Econ - Chapter 15: Unemployment

Question 1

How is unemployment measured?

Answer 1

Labor force are produced by the Bureau of Labor Statistics (BLS)

Question 2

Current Population Survey (CPS)

Answer 2

• survey 60,000 randomly selected households every month based on answers to survey questions
• BLS places each adult into 1 of 3 categories

Question 3

What are the 3 categories used to measure unemployment?

Answer 3

• employment
• unemployment
• not in the labor force

Question 4

employed

Answer 4

if a person spend some of the pervious week working as paid employee, self employed, or unpaid worker in family business (worked at least 15 hours a week)

Question 5

unemployed

Answer 5

• available for work but no employed and tried to find work in the past 4 weeks
• including temporary layoff

Question 6

not in the labor force

Answer 6

everyone else

Question 7

unemployment rate

Answer 7

• percentage of labor force that is unemployed
  = (# of unemployed/labor force)*100

Question 8

Labor Force Participation Rate (LFPR)

Answer 8

• fraction of adult pop who is in the labor force
  = (Labor Force/adult pop)*100

Question 9

Does the unemployment rate measures what we want it to?

Answer 9

• difficult to distinguish between a person who is unemployed and a person who is not in the labor force
• discouraged workers
• unemployment rate doesn’t distinguish between full-time and part-time work

Question 10

discouraged workrt

Answer 10

• who would like to work but have given up looking for a job after an unsuccessful search
• categorized as a not in the labor force

Question 11

alternative measures of labor underutlization

Answer 11

marginally attached:
- looked for jobs in the last 12 month
discouraged workers:
- marginally attached
- gave a job-market reason for a job

Question 12

U3

Answer 12

(# unemployed)/LF

Question 13

U4

Answer 13

total unemployed + discouraged
((# unemployed +discouraged)/(LF+discouraged))*100

Question 14

U5

Answer 14

total unemployed + discouraged + all other marginally attached
= ((# unemployed + all marginally attached)/(LF+all marginally attached))*100

Question 15

U6

Answer 15

U5 + part-time for econ. reasons
= ((U5 + part-time for econ. reasons/(LF+all marginally attached))*100

Question 16

natural rate of unemployment

Answer 16

normal rate of unemployment around which the actual unemployment rate fluctuate

Question 17

cyclical unemployment

Answer 17

• deviation of unemployment from its natural rate

Question 18

why are there always some people unemployed

Answer 18

in an ideal market, wages would adjust to balance the supply and demand of labor

Question 19

explaining the natural rate

Answer 19

• frictional unemployment
• structural employment

Question 20

frictional unemployment (1)

Answer 20

• due to time it takes to match workers w/ a job
• it takes time for workers to search for jobs that best suit their taste and skills
• short spells of most workers

Question 21

structural unemployment

Answer 21

• due to there being more workers than jobs
• usually longer spells of unemployment
• wage rigidity
• wages stuck too high above level that balances supply and demand

Question 22

Causes for structural unemployment

Answer 22

• min wages set too high
• wages set too high through collective bargaining (unions)
• efficiency wages
• firms paying above market wages to improve quality of work

Question 23

efficiency wages

Answer 23

• improve worker’s health
• reduce worker turnover

Question 24

frictional unemployment (2)

Answer 24

Job search
- process by which workers find appropriate jobs given their taste and skill
- sectoral shifts
- changing in the composition of demand among industries or regions
- it takes time for workers to search for and find in new sector given their skill

Question 25

Public Policy and Job Search

Answer 25

- Govt programs can affect the times it takes unemployed workers to find new job - These programs include: - Gov't-run employment agencies - public training programs - unemployment insurance