2010 premium ppt macroprinc-ch28-

1、28C H A P T E RUnemploymentEcP RoI N nC I PoL E mSO FicsN. Gregory MankiwPremium PowerPoint Slides by Ron Cronovich 2010 South-Western, a part of Cengage Learning, all rights reserved2010updateIn this chapter,look for the answers to these questions:How is unemployment measured?What is the “natural r

2、ate of unemployment”?Why are there always some people unemployed?How is unemployment affected by unions and minimum wage laws?What is the theory of efficiency wages, and how does it help explain unemployment?1Labor Force StatisticsProduced by Bureau of Labor Statistics (BLS), in the U.S. Dept. of La

3、borBased on regular survey of 60,000 households Based on “adult population” (16 yrs or older)2UNEMPLOYMENTLabor Force StatisticsBLS divides population into 3 groups:Employed:paid employees, self-employed,and unpaid workers in a family businessUnemployed:people not working who havelooked for work dur

4、ing previous 4 weeksNot in the labor force:everyone elseThe labor force is the total # of workers, includingthe employed and unemployed.3UNEMPLOYMENTLabor Force StatisticsUnemployment rate (“u-rate”):% of the labor force that is unemployedLabor force participation rate:% of the adult population that

5、 is in the labor force4UNEMPLOYMENTlabor force=100 xlabor force participation rateadult populationu-rate=100 x# of unemployedlabor forceL E A R N I N G1A C T I V E Calculate labor force statisticsCompute the labor force, u-rate, adult population, and labor force participation rate using this data:5A

6、dult population of the U.S. by group, December 2009# of employed137.8 million# of unemployed15.3 millionnot in labor force83.9 millionL E A R N I N G1A C T I V E AnswersLabor force=employed + unemployed 137.8 + 15.3153.1 millionU-rate=100 x (unemployed)/(labor force) 100 x 15.3/153.110.0%6L E A R N

7、I N G1A C T I V E AnswersPopulation =labor force + not in labor force=153.1 + 83.9237.0LF partic. rate=100 x (labor force)/(population)=100 x 153.1/237.064.6%7Labor Market Statistics for Different GroupsThe BLS publishes these statistics for demographic groups within the population.These data reveal

8、 widely different labor market experiences for different groups.8UNEMPLOYMENTLabor Market Statistics for Whites & Blacks,December 20099UNEMPLOYMENTAdults (20 yrs & older)u-rateLF part. rateWhite, male9.3%74.3%White, female7.460.0Black, male16.668.8Black, female13.162.7Labor Market Statistics for Whi

9、tes & Blacks,December 200910UNEMPLOYMENTTeens (16-19 yrs)u-rateLF part. rateWhite23.6%38.4%Black48.4%27.5%Labor Market Statistics for Other Groups,December 200911UNEMPLOYMENTAll agesu-rateLF part. rateAsian8.4%65.7%Hispanic12.967.1Labor Market Statistics by Education Level,December 200912UNEMPLOYMEN

10、TAdults (25 yrs & older)u-rateLF part. rateless than h.s.15.3%45.6%h.s. diploma10.561.4some college or assoc degree9.070.6bachelors degree or more5.077.3LF Participation Rates by Sex, 1950-20079080Men706050Women40302019501955 1960 1965 1970 19751980 19851990 1995 2000 200513UNEMPLOYMENTL E A R N I N

11、 G2A C T I V ELimitations of the u-rateIn each of the following, what happens to the u-rate? Does the u-rate give an accurate impression of whatshappening in the labor market?A.B.Sue lost her job and begins looking for a new one.Jon, a steelworker who has been out of work since his mill closed last

12、year, becomes discouraged and gives up looking for work.Sam, the sole earner in his family of 5, just lost hisC.$80,000 job as a research scientist.Immediately,he takes a part-time job at McDonalds until he canfind another job in his field.14L E A R N I N G2A C T I V E AnswersA.Sue lost her job and

13、begins looking for a new one.u-rate risesA rising u-rate gives the impression that the labor market is worsening, and it is.15L E A R N I N G2A C T I V E AnswersB.Jon has been out of work since last year,becomes discouraged, stops looking for work.Discouraged workers would like to work but have give

14、n up looking for jobs classified as “not in the labor force” rather than “unemployed”U-rate falls because Jon is no longer counted as unemployed.A falling u-rate gives the impression that the labor market is improving, but it is not.16L E A R N I N G2A C T I V E AnswersC.Sam lost his $80,000 job, an

15、d takes a part-timejob at McDonalds until he finds a better one.U-rate unchanged because a person is “employed” whether they work full or part time.Things are worse, but the u-rate fails to show it.17What Does the U-Rate Really Measure?The u-rate is not a perfect indicator of joblessness or the heal

16、th of the labor market: It excludes discouraged workers. It does not distinguish between full-time and part-time work, or people working part time because full-time jobs not available. Some people misreport their work status in the BLS survey.Despite these issues, the u-rate is still a very useful b

17、arometer of the labor market & economy.18UNEMPLOYMENTThe Duration of UnemploymentMost spells of unemployment are short:Typically 1/3 of the unemployedhave been unemployed under 5 weeks,2/3 have been unemployed under 14 weeks.Only 20% have been unemployed over 6 months.Yet, most observed unemployment

18、 is long term.The small group of long-term unemployed persons has fairly little turnover, so it accounts for most of the unemployment observed over time.Knowing these facts helps policymakers designbetter policies to help the unemployed.19UNEMPLOYMENTCyclical Unemployment vs. the Natural RateTheres

