Help
Options
Didn't know it?
click below
click below
Knew it?
click below
click below
Don't Know
Remaining cards (0)
Know
retry
shuffle
restart
0:00
Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page.
Normal Size Small Size show me how
Normal Size Small Size show me how
Econ — Unemployment
going through all of unemployment in 3.3
| Question | Answer |
|---|---|
| Unemployment | - count of jobless people in a country who are seeking work but who do not have a job - need to be in labor market looking for work and not just be people of working age who are not working |
| Active Population/Labor Force | - made up of people in work and people who are un employment - leaves proportion of people of working age who could work but who are not in labor force |
| People who are not in labor force | - homemakers - carers - students - early retired - discouraged workers (people who have given up looking for work) |
| Unemployment rate | - number of unemployed/labor force x 100 - country's labor force is sum of employed and unemployed people (aged 18-65) |
| Examples of people in labor force | - part time retail salesclerk who is also going to college - full-time nurse - recent college graduate interviewing at different companies for his first job (unemployed) |
| Examples of people not in labor force | - stay-at-home mother because she is not employed nor seeking for a job - discouraged worker who has been looking for a job for 18 months but has given up job search |
| Underemployment/Hidden Employment | people in economy may be working but their work might be considered underemployment and it can mask true level of unemployment in country |
| Part-time work — Underemployment | people work part-time but would like full-time or to work longer hours --> will not be recorded in unemployment data |
| Low marginal product — Underemployment | some people may work in a job that has such low marginal product that they cannot be considered to be working in normal way (e.g. street vendors --> money they earn is so small; difficult to count them as employed) |
| Over-qualification | some highly qualified workers take jobs that are below level of qualification --> doctor who takes job as taxi driver instead |
| Official statistics underestimate true unemployment because of hidden unemployment | - unemployment figures only include unemployed people looking for job - no distinction between full time and part time - no distinction on type of work done |
| Official statistics overestimate true unemployment | unemployment figures do not include people working in underground economy |
| Econ cost of unemployment — Loss of Real GDP | fewer people work than are available to work --> amount of output produced is less than level of economy can produce |
| Econ cost of unemployment — Lower level of AD | consumption is determined by disposable income; unemployment lowers households' income and consumption --> pulls econ into recession |
| Econ cost of unemployment — Brain-drain | skilled workers may choose to leave country with high unemployment if job opportunities are more abundant elsewere |
| Econ cost of unemployment — Loss of tax-revenue | lower income --> less tax collected |
| Econ cost of unemployment — Unemployment benefits | costs to government of unemployment benefits |
| Social cost of unemployment — Personal problems | loss of income, increased indebtedness, loss of self esteem --> cause great psychological stress sometimes resulting in lower levels of health, family tensions, family breakdowns, suicide |
| Social cost of unemployment — Greater social problems | high rates of unemployment can lead to increased crime and violence, drug use, and homelessness |
| Labor Market | - price of labor (wage rate) and number of people employed is determined by D&S for labor - equilibrium when D=S - looked at from perspective of whole econ or from individual markets |
| Demand for Labor — Overall | - comes from firms and organizations that employ workers - ADL adds together D for all different types of work (doctors, journalists, taxi drivers, etc) - firms demand workers for what they can produce for them |
| Demand for Labor — Definition | - number of workers a firm is willing and able at a given market wage rate and a particular point in time - as wage rate falls, quantity demanded for labor rises, if wages rise, the quantity demanded for labor falls |
| Supply for Labor — Definition | - number of people who are willing and able to take a job at particular market wage rate and given point in time - as wages rise, quantity supplied of labor increases --> higher wages, greater incentive for individuals to take job (opposite is true) |
| Changes in labor market equilibrium | if either D or S changes, wage rate and quantity of labor employed will change |
| Example of change in labor market | if there is fall in D for workers in a recession, D will fall |
| Disequilibrium in labor market | - use min wage to try and protect workers on low incomes - reduce income inequality in labor market - when min wage is above equilibrium wage rate, quantity supplied of labor is greater than quantity demanded --> surplus |
| Seasonal Unemployment | - D changes at different times of year - summer holiday destinations will have fall in D in winter - unemployment rises in Jan and Feb after Christmas - "voluntary" unemployment |
| Frictional Unemployment | - people leave job and take time to find another - don't like work, seeking new challenge, etc - first job after full-time ed - short-time (3 months) - decrease in recessions (workers fear losing jobs) and opposite in expansion |
| Structural Unemployment | - structural changes in econ - difficult to find jobs because skills are not transferable - decline of D, foreign competition, tech changes |
| Decline in Demand for G&S | - ex: high quality cameras - fall in D for conventional cameras - people who were employed in conventional camera market would have lost their jobs - skills are not easily transferable |
| Foreign Competition | - industry in country may decline because of increase in foreign competition - ex: US steel industry - low priced steel from Asia and Eastern Europe - fall in D in US |
| Technological Changes | - advances in production tech means workers are replaced by capital on production line - ex: robot tech in car production has reduced D for labor in car manufacturing |
| Demand Deficient/Cyclical Unemployment | - slow econ growth or recession - affects all types of labors - ex: increase in joblessness due to COVID |
| Stickiness in Cyclical Unemployment | - SR stickiness of wages illustrated by SRAS curve - when AD falls, firms are forced to reduce level of employment rather than reducing wages to offset decline in revenues resulting in falling sales |
| Keynesian Model and Stickiness | - wages hold steady - firms choose to fire workers and retain rest at full wages to avoid reducing wages - unemployment benefits may reduce need for workers to take lower-paying job after being laid off - unions can negotiate wages that are higher |
| Consequence of Stickiness | equilibrium wage holds for a time, creating surplus (D<S) of workers in econ known as cyclical unemployment |
| Unemployment in Neoclassical Model — Perfect World | - wages are perfectly flexible and econ is always at full employment level output - fall in AD would result in no change in output and employment but large decrease in APL - wages decrease due to low D, while employment remains at YFE |
| Unemployment in Neoclassical Model — Real World | - real-world wages are sticky in R - D for output and workers decrease; wages are high, firms must lay workers off to reduce costs in SR - in LR, cyclical unemployment may be reduced as wages adjust to decreased demand in econ |
| Natural Rate of Unemployment (NRU) | - frictional and structural unemployment - natural because even healthiest of econs will have workers starting and leaving positions, looking for better jobs, decline in industries, new industries emerging - usually 5% |
| NRU variances in country to country | - low info about job vacancies and available talent - mismatch of workers' training and skills - level of unemployment benefits provided - unemployed workers become less employable the longer they are out of work |
Created by:
soguzman
Popular Economics sets