someone who is working part-time but wants full-time work

Question 15

is the labour market an input or an output market?

Answer 15

input market

businesses demand labour, households supply labour

the market price is the wage rate

Question 16

what does the equilibrium in the labour market represent

Answer 16

the equilibrium is where the supply of labour equals the demand for labour

Question 17

what are the three types of unemployments?

Answer 17

1) frictional
2) structural
3) cyclical

Question 18

what is frictional unemployment?

Answer 18

unemployment that is due to the time it takes for employers to search for jobs

Question 19

what causes frictional unemployment?

Answer 19

1) job-search resources
2) skills mismatch
3) unemployment insurance and other income support

Question 20

what is structural unemployment?

Answer 20

unemployment that occurs because wages don’t fall to bring labour demand and supply into equilibrium

Question 21

what causes structural unemployment?

Answer 21

structural unemployment occurs when wages are unable to fall to the market-clearing wage. this creates a labour surplus

efficiency wages

institution

Question 22

what are the three steps of structural unemployment?

Answer 22

1) when wages can easily adjust to market conditions, equilibrium occurs at the market-clearing wage, where the supply curve meets the labour demand curve and there is no unemployment
2) sometimes, the bargained wage gets stuck above the market-clearing wage
3) as a result, there is a persistent gap between the supply of labour and the demand for it. this causes structural unemployment

Question 23

what are efficiency wages?

Answer 23

a higher wage paid to encourage greater worker productivity

efficiency wages cause structural unemployment but can also lower total labour costs

Question 24

what are the institutional causes of structural unemployment?

Answer 24

1) unions keep wages high for some workers
2) job protection regulations make it hard to fire workers
3) minimum wage laws prevent wages from falling to market-clearing wage

Question 25

what is cyclical unemployment?

Answer 25

Occurs when there is a temporary downturn in the economy

Reflects the fact that during a downturn there are lots of unused resources in the economy, including workers

Question 26

what are the economic costs of unemployment?

Answer 26

• the unemployed often end up with lower wages and worse career opportunities
• hysteresis
• high unemployment means that the government receives lower tax revenues but spends more

Question 27

what is hysteresis?

Answer 27

occurs when a period of high unemployment leads to a higher equilibrium unemployment rate

Question 28

what are the social costs of unemployment?

Answer 28

• unemployment is isolating and painful
• long-term unemployment is associated with worse outcomes
• children whose parents experience unemployment suffer