19、always some unemployment, though the u-rate fluctuates from year to year.Natural rate of unemployment the normal rate of unemployment around which the actual unemployment rate fluctuatesCyclical unemployment the deviation of unemployment from its natural rate associated with business cycles, which w

20、ell study in later chapters20UNEMPLOYMENTU.S. Unemployment, 1960-200712Unemployment rate1086Natural rate of4unemployment201960196519701975198019851990199520002005percentage of labor forceExplaining the Natural Rate:An OverviewEven when the economy is doing well, there is always some unemployment, in

21、cluding:Frictional unemployment occurs when workers spend time searching for the jobs that best suit their skills and tastes short-term for most workersStructural unemployment occurs when there are fewer jobs than workers usually longer-term22UNEMPLOYMENTJob SearchWorkers have different tastes & ski

22、lls, and jobs have different requirements.Job search is the process of matching workers with appropriate jobs.Sectoral shifts are changes in the composition of demand across industries or regions of the country.Such shifts displace some workers,who must search for new jobs appropriate for their skil

23、ls & tastes.The economy is always changing,so some frictional unemployment is inevitable.23UNEMPLOYMENTPublic Policy and Job SearchGovt employment agenciesprovide information about job vacancies to speed up the matching of workers with jobs.Public training programsaim to equip workers displaced from

24、 declining industries with the skills needed in growing industries.24UNEMPLOYMENTUnemployment InsuranceUnemployment insurance (UI):a govt program that partially protects workers incomes when they become unemployedUI increases frictional unemployment. To see why, recall one of theTen Principles of Ec

25、onomics: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.25UNEMPLOYMENTUnemployment InsuranceBenefits of UI:Reduces uncertainty over incomesGives the unemployed more time to search, result

26、ing in better job matches and thus higher productivity26UNEMPLOYMENTExplaining Structural UnemploymentStructural unemployment occurs when not enough jobs to go around.Occurs when wage is kept above eqm.There are three reasons for thisunemp- loymentWSactual wageW1WEDL27UNEMPLOYMENT1.Minimum-Wage Laws

27、The min. wage may exceed the eqm wage for the least skilled or experienced workers, causing structural unemployment.But this group is a small part of the labor force, so the min. wage cant explain most unemployment.28UNEMPLOYMENT2.UnionsUnion:a worker association that bargains withemployers over wag

28、es, benefits, and working conditionsUnions exert their market power to negotiate higher wages for workers.The typical union worker earns 20% higher wages and gets more benefits than a nonunion worker for the same type of work.29UNEMPLOYMENT2.UnionsWhen unions raise the wage above eqm, quantity of la

29、bor demanded falls and unemployment results.“Insiders” workers who remain employed, they are better off“Outsiders” workers who lose their jobs, they are worse offSome outsiders go to non-unionized labor markets, which increases labor supply and reduces wages in those markets.30UNEMPLOYMENT2.UnionsAr

30、e unions good or bad?Economists disagree.Critics:Unions are cartels.They raise wages above eqm,which causes unemployment and/or depresses wages in non-union labor markets.Advocates:Unions counter the market power of large firms, make firms more responsive to workers concerns.31UNEMPLOYMENT3.Efficien

31、cy WagesThe theory of efficiency wages:Firms voluntarily pay above-equilibrium wages to boost worker productivity.Different versions of efficiency wage theory suggest different reasons why firms pay high wages.32UNEMPLOYMENT3.Efficiency WagesFour reasons why firms might pay efficiency wages:1.Worker

32、 healthIn less developed countries, poor nutrition is acommon problem.Paying higher wages allowsworkers to eat better, makes them healthier, more productive.Worker turnoverHiring & training new workers is costly. Paying high wages gives workers more incentive to stay, reduces turnover.2.33UNEMPLOYME

33、NT3.Efficiency WagesFour reasons why firms might pay efficiency wages:3.Worker qualityOffering higher wages attracts better job applicants, increases quality of the firms workforce.Worker effort4.Workers can work hard or shirk.Shirkers are firedif caught.Is being fired a good deterrent?Depends on ho

34、w hard it is to find another job.If market wage is above eqm wage, there arent enough jobs to go around, so workers have more incentive to work not shirk.34UNEMPLOYMENTL E A R N I N G3A C T I V E Applying the conceptsWhich of the following would be most likely to reduce frictional unemployment?A. Th

35、e govt eliminates the minimum wage.B. The govt increases unemployment insurance benefits.C. A new law bans labor unions.D. More workers post their resumes at M, and more employers use M to find suitable workers to hire.E. Sectoral shifts become more frequent.35L E A R N I N G3A C

36、 T I V E AnswersWhich of the following would be most likely to reduce frictional unemployment?A.The govt eliminates the minimum wage.C.A new law bans labor unions.These are likely to reduce structural unemployment,not frictional unemployment.36L E A R N I N G3A C T I V E AnswersWhich of the followin

37、g would be most likely to reduce frictional unemployment?B.The govt increases unemployment insurance benefits.E.Sectoral shifts become more frequent.These are likely to increasefrictional unemployment, not reduce it.37L E A R N I N G3A C T I V E AnswersWhich of the following would be most likely to reduce frictional unemployment?D.More workers post their resumes at M, and more employers use M to find suitable workers to hire.Likely to speed up the process of matching workers & jobs, which would reduce frictional unemployment.38Explaini