Flashcards in Chapter 19 Deck (13):
Adults in the United States who are either employed or unemployed make up the U.S. labor force.
loanable funds market
Refers to an individual who prefers full-time employment but works only part-time.
Part of the unemployment rate that refers to workers who are moving between jobs.
Rise in unemployment that occurs because of a recession. It is closely tied to the business cycle.
An understanding that the employer will try to keep wages from falling when the economy is weak or the business is having trouble, and the employee will not expect huge salary increases when the economy or the business is strong.
efficiency wage theory
Argues that the productivity of workers will increase if they are paid more, and so employers will often find it worthwhile to pay their employees somewhat more than market conditions might dictate. Slightly higher wages encourage workers to remain at their current jobs, creating less worker turnover and thus higher productivity.
adverse selection of wage cuts argument
Points out that if an employer reacts to poor business conditions by reducing wages for all workers, then the best workers (with the best employment alternatives at other firms) are more likely to leave, while the least attractive workers (with fewer employment alternatives) are more likely to stay. Consequently, firms are more likely to choose which workers should depart through layoffs and firings, rather than trimming wages across the board.
Model of the labor force that argues that those already working for firms are “insiders,” while new employees, at least for a time, are “outsiders.” A firm depends on its insiders to grease the wheels of the organization, to be familiar with routine procedures, to train new employees, and so on. However, cutting wages will alienate the insiders and damage the firm’s productivity and prospects.
relative wage coordination argument
Points out that even if most workers were hypothetically willing to see a decline in their own wages in bad economic times so long as everyone else also experienced such a decline, there is no obvious way for a decentralized economy to cut all wages across the board. Instead, workers confronted with the possibility of a wage cut will worry about finding themselves worse off—both in absolute terms and relative to other workers who have seen their wages preserved. As a result, workers fight hard against wage cuts.
Type of unemployment that occurs because of fundamental changes in the nature of the economy.
Subcategory of structural unemployment. Seasonal unemployment occurs because of the seasonal nature of some jobs. Construction workers are often laid off because of changing weather. Downhill ski instructors are rarely employed in the summer when there is no snow, while water ski instructors have little to do when the water is frozen.