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Unemployment
According to Forecasts.org |
Unemployment Rate
The Unemployment rate(u) is calculated as the percentage of the Labor Force (L) that is unemployed.u = (L-E)/L
Groups with higher rates of unemployment tend to have much higher rates of job separation than groups with low rates of unemployment rather than much lower rates of finding a job.
Sectoral Shifts
Sectoral Shifts occurs when there is a change in the composition of demand among firms, industries or regions.Natural Rate of Unemployment = s/(s + f)
The average rate of unemployment around which the economy fluctuates is called the Natural Rate of Unemployment.
The main determinant of the natural rate of unemployment is the rate of job separation and job finding.
Efficiency Wage Theory and Discouraged Workers
High wages make workers more productive. Discouraged Workers are those who after an unsuccesful search have given up looking for a job.Higher wages...
- Allow workers to afford more nutritious diets
- Attract higher-quality workers.
- May improve worker effort by increasing the cost of losing one's job.
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Moving Into and Out of Unemployment Rate
The number of people moving out of unemployment, fU, must equal the number of people moving into unemployment, sEfU = sE = s(L - U)
Groups with higher rates of unemployment tend to have much higher rates of job separation than groups with low rates of unemployment rather than much lower rates of finding a job. For steady unemployment rate:
U/L = s/(s + f)
Frictional Unemployment
Frictional Unemployment is caused by the time it takes workers to search for a new job.An increase in unemployment insurance benefits is a Government Policy that increases frictional levels.
As a consequence:
- There is a sectoral shift in the economy
- Certain firms go bankrupt
- Workers quit their current jobs and stop looking for work altogether.
Structural Unemployment
Structural unemployment is the result from wage rigidity is when real wage fails to adjust until labor supply equals labor demand.When jobs are rationed increases structural levels.
Wage Rigidity
Wage Rigidity can be caused by- Unions
- Minimum Wage Laws
- Efficiency Wages.
According to Macroeconomics by Gregory Mankiw
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