chapter 6 homework questions 6, 10, 14, and 16. chapter 7 unemployment and employment
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Chapter 6 homework
• Questions 6, 10, 14, and 16
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Chapter 7
Unemployment and Employment
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Theory in Action…
• http://news.yahoo.com/s/afp/20070221/ts_alt_afp/usjapanautocompany_070221002126;_ylt=AmGijEzozUCCr8_ei2B8UdrlyREB Nissan Offers Voluntary Layoffs at Tennessee Plants Applied Topics: Derived demand, determinants of the demand for labor, production function
• The article examines Nissan's recent offer to workers. • Questions: • How is Nissan's offer to its workers for "buyouts" related to the
concept of derived demand? • How is it possible that the productivity of Nissan's workers has
increased but that the demand for labor at Nissan has decreased? (Hint: Is the production function the same for the new mix of vehicles to be produced this year as compared to 2006?)
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Individuals Overlooked by the Unemployment Rate
• Discouraged workers Withdrawn from the labor force because of
poor job prospects, or to pursue alternative activities.
• Underemployed workers Work fewer hours than they would like, or
have jobs for which they are over-qualified.
• Illegal aliens Work, but try not to be detected.
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Types of Unemployment
• Frictional Unemployment It takes time to match job openings with the
workers willing to take them
• Generally doesn’t last long, so few resources are directed at dealing with it.
• Most policy takes the form of providing information to employers and job seekers.
• Has declined with better job postings, internet, e-mail…
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Types of Unemployment (cont’d)
• Seasonal Unemployment Periodic rise and fall of unemployment with
the seasons of the year
• Unemployment rates are adjusted for seasonal unemployment.
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Types of