Week 7 - Labour and Unemployment Flashcards
(18 cards)
unemployment
someone who does not have a job and is willing and available for work at the going rate
labour force
the total number of people in work plus those who are unemployed
in an ideal labour market
- wages would adjust so that the quantity of labour supplied, and the quantity of labour demanded would be equal
- at equilibrium, there is no unemployment
- changes in the supply and demand for labour would create surpluses and shortages in the labour market and the adjustment of the wages rate would ensure that all workers are fully employed
frictional unemployment
the unemployment that results from the time that it takes to match workers with jobs
voluntary unemployment
people choose to remain unemployed rather than take jobs which are available
involuntary unemployment
people want work at going market wage rates but cannot find employment
structural unemployment
occurs when there is a balance between the types of jobs available in the economy and the kind of workers who are looking for a job
occupational and geographic immobility
workers who lose their jobs in one industry may find that jobs that are available require skills and experience they do not possess or are not in the immediate region where they live
cyclical unemployment
when aggregate demand in the economy is too low, the demand for workers also drops, leading to unemployment
natural rate of unemployment
unemployment that does not go away on its own even in the long run
minimum wage
when the minimum wage is set above the level that balances supply and demand, it creates unemployment
union
a union is a worker association that bargains with employers over wages and working conditions
minimum wage laws
- setting a minimum wage above equilibrium creates unemployment
- workers who find a minimum wage job get a higher wage
- others are unemployed
effects of labour union
- reduced worker exploitation
- increased productivity
- introduces inefficiency into competitive markets
- may keep companies from competing globally
- increase labour supply in non union sector
- decreases wages for non union workers
the theory of efficiency wages
- efficiency wages are above equilibrium wages paid by firms to increase worker productivity
- the theory of efficiency wages states that firms operate more efficiently if wages are above the equilibrium level
job search
the process by which workers find appropriate jobs given their tastes and skills
cost of unemployment to the individual
- loss of earnings
- self esteem and health problems
- drug abuse and alcohol abuse and crime
- family breakdown
- de skilling
costs of unemployment to society and the economy
- lost output
- lower tax revenues, higher welfare payments
