ECON1102 Chapter Notes - Chapter 7: Labour Force Survey, Unemployment Benefits, Reichsarbeitsdienst

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17 May 2018

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Chapter 7: Unemployment

Measuring The Unemployment Rate and The Labour Force Participation

Rate:

• ABS estimates unemployment rate every month based on previous month

The Labour Force Survey:

• Monthly labour force survey (ABS) – data needed to calculate unemployment

rate

• Employed → if they work for at least one hour in paid employment the week

before the survey

Unemployment Rate: The percentage of the labour force that is unemployed

Labour Force: The sum of employed and unemployed workers in the economy

Discouraged Workers: People who are available for work but have not looked for a

job during the previous four weeks because they believe no jobs are available for

them

Labour Force Participation Rate: The percentage of the working age population in

the labour force

Problems with Measuring the Unemployment Rate:

• Not a perfect measure of the current state of joblessness – can’t distinguish

between unemployed and people who are not in labour force

• Labour service does not verify the responses of people included in the survey

Extended labour force underutilisation rate:

• Not counting discouraged workers as unemployed and counting people as

employed who are working part time

Trends in Labour Force Participation:

• Higher the labour force participation rate → more labour available → higher a

country’s level of potential GDP

• Rising labour force participation rate of females and the falling labour force

participation rate of males (older men retiring and young men remaining in

school longer)

• Decline in labour force participation among males who are too young to retire

How Long Are People Usually Unemployed?

Long-Term Unemployment: Those in the labour force who have been continuously

unemployed for a year or longer

• Except in severe recessions – unemployment does not last long

• Factors: age (older → more likely), education

Job Creation and Job Destruction:

• Economy creates and destroys lots of jobs → not all unemployment is bad

(labour market is very dynamic)

• Results from changes in consumer tastes, technological progress,

successes/failures of entrepreneurs

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• Unemployment/unemployment rates are net figures (change in the number

of persons employed is equal to the total number of jobs created minus the

number of jobs eliminated)

The Costs of Unemployment:

Costs to the Economy:

1. Loss of GDP

• Unemployment decreases total output in the economy

2. Loss/deterioration of human capital

• Person’s skills may deteriorate when they are not using them

3. Retraining Costs

• Costs associated → but may lead to more productive workforce

4. Costs to the Government

• Benefit payment from government – net drain on the budget of the

government (carries opportunity cost)

• Impact on government’s budget increases during times of rising

unemployment – increase in unemployment benefits paid, loss of tax

revenue that the government would have received had more people

been working (paying personal income tax)

• Unemployed → significantly lower incomes (businesses – lower sales)

• Lower business profits → less company income tax revenue for the

government → lower consumer spending (less GST revenue to the

government

Costs to the Individual:

1. Loss of income

2. Social costs

• Loss of self esteem

• Health problems

• Mental illness

• Crime

• Political unrest

• Family break-ups

The Distribution of Unemployment:

• Unequal → Indigenous Australians, age, education, socioeconomic income

area, parents education

• Unemployment → contributing factor to inequity in society

Types of Unemployment:

Cyclical Unemployment: Unemployment caused by a business cycle contraction

• Firm in contraction → sales falls/cut backs on production → lay off workers

• Economy begins to recover – cyclic unemployment falls but with a lag (due to

the proportion of discouraged workers increasing → reduces participation rate

and hides full extent of unemployment, and businesses are reluctant to hire)

• Unemployment rate continues to rise after recovery of economy (lag) → due

to discouraged workers entering the workforce, some firms have excess

capacity – want to check recovery is lasting before hiring workers

• On graph → same time as recessions

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Document Summary

Measuring the unemployment rate and the labour force participation. Rate: abs estimates unemployment rate every month based on previous month. The labour force survey: monthly labour force survey (abs) data needed to calculate unemployment rate, employed if they work for at least one hour in paid employment the week before the survey. Unemployment rate: the percentage of the labour force that is unemployed. Labour force: the sum of employed and unemployed workers in the economy. Discouraged workers: people who are available for work but have not looked for a job during the previous four weeks because they believe no jobs are available for them. Labour force participation rate: the percentage of the working age population in the labour force. Extended labour force underutilisation rate: not counting discouraged workers as unemployed and counting people as employed who are working part time.

Related Questions

1.Assume that there was a 10 per cent increase in the price of all goods in 2010; if the base year is 2009, then the price index in 2010 will be Select one:

a. 1100. b. 200. c. 90. d. 110.

2.The value of your money income, in terms of buying goods and services, is referred to like your money's

a. transaction cost.

b. rigidity factor.

c. staying power.

d. purchasing power.

3. Unemployment that is caused by business recessions is called

a. frictional unemployment.

b. seasonal unemployment.

c. structural unemployment.

d. cyclical unemployment.

4.All of the following are examples of a flow EXCEPT

a. the current unemployment rate.

b. a person who is fired from a job.

c. an individual who voluntarily leaves the labour force.

d. a new entrant into the labour force.

5.Which one of these factors plays a role in determining the extent and duration of frictional unemployment?

a. the ease with which job seekers can obtain information about job openings

b. the degree to which the overall level of business activity fluctuates up and down

c. the extent to which government legislation requires firms to provide health insurance for employees

d. the education and skill levels of labour force participants

6.Since 1950, the labour force participation rate in the United States

a. of men and women both decreased.

b. of men decreased and for women increased.

c. of men increased and women decreased.

d. of men and women both increased.

7.Increases in the duration of unemployment may

a. reflect a general downturn in economic activity that depresses job openings.

b. increase the unemployment rate.

c. All of these.

d. increase the number of discouraged workers.

8. A discouraged worker is someone who

a. is unemployed.

b. has been fired.

c. is not in the labour force.

d. is employed.

9.In the United States, the wage floor legislated by the government below which it is generally illegal to pay workers is known as

a. the going wage.

b. the employment gap.

c. the minimum wage.

d. the wage ceiling.

10. Which of the following is an effect of a minimum wage law that establishes a ceiling wage below the current market-clearing wage?

a. Surplus labour, or unemployment

b. A decrease in the market-clearing wage

c. A decrease in the quantity of labour supplied

d. An increase in the quantity of labour supplied

11. Which group of individuals most likely benefits from rent controls?

a. low-income wage earners who fail to obtain rental housing

b. the unemployed who fail to obtain rental housing

c. single-parent families without savings or other financial assets who fail to obtain rental housing

d. upper-income professionals who rent apartments at the price ceiling rate

blushsardine736

In calculating the unemployment rate, part-time workers are:

A. Counted as unemployed because they are not working full-time

B. Counted as employed because they are receiving payment for work.

C. Used to determine the size of the labor force, but not the unemployment rate

D. Treated the same as "discouraged" workers who are not actively seeking employment

salmonmole681

QUESTION 1

Rosina Gonzales quit her job in Pennsylvania and moved to California to be close to her family. She is currently looking for work, so she would be considered

		frictionally unemployed.
		cyclically unemployed.
		a discouraged worker.
		seasonally unemployed.

1 points

QUESTION 2

Discouraged workers

		are counted as unemployed workers when the unemployment rate is calculated.
		would decrease the unemployment rate if they were added to the number of unemployed workers.
		are counted as one-half of a worker in the unemployment statistics.
		would increase unemployment rate if they were added to the number of unemployed workers.

1 points

QUESTION 3

In measuring the unemployment rate, part-time workers are ________ and discouraged workers are ________.

		included as employed; included as unemployed
		excluded; excluded
		excluded; included as unemployed
		included as employed; excluded

1 points

QUESTION 4

Mary has decided that the she does not like Iowa and has decided to quit her job as a medical technician and move to Arizona. Mary's unemployment as she searches for a new job is best classified as

		frictional.
		cyclical.
		structural.
		seasonal.

1 points

QUESTION 5

When a golf caddy in Minnesota (where golf courses close in the winter) is unemployed in December, it is most likely the case that the golf caddy is

		cyclically unemployed during long droughts.
		frictionally unemployed during spring and summer.
		structurally unemployed during spring and summer.
		seasonally unemployed.

1 points

QUESTION 6

After graduating from college, Yunis, age 22, started working for his parent's real estate business as an unpaid assistant. He works 25 hours a week helping manage rental units . In the Current Population Survey, Yunis is considered

		part of the labor force and employed.
		part of the labor force and unemployed.
		a discouraged worker.
		not part of the labor force.

1 points

QUESTION 7

The working-age population includes

		youngsters between the ages of 14 and 16 if they are working at least part time.
		only employed people over the age of 16.
		those in jails and hospitals.
		employed and unemployed people over the age of 16.

1 points

QUESTION 8

Involuntary part-time workers are workers who

		work less than 35 hours but would like to work full time.
		work more than 35 hours but would like to work less than 35 hours.
		work less than 35 hours by choice.
		work have lost their jobs within the last four weeks and are seeking another job.

1 points

QUESTION 9

Frictional unemployment is the result of

		the normal process of jobs being created and destroyed.
		an economic recession.
		people not getting along (having friction) with their employers.
		the economic decline of major industries

1 points

QUESTION 10

Bill just graduated with his degree in economics. Through Career Services he submitted his resume to several companies and he will visit them during the next two weeks. Bill is considered

		not in the labor force.
		cyclically unemployed.
		frictionally unemployed.
		structurally unemployed.

1 points

QUESTION 11

Harry works at the video rental store for 20 hours per week. He's asked his boss to allow him to work 40 hours per week, but has been told that business is too slow. Harry is considered

		an involuntary part-time worker.
		a marginally attached worker.
		a discouraged worker.
		not in the labor force.

1 points

QUESTION 12

Discouraged workers who are over 16 years old are

i.not counted as unemployed.

ii.part of the working-age population.

iii.part of the labor force.

		i and ii
		ii and iii
		ii only
		i only

1 points

QUESTION 13

Higher unemployment benefits create

		higher seasonal unemployment as workers switch jobs.
		a lower number of job leavers.
		incentives for longer job searches and higher frictional unemployment.
		incentives for shorter job searches and higher structural unemployment.

1 points

QUESTION 14

Seasonal unemployment includes people who become unemployed from

		changes in the business cycle.
		technological changes.
		the seasonal weather patterns.
		normal changes in the labor force.

1 points

QUESTION 15

Cyclical unemployment is

		higher when the economy is expanding.
		always greater than the total of structural and frictional unemployment.
		the total of structural and frictional unemployment.
		created by a recession.

1 points

QUESTION 16

Which of the following people would be classified as employed in the Current Population Survey?

		April, who just graduated from college and is looking for work
		Jason, who was laid off from work less than 6 months ago but who has stopped looking for work
		Rich, who is working 20 hours a week but wants a full-time job
		Misty, who just quit her job to return full time to school

1 points

QUESTION 17

People who are willing and able to work but are not looking for work because they have been discouraged by their previous futile efforts are called

		discouraged workers.
		involuntarily unemployed.
		part-time lookers.
		unemployed workers.

1 points

QUESTION 18

Discouraged workers are included in the calculation of the

i.unemployment rate.

ii.labor force participation rate.

iii.working-age population.

		i and ii
		i only
		iii only
		ii only

1 points

QUESTION 19

As firms search for the best employee to fill an opening and the unemployed search for the job that best fits their skills, the economy experiences

		changes in the business cycle.
		cyclical unemployment.
		frictional unemployment.
		structural unemployment.

1 points

QUESTION 20

Suppose the U.S. population is 275 million. If 210 million people are of working age, 135 million are employed, and 6 million are unemployed, what is the labor force participation rate?

		64 percent
		67 percent
		76 percent
		49 percent

1 points

QUESTION 21

During a recession the unemployment rate generally ________ and during an expansion the unemployment rate generally ________.

		rises; rises
		rises; does not change
		falls; rises
		rises; falls

1 points

QUESTION 22

In January of 2001, the population of the United States was 276.8 million, the working-age population was 210.2 million, the total number of people employed was 140, and the total number of people unemployed was 5.0 million. What was the labor force participation rate?

		56 percent
		69 percent
		78 percent
		67 percent

1 points

QUESTION 23

If Brian, age 24, had no job but was available for work and had looked for a job the week before the survey, Brian is classified in the Current Population Survey as

		unemployed.
		employed.
		a discouraged worker.
		not in the labor force.

1 points

QUESTION 24

Julie works part-time for economic reasons. She would be considered

		an involuntary part-time worker.
		not in the labor force.
		a job seeker.
		a discouraged worker.

1 points

QUESTION 25

Suppose the population is 300 million people, the labor force is 200 million people, the number of people employed is 185 million, and the working-age population is 170 million people. What is the unemployment rate?

		5 percent
		7.5 percent
		8.8 percent
		92.5 percent

1 points

ECON1102 Chapter Notes - Chapter 7: Labour Force Survey, Unemployment Benefits, Reichsarbeitsdienst

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