Unemployment Flashcards
(20 cards)
What is unemployment?
When people are not working, but they are actively looking for work
Unemployment is a key economic indicator.
How is the unemployment rate calculated?
Number unemployed divided by labor force times 100
The unemployment rate provides insight into the health of the labor market.
What is the labor force?
The number of people in a population who are either employed or unemployed
The labor force is a critical component of economic analysis.
Define underemployed.
People who work part-time but may want to work full-time if they could find a full-time job
Underemployment can indicate a mismatch between available jobs and workers’ desires.
Name the three types of unemployment described by economists.
- Frictional
- Structural
- Cyclical
Each type of unemployment has distinct causes and characteristics.
What is frictional unemployment?
Unemployment that occurs because the job search process is not instantaneous
It includes the time taken for individuals to find new jobs after voluntarily leaving their previous positions.
What are the causes of frictional unemployment?
- Job search
- Entry and re-entry into the workforce
- Mismatch of skills and job requirements
Frictional unemployment is often temporary and can be seen as a normal part of job transitions.
Define structural unemployment.
Unemployment that occurs as a result of a structural change in the economy
This often results from technological advancements or changes in consumer demand.
What causes structural unemployment?
- Technological advancements
- Globalization
- Changes in consumer demand
- Labor market rigidities
Structural unemployment can require retraining of workers to meet new job requirements.
What is cyclical unemployment?
Unemployment associated with recessions and expansions
It fluctuates with the business cycle and is often temporary.
List the causes of cyclical unemployment.
- A decrease in aggregate demand
- Reduced consumer spending
- Reduced business investment
- Global economic slowdowns
Cyclical unemployment typically arises from economic downturns.
What is seasonal unemployment?
Occurs when workers in certain industries find themselves out of work due to reduced demand during certain seasons
Industries affected include agriculture, tourism, and retail.
Define classical unemployment.
Results from the real wage being too high due to minimum wage laws, union wage bargaining, or efficiency wages
Classical unemployment can occur even in a healthy economy.
What are the limitations of the unemployment rate?
- It understates the level of joblessness
- Excludes anyone working at all
- Excludes those not looking for work
- Leaves out discouraged workers and underemployed
These factors can lead to a misleading portrayal of the labor market.
True or False: Not everyone who is out of work is unemployed.
True
To be considered unemployed, one must be actively seeking work.
What are the two main categories of unemployment?
- The natural rate of unemployment (long-run)
- The cyclical rate of unemployment (short-run)
Understanding these categories helps in analyzing economic conditions.
What is the natural rate of unemployment?
The unemployment rate that is sustainable into the future, given the structural characteristics of the economy
It includes frictional and structural unemployment.
What are the causes of unemployment?
- Economic recession
- Lack of industrial growth
- High cost of education
- Poor development plans
- Immobility of labor
- Changes in the pattern of demand
Various economic factors contribute to unemployment levels.
List the effects of unemployment.
- High rate of dependency
- Waste of human resources
- Migration
- Reduction in investment
- Increase in crime rate
Unemployment can have widespread social and economic consequences.
What are some solutions to unemployment?
- Industrialization
- Proper development plans
- Population control
- Encouraging geographical mobility of labor
- Boosting job creation
- Improving skills and education
- Encouraging entrepreneurship
- Providing support for the unemployed
These solutions can help mitigate unemployment rates and improve economic conditions.
