Scribd
Upload
8 views22 pages

Chapter 3

Uploaded by

dreamersteamfakous
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
8 views22 pages

Chapter 3

Uploaded by

dreamersteamfakous
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 22

Commercial Studies in English

Chapter Three: Unemployment


Measuring the Unemployment Rate, the Labor Force Participation Rate, and
the Employment–Population Ratio

Chapter objectives:
Define the unemployment rate, the labor force participation rate, and
the employment–population ratio and understand how they are
computed.
The Household Survey
o Employed: Those who worked at least one hour during the
reference week or were temporarily absent from their jobs.

o Unemployed: Those not currently working but available for work


and actively seeking employment within the past month.
o Not in the labor force: Applies to people who are neither working
nor looking for work.
Measuring Unemployment
Given the large population of over 300 million people in the United
States, tracking and regularly documenting their activities would be
both complex and expensive. To manage this, the U.S. Department of
Labor instead provides monthly estimates regarding employment,
unemployment, and other workforce-related data.

One of the most closely monitored figures is the unemployment rate,


which represents the proportion of the labor force that is not currently
employed.

The labor force includes all individuals who are either working or
actively seeking employment.
Number of unemployed
100  Unemployment rate
Labor force

Labor force
100  Labor force participation rate
Working - age population

Employment
100  Employment - population ratio
Working - age population
.
.
Trends in Labor Force Participation

The participation rate of adult men in the labor


force has been steadily decreasing since 1948, Trends in the labor
while the rate for adult women has risen force: participation
rates of adult men and
substantially, leading to an overall higher women since 1948
participation rate today compared to the past.
Unemployment Rates for Different Groups

Unemployment rates differ across various ethnic Figure:


groups and also depend on education levels. Unemployment
These two factors are statistically linked. rates in the U.S.,
2013
United States Annual Unemployment Rate over Time

Unemployment rates increase during economic Figure:


downturns and decrease when the economy The annual
improves, but they never reach zero. To understand unemployment rate in
the U.S., 1950-2012
the reasons behind this, we need to explore the
different types of unemployment.
Three Types of Unemployment
The three types of unemployment are:
• Frictional unemployment
• Structural unemployment
• Cyclical unemployment

We will examine each in turn over the coming slides.


Types of Unemployment

LEARNING OBJECTIVE

Identify the three types of unemployment.

© Pearson Education Limited 2015


Frictional Unemployment
Frictional unemployment:
Frictional unemployment refers to short-term joblessness that
happens as workers transition between jobs or enter the workforce for
the first time. This type of unemployment mainly stems from job
searches or moving between positions.

It can also result from seasonal fluctuations in certain industries, such


as farming or ski instruction, where demand for labor changes with
the seasons. To account for this, the Bureau of Labor Statistics (BLS)
publishes both unadjusted and seasonally-adjusted employment data.

Interestingly, frictional unemployment can boost economic efficiency


by helping workers find better-suited positions.
Structural Unemployment
Structural unemployment: Unemployment that arises from a
persistent mismatch between the skills and attributes of workers and
the requirements of jobs.

Structural unemployment is associated with longer unemployment


spells.

Workers who are structurally unemployed may require retraining in


order to obtain “modern” jobs.
Cyclical Unemployment
Cyclical unemployment:
Cyclical unemployment occurs when economic downturns or
recessions lead to job losses. As the economy recovers, this type of
unemployment typically declines.

When only frictional and structural unemployment remain, the


economy is considered to be at full employment. This implies that
some level of unemployment will always exist. Economists refer to
this as the natural rate of unemployment, which is made up of
frictional and structural unemployment. The prevailing view among
economists is that the natural rate of unemployment in the U.S. falls
between 5 and 6 percent.
Government Policies and the Unemployment Rate

Governments frequently take action to try to impact unemployment


levels. For instance, the federal Trade Adjustment Assistance
program provides training to workers who lost jobs due to foreign
competition, aiming to reduce structural unemployment. Other
measures, like offering subsidies for hiring new employees, are
designed to cut down on frictional unemployment.

However, certain policies may inadvertently raise unemployment


rates, such as unemployment benefits and minimum wage laws. We
will explore how each of these factors affects unemployment in more
detail.
Unemployment Insurance
Suppose you have just lost your job. You want to find another, and
have two main options:
• Take a new low-paying job immediately, or
• Search for a better job
If unemployment insurance payments are available to you, you will
probably be more likely to choose the second option.

Imagine you've just been laid off and are looking for a new job. You
have two choices: accept a low-paying job right away or take some
time to search for a higher-paying, better opportunity. If you qualify for
unemployment benefits, you’re more likely to opt for the second
choice.
In the U.S., unemployment benefits are generally modest compared
to other wealthy countries, and they usually come with strict time
limits. Many economists argue that the more generous unemployment
benefits in countries like Germany and France have played a role in
Minimum Wage Laws
Minimum wage laws are designed to help low-income workers; but
raising the wage that firms have to pay will likely result in them hiring
fewer workers.
Federal minimum Inflation-adjusted
Year wage minimum wage
1938 (first year of federal
$0.25 per hour $4.15 per hour
minimum wage)
2013 $7.25 per hour $7.25 per hour

A small percentage of full-time adults earn the minimum wage, with


teenagers being the group most frequently affected. The extent to
which minimum wage contributes to unemployment is still debated
among economists, who generally consider the impact to be minimal.
Research indicates that a 10% rise in the minimum wage could lead
to approximately a 2% decrease in employment among teenagers.
Labor Unions
Labor unions are organizations of workers that bargain with
employers for higher wages and better working conditions.

Unions are probably not a significant cause of unemployment in the


United States. While they raise the wage, only about 9% of private-
sector workers are unionized, limiting the effect that unions have on
the wider economy.
Efficiency Wages

Efficiency wage refers to a wage set above the market rate that
companies offer to enhance employee productivity.

Businesses aim to maximize worker performance, but monitoring can


be challenging and expensive. One strategy is to offer higher wages,
which encourages employees to work harder to retain their positions.

These elevated wages may also contribute to the persistence of


unemployment, even when cyclical unemployment is nonexistent.

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy