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42 Cards in this Set

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  • Back

What are the 4 types of Unemployment


What makes up the Labor Force?

The Employed and the Unemployed

Labor Force =

Employed + Unemployed

Unemployment Rate =

(# of unemployed / labor force) * 100

Labor-Force (Employed and Unemployed) Participation Formula =

(Labor Force / Adult Population) * 100

What agency in the United States measures Unemployment?

the B.L.S. (Bureau of Labor Statistics)

How often does the B.L.S. collect its data?

It collects its data monthly from people aged 16(+) roughly 60,000 households and reports on its findings.

"Employed" people...

Have worked as...
1. A paid worker
2. Worked in their OWN business

3. Unpaid worker in family business
4. All full-time and part-time workers
5. Those who are temporarily absent from work.

"Unemployed" people...

1. Those who were not employed.
2. Being available to work and wanting to work.
3.Have looked for work for previous 4 weeks
4. Recalled from a job since being laid off.

"Not in the Labor Force" people...

Those who do not fit in either "Unemployed" or "Employed" categories. Full time students, retirees, military personnel, and homemakers.

What does the Labor Force Participation Rate measure?

Measures the percentage of the total adult population that has CHOSEN to partake in the labor market.

Natural Rate of Unemployment is . . .

The predicted rate that unemployment will take over time given previous statistics.

Can -or- should unemployment rate = 0.0%?

Nope. The 4 types of unemployment prevent this.`

People who fall out of the Labor Force because they're no longer consider unemployed after a certain amount of time...

The Discouraged Worker

The 4 Causes of Unemployment:

1. Job Search
2. Unions
3. Minimum-Wage Laws
4. Efficiency-Wage Theory

Sometimes Unexpected "Deviation" from the predicted Natural Rate of Unemployment is called...

Cyclical Unemployment. This happens during recessions and is related to business cycles. Can be really harmful to the economy, and in worst cases can take a government stimulus to fix the problem.

Most spells of unemployment are short, and most unemployment observed is long-term. True or False?

True :
-Imagine 4 observed people. 1 is always different each time observed while the other 3 are constant. This can make the statement true.

Job Search =

All jobs require different skills at different levels. This can take time. Its when Job Searching fails it can lead to Discouraged Workers

Frictional Unemployment =

1. Takes time for people to find new jobs.

2. Result from people always leaving/entering the labor force.

3. People might be waiting and looking for better jobs.

4. This is typically short-term, and not too serious.

Sectoral Shifts =

Changes in the composition of demand among industries or regions. One industry might be booming in 1 region, which might result in 1 to bust in another.

What % of U.S. Manufacturing Jobs are destroyed every year?


More than ______% of workers typically leave their jobs in a month


This Government Program helps protect those who just recently become completely unemployed or laid-off.

Unemployment Insurance - it typically lasts for 6 months - 1 year and payments are 50% of the person's previous income.

Does Unemployment Insurance reduce or increase unemployment?

Unemployment Insurance programs INCREASE the unemployment rate because it gives people the incentive to not be as determined to return to employment.

The Unemployment Rate is a good way to measure a nation's overall economic well-being: True or False?

False - there are simply to many factors that are involved when trying to make a clear conclusion

Minimum-Wage Laws

Laws passed by our Government that forces firms to increases wages, even if it goes above the ideal equilibrium level for labor supply and labor demand. When minimum-wage laws can cause a surplus of labor.

The raise in wages results in higher quantity of labor supplies and lower quantity of labor demanded.

Who do minimum-wage laws matter to most?

Typically younger people who are just now entering the labor force, such as teenagers. Most people aren't affected by this because they have experience and get paid well above the minimum wage.

What are Unions?

Unions are groups of workers who collectively bargain with firms over wages, and working conditions.

What is collective bargaining?

When a Union negotiates with a firm over work-related matters like wages, working conditions, and benefits.


When a Union organizes in a withdrawal in labor form a firm. This leads to productive and profit loss for the firm, thereby pressuring firms to avoid strikes.

Wagner Act of 1935

Prevents employers from interfering when workers try to organize unions and requires employers to bargain with unions in good faith.

The National Labor Relations Board (NLRB) . . .

Enforces the Wagner Act of 1935 and more generally speaking, their right to unionize.

The positives of a Union

1. Greater chance of wages, benefits, and working conditions.

2. Also protect those individuals in remote geographical locations that are dominated by a single firm. These workers would be ruined without the chance to unionize. These areas are called "company towns"

The negatives of a Union

-Some believe that Unions are inequitable and inefficient. Some believe Unions are just a form of cartel. Their influence over firms can sometimes damage the competitive markets.

Theory of Efficiency-Wages

A set of theories that states that raising the wages might be better long-term for firms and workers alike.

The 4 Efficiency Wage Theories...:

1. Worker Health
2. Worker Turnover
3. Worker Quality
4. Worker Effect

Worker Health (Efficiency Wage Theory) is. . .

When workers have higher wages, it can lead to better nutrition and therefore lead to greater production.

Worker Turnover (Efficiency Wage Theory) is . . .

The Idea that it is far more cost-efficient for firms to pay the workers they have with higher wages rather they constantly have to re-hire, and pay to train new hires. Even then its not as efficient, because the production levels of new hires vs. seasoned workers are not equal.

Worker Quality (Efficiency Wage Theory) is . . .

The idea that when using higher wages to attract to workers, the high wages will allow you to narrow down who would be the best addition to a firm.

Worker Effort (Efficiency Wage Theory) is . . .

The idea that there's a direct link between wages and worker effort. If wages were low, most workers wouldn't work to hard. The opposite could be said when wages are higher. Higher wages encourage workers to not shirk their responsibilities.

Structural Unemployment is . . .

When a large amount of mis-match occurs between job openings and job skills acquired.
EX: A truck-driver can't do a nurse's job.
-Solution: people need to be re-trained (inefficient but necessary)

Can happen in regions based on growing/declining industries.
-Solution: relocation and training (very costly)

Seasonal Unemployment

When Unemployment depends on the Season..
-Retail workers needed for Holiday Rush
-Lifeguards needed for Summer Time

-Snow Plowers needed for Winter Time

Short-Term because it is just seasonal, but does cause unemployment.

The unemployment reports are adjusted to accommodate this fact.