1 / 42

CHAPTER 6: Employment and Unemployment

CHAPTER 6: Employment and Unemployment. CHAPTER CHECKLIST. Define the unemployment rate and other labor market indicators. Describe the trends and fluctuations in the indicators of labor market performances in the United States.

katelyn
Download Presentation

CHAPTER 6: Employment and Unemployment

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. CHAPTER 6:Employment and Unemployment

  2. CHAPTER CHECKLIST • Define the unemployment rate and other labor market indicators. • Describe the trends and fluctuations in the indicators of labor market performances in the United States. • Describe the sources and types of unemployment, define full employment, and explain the relationship between unemployment and real GDP.

  3. LECTURE TOPICS • Labor Market Indicators • Labor Market Trends • The Sources and Types of Unemployment

  4. 6.1 LABOR MARKET INDICATORS • Current Population Survey • Every month, the U.S. Census Bureau surveys 50,000 households to establish the gender, age, and job market status of each member of the household. • Working-age population • Total number of people aged 16 years and over who are not in a jail, hospital, or some other form of institutional care.

  5. 6.1 LABOR MARKET INDICATORS • The working-age population is divided into those in the labor force and those not in the labor force. • Labor force • The number of people employed plus the number unemployed. • “Not in the labor force” includes the retired; the disabled; full-time students; those keeping house full-time; and ‘discouraged workers’ – more on them later.

  6. 6.1 LABOR MARKET INDICATORS • Population Survey Criteria • The survey counts as employed all persons who, during the week before the survey: • 1. Worked at least 1 hour in a paid job or 15 hours unpaid in a family business – had ‘gainful activity.’ • 2. Were not working, but who had gainful activity from which they were temporarily absent [e.g. sick leave, vacation, laid-off temporarily].

  7. 6.1 LABOR MARKET INDICATORS • The survey counts as unemployed all persons who, during the week before the survey: • 1. Had no gainful activity • 2. Were available for work, • and either: • 3. Had made efforts to find employment during the previous four weeks, or • 4. Were waiting to be recalled to a job from which they had been laid off. • To count as unemployed, you must meet both 1 and 2, and either 3 or 4.

  8. 6.1 LABOR MARKET INDICATORS Figure 6.1 shows population labor force categories. The figure shows the data for June 2000.

  9. Number of people unemployed Unemploymentrate = x 100 Labor force 6.1 LABOR MARKET INDICATORS • Two Main Labor Market Indicators • The unemployment rate • The labor force participation rate • Unemployment rate • The percentage of people in the labor force who are unemployed.

  10. Labor force Labor force participation rate = x 100% Working-age population 6.1 LABOR MARKET INDICATORS • Labor force participation rate • The percentage of the working-age population who are members of the labor force.

  11. 6.1 LABOR MARKET INDICATORS • Discouraged Workers • Discouraged workers • People available to work but who have not made efforts to find a job within the previous 4 weeks. • When it is very hard to find a job locally, people may stop looking. So areas with high unemployment rates often have low labor force participation rates, because people stop looking for work and therefore ‘leave the labor force’ -- they become ‘discouraged workers.’

  12. 6.1 LABOR MARKET INDICATORS • Part-Time Workers • Full-time workers • People who work 35 hours or more per week. • Part-time workers • People who work less than 35 hours per week. • Involuntary part-time workers • People working 1 to 34 hours per week who want to work 35 hours or more per week.

  13. 6.1 LABOR MARKET INDICATORS • Aggregate Hours • The total number of hours worked by all the people employed during a year. • In June 2000, 135.2 million people worked an average of 34.5 hours per week. • In the year there are 50 workweeks, so aggregate hours in 2000 were 233.2 billion.

  14. 6.2 LABOR TRENDS AND FLUCTUATIONS • Unemployment Figure 6.2 shows the U.S. unemployment rate: 1960–2000 The average unemployment rate between 1960 and 2000 was 6 percent.

  15. 6.2 LABOR TRENDS AND FLUCTUATIONS • The Participation Rate • The participation rate increased from 59 percent during the 1960s to 67 percent during the 1990s. • Between 1960 and 2000, the participation rate for women increased from 38 percent to 60 percent. • Between 1960 and 2000, the participation rate for men decreased from 83 percent to 75 percent.

  16. 6.2 LABOR TRENDS AND FLUCTUATIONS Figure 6.3 shows the changing face of the labor market. The labor force participation rate of women has increased.

  17. 6.2 LABOR TRENDS AND FLUCTUATIONS The labor force participation rate of men has decreased. The average participation rate for both has increased.

  18. 6.2 LABOR TRENDS AND FLUCTUATIONS • Part-Time Workers • Part-time work is attractive to some workers because it allows them to: • Balance school or family with work; or work two jobs • Part-time work is attractive to some employers because: • Most fringe benefits are usually not paid to part-time workers • There is less government regulation of part-time workers

  19. 6.2 LABOR TRENDS AND FLUCTUATIONS Figure 6.4 shows part-time workers from 1970 to 2000. Part-time workers up from 15 percent of labor force in 1970 to 17 percent in 2000.

