Princ ch28 Presentation
Princ ch28 Presentation
Princ ch28 Presentation
28 In this chapter,
look for the answers to these questions:
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UNEMPLOYMENT 2 UNEMPLOYMENT 3
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UNEMPLOYMENT 4 5
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ACTIVE LEARNING 1 ACTIVE LEARNING 1
Answers Answers
Labor force = employed + unemployed Population = labor force + not in labor force
= 145.9 + 8.5 = 154.4 + 79.2
= 154.4 million = 233.6
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Labor Market Statistics for Different Groups Labor Market Statistics for Whites & Blacks,
June 2008
▪ The BLS publishes these statistics for
demographic groups within the population. Adults (20 yrs & older)
▪ These data reveal widely different labor market u-rate LF part. rate
experiences for different groups.
White, male 4.5% 76.1%
UNEMPLOYMENT 8 UNEMPLOYMENT 9
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Labor Market Statistics for Whites & Blacks, Labor Market Statistics for Other Groups,
June 2008 June 2008
UNEMPLOYMENT 10 UNEMPLOYMENT 11
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Labor Market Statistics by Education Level, LF Participation Rates by Sex, 1950-2007
June 2008
90
Adults (25 yrs & older)
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u-rate LF part. rate Men
70
less than h.s. 8.7% 45.9%
60
h.s. diploma 5.1 62.8 50
some college or Women
4.2 71.9 40
assoc degree
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bachelor’s
2.3 78.1
degree or more 20
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
UNEMPLOYMENT 12 UNEMPLOYMENT 13
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What Does the U-Rate Really Measure? The Duration of Unemployment
▪ The u-rate is not a perfect indicator of joblessness Most spells of unemployment are short:
or the health of the labor market: ▪ Typically 1/3 of the unemployed
▪ It excludes discouraged workers. have been unemployed under 5 weeks,
2/3 have been unemployed under 14 weeks.
▪ It does not distinguish between full-time and
▪ Only 20% have been unemployed over 6 months.
part-time work, or people working part time
because full-time jobs not available. Yet, most observed unemployment is long term.
▪ Some people misreport their work status in the ▪ The small group of long-term unemployed persons
BLS survey. has fairly little turnover, so it accounts for most of
the unemployment observed over time.
▪ Despite these issues, the u-rate is still a very
useful barometer of the labor market & economy. Knowing these facts helps policymakers design
better policies to help the unemployed.
UNEMPLOYMENT 18 UNEMPLOYMENT 19
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Natural rate of unemployment
▪ the normal rate of unemployment around which 8
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Public Policy and Job Search Unemployment Insurance
▪ Govt employment agencies ▪ Unemployment insurance (UI):
provide information about job vacancies to speed a govt program that partially protects workers’
up the matching of workers with jobs. incomes when they become unemployed
▪ Public training programs ▪ UI increases frictional unemployment.
aim to equip workers displaced from declining To see why, recall one of the
industries with the skills needed in growing Ten Principles of Economics:
industries. People respond to incentives.
UI benefits end when a worker takes a job,
so workers have less incentive to search or
take jobs while eligible to receive benefits.
UNEMPLOYMENT 24 UNEMPLOYMENT 25
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UNEMPLOYMENT 26 UNEMPLOYMENT 27
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UNEMPLOYMENT 28 UNEMPLOYMENT 29
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2. Unions 2. Unions
▪ When unions raise the wage above eq’m, Are unions good or bad? Economists disagree.
quantity of labor demanded falls and ▪ Critics:
unemployment results. Unions are cartels. They raise wages above eq’m,
▪ “Insiders” – workers who remain employed, which causes unemployment and/or depresses
they are better off wages in non-union labor markets.
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UNEMPLOYMENT 32 UNEMPLOYMENT 33
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ACTIVE LEARNING 3 ACTIVE LEARNING 3
Answers Answers
Which of the following would be most likely to reduce Which of the following would be most likely to reduce
frictional unemployment? frictional unemployment?
A. The govt eliminates the minimum wage. B. The govt increases unemployment insurance
benefits.
C. A new law bans labor unions.
E. Sectoral shifts become more frequent.
These are likely to reduce
structural unemployment, These are likely to increase
not frictional unemployment. frictional unemployment, not reduce it.
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▪ The unemployment rate is the percentage of those ▪ The natural rate includes frictional unemployment
who would like to work who do not have jobs. and structural unemployment.
▪ Unemployment and labor force participation vary ▪ Frictional unemployment occurs when workers
widely across demographic groups. take time to search for the right jobs.
▪ The natural rate of unemployment is the normal ▪ Structural unemployment occurs when above-
rate of unemployment around which the actual rate equilibrium wages result in a surplus of labor.
fluctuates. Cyclical unemployment is the deviation
▪ Three reasons for above-equilibrium wages include
of unemployment from its natural rate and is
minimum wage laws, unions, and efficiency wages.
connected to short-term economic fluctuations.
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