princ-ch28-presentation

©2007ThomsonSouth-Western,allrightsreservedN.GREGORYMANKIWPowerPoint®SlidesbyRonCronovich28ECONOMICSPRINCIPLESOFFOURTHEDITIONUnemployment1CHAPTER28UNEMPLOYMENTInthischapter,lookfortheanswerstothesequestions:Howisunemploymentmeasured?Whatisthe“naturalrateofunemployment”?Whyaretherealwayssomepeopleunemployed?Howisunemploymentaffectedbyunionsandminimumwagelaws?Whatisthetheoryofefficiencywages,andhowdoesithelpexplainunemployment?2CHAPTER28UNEMPLOYMENTLaborForceStatisticsProducedbyBureauofLaborStatistics(BLS),intheU.S.Dept.ofLaborBasedonregularsurveyof60,000householdsBasedon“adultpopulation”(16yrsorolder)3CHAPTER28UNEMPLOYMENTLaborForceStatisticsBLSdividespopulationinto3groups:•employed:paidemployees,self-employed,andunpaidworkersinafamilybusiness•unemployed:peoplenotworkingwhohavelookedforworkduringprevious4weeks•notinthelaborforce:everyoneelseThelaborforceisthetotal#ofworkers,includingtheemployedandunemployed.4CHAPTER28UNEMPLOYMENTlaborforceparticipationratelaborforceadultpopulation=100xLaborForceStatisticsLaborforceparticipationrate:%oftheadultpopulationthatisinthelaborforceUnemploymentrate(“u-rate”):%ofthelaborforcethatisunemployedu-rate#ofunemployedlaborforce=100xACTIVELEARNING1:CalculatelaborforcestatisticsComputethelaborforce,u-rate,adultpopulation,andlaborforceparticipationrateusingthisdata:5AdultpopulationoftheU.S.bygroup,January2006#ofemployed143.1million#ofunemployed7.0millionnotinlaborforce77.4millionACTIVELEARNING1:AnswersLaborforce=employed+unemployed=143.1+7.0=150.1millionU-rate=100x(unemployed)/(laborforce)=100x7.0/150.1=4.7%6ACTIVELEARNING1:AnswersPopulation=laborforce+notinlaborforce=150.1+77.4=227.5LFpartic.rate=100x(laborforce)/(population)=100x150.1/227.5=66.0%78CHAPTER28UNEMPLOYMENTLaborMarketStatisticsforDifferentGroupsTheBLSpublishesthesestatisticsfordemographicgroupswithinthepopulation.Thesedatarevealwidelydifferentlabormarketexperiencesfordifferentgroups.9CHAPTER28UNEMPLOYMENTLaborMarketStatisticsforWhites&Blacks,January2006Adults(20yrs&older)u-rateLFpart.rateWhite,male3.6%76.4%White,female3.759.7Black,male7.569.8Black,female8.164.410CHAPTER28UNEMPLOYMENTLaborMarketStatisticsforWhites&Blacks,January2006Teens(16-19yrs)u-rateLFpart.rateWhite13.347.1Black31.430.911CHAPTER28UNEMPLOYMENTLaborMarketStatisticsforOtherGroups,January2006Allagesu-rateLFpart.rateAsian3.265.7Hispanic5.869.312CHAPTER28UNEMPLOYMENTLaborMarketStatisticsbyEducationLevel,January2006Adults(25yrs&older)u-rateLFpart.ratelessthanh.s.7.0%46.0%h.s.diploma4.462.5somecollegeorassocdegree3.572.5bachelor’sdegreeormore2.178.3LFParticipationRatesbySex,Since19502030405060708090100195019551960196519701975198019851990199520002005MenWomenACTIVELEARNING2:ExerciseIneachofthefollowing,whathappenstotheu-rate?Doestheu-rategiveanaccurateimpressionofwhat’shappeninginthelabormarket?14A.Suelostherjob,andbeginslookingforanewone.B.Jon,asteelworkerwhohasbeenoutofworksincehismillclosedlastyear,becomesdiscouragedandgivesuplookingforwork.C.Sam,thesoleearnerinhisfamilyof5,justlosthis$80,000jobasaresearchscientist.Immediately,hetakesapart-timejobatMcDonald’suntilhecanfindanotherjobinhisfield.ACTIVELEARNING2:Answers15A.Suelostherjob,andbeginslookingforanewone.u-raterisesArisingu-rategivestheimpressionthatthelabormarketisworsening,anditis.ACTIVELEARNING2:Answers16B.Jonhasbeenoutofworksincelastyear,becomesdiscouraged,stopslookingforwork.Discouragedworkers•wouldliketoworkbuthavegivenuplookingforjobs•classifiedas“notinthelaborforce”ratherthan“unemployed”u-ratefalls,becauseJonisnolongercountedasunemployed.Afallingu-rategivestheimpressionthatthelabormarketisimproving,butitisnot.ACTIVELEARNING2:Answers17C.Samlosthis$80,000job,andtakesapart-timejobatMcDonald’suntilhefindsabetterone.u-rateunchanged,becauseapersonis“employed”whethertheyworkfullorparttime.Thingsareworse,buttheu-ratefailstoshowit.18CHAPTER28UNEMPLOYMENTWhatDoestheU-RateReallyMeasure?Theu-rateisnotaperfectindicatorofjoblessnessorthehealthofthelabormarket:•excludesdiscouragedworkers•doesnotdistinguishbetweenfull-timeandpart-timework,orpeopleworkingparttimebecausefull-timejobsarenotavailable.•Also,somepeoplemaymisreporttheirworkstatusintheBLSsurvey.Despitetheseissues,theu-rateisstillaveryusefulbarometerofthelabormarket&economy.19CHAPTER28UNEMPLOYMENTTheDurationofUnemploymentMostspellsofunemploymentareshort:•Typically1/3oftheunemployedhavebeenunemployed5weeks,2/3havebeenunemployed14weeks.•Only20%havebeenunemployed6months.Yet,mostobservedunemploymentislongterm.•Thesmallgroupoflong-termunemployedpersonshasfairlylittleturnover,soitaccountsformostoftheunemploymentobservedovertime.Knowingthesefactshelpspolicymakersdesignbetterpoliciestohelptheunemployed.20CHAPTER28UNEMPLOYMENTCyclicalUnemploymentvs.theNaturalRateThere’salwayssomeunemployment,thoughtheu-ratefluctuatesfromyeartoyear.Thenaturalrateofunemployment•thenormalrateofunemploymentaroundwhichtheactualunemploymentratefluctuatescyclicalunemployment•thedeviationofunemploymentfromitsnaturalrate•associatedwithbusinesscycles,whichwe’llstudy