  20. 6.2 LABOR TRENDS AND FLUCTUATIONS The figure also shows involuntary part-time workers. Involuntary part-time work peaked during the 1982 recession.

  21. 6.2 LABOR TRENDS AND FLUCTUATIONS • Aggregate and Average Hours • Between 1960 and 2000, the number of people employed doubled (up 105 percent) but aggregate hours increased by only 84 percent. • The reason: average hours per worker decreased.

  22. 6.2 LABOR TRENDS AND FLUCTUATIONS Figure 6.5(a) shows aggregate hours: 1960–2000 Between 1960 and 2000, aggregate hours increased by an average of 1.5 percent a year.

  23. 6.2 LABOR TRENDS AND FLUCTUATIONS Figure 6.5(b) shows average weekly hours from 1960 to 2000.

  24. 6.3 UNEMPLOYMENT • Sources of Unemployment • People who become unemployed are: • Job losers—people who are fired or laid off from their jobs • Job leavers—people who voluntarily quit their jobs • Entrants and reentrants—people who have just left school or who are now looking for a job after a period out of the labor force.

  25. 6.3 UNEMPLOYMENT Figure 6.6 shows unemployment by reasons. Job losers are the biggest group, and their number fluctuates most.

  26. 6.3 UNEMPLOYMENT • How Unemployment Ends • People who end a period of unemployment are either: • Hires and recalls—people who have been hired in a new job or recalled after a temporary layoff. • Withdrawals—people who have stopped looking for jobs.

  27. 6.3 UNEMPLOYMENT Figure 7.6 summarizes the labor market flows.

  28. 6.3 UNEMPLOYMENT Job losers and job leavers become unemployed or leave the labor force.

  29. 6.3 UNEMPLOYMENT Entrants and reentrants become unemployed or get jobs.

  30. 6.3 UNEMPLOYMENT Unemployment ends when a person is hired or recalled….

  31. 6.3 UNEMPLOYMENT … or when a person withdraws from the labor force.

  32. 6.3 UNEMPLOYMENT • Types of Unemployment • Frictional unemployment • The unemployment that arises from normal labor turnover—from people entering and leaving the labor force and from the ongoing creation and destruction of jobs. Why? Because it takes time to search for jobs and employees. • Structural unemployment • The unemployment that arises when changes in the structure of the economy [technology, international competition, etc] change the skills needed to perform jobs or change the locations of jobs. The structure [skills, locations, experience, etc] of job openings does not match the structure [skills etc] of job-seekers.

  33. 6.3 UNEMPLOYMENT • Seasonal unemployment • The unemployment that arises because of seasonal weather patterns. • Cyclical unemployment • The fluctuating unemployment over the business cycle that increases during a recession and decreases during an expansion.

  34. 6.3 UNEMPLOYMENT • Duration and Demographics of Unemployment Figure 6.8(a) compares the duration of unemployment in 2000 with 1983 The average duration of unemployment varies over the business cycle.

  35. 6.3 UNEMPLOYMENT • Duration and Demographics of Unemployment The average unemployment rate was less in 2000 than in 1983. The lower the average unemployment rate, the shorter is the average duration of unemployment.

  36. 6.3 UNEMPLOYMENT Figure 6.8(b) shows unemployment demographics. Black unemployment is more than twice that of white. Teenage unemployment is three times that of workers aged 20 and over.

  37. 6.3 UNEMPLOYMENT • Full Employment • Full employment • When there is no cyclical unemployment or, equivalently, when all the unemployment is frictional or structural. • Natural unemployment rate • The unemployment rate at full employment. This is a circular definition, but we live with it. Also sometimes called ‘NAIRU’ – not a Pacific island, the “Non-Accelerating Inflation Rate of Unemployment.”

  38. Types of Unemployment (cont.) • The natural rate of unemployment is the rate when there is no cyclical unemployment. • Full employment occurs when the unemployment rate equals the natural rate of unemployment. • The natural rate is not firmly fixed -- it will change with structural change, change in labor market efficiency, etc.

  39. 6.3 UNEMPLOYMENT • Unemployment and Real GDP • Because the actual unemployment rate fluctuates around the natural rate, actual real GDP fluctuates around potential GDP. • Potential GDP • The level of real GDP that the economy would produce if it were at full employment. • When the unemployment rate is above the natural rate, real GDP is below potential GDP. • When the unemployment rate is below the natural rate, real GDP is above potential GDP.

  40. Figure 6.9(a)shows the relationship between unemployment and real GDP. As the unemployment rate fluctuates around the natural rate of unemployment (part a), real GDP fluctuates around potential GDP (part b).

  41. Explaining Employmentand Wage Rates • Changes in the Distribution of Jobs and Wage Rates • [Real] Wage rates of manufacturing non-supervisory workers have decreased • [Real] Wage rates of those with a high school education or less have decreased • [The ‘real’ wage rate is the (money) wage rate adjusted for changes in the price level, i.e. inflation. If B is the base year, then (money wage)Yr A/CPIYr A = (real wage)Yr A/CPIYr B]

  42. 11.80 18 Labor Force Reallocation LSM 12.60 Real wage rate (1992 dollars per hour) Manufacturing LD80 18 20 30 Labor (millions of people)

More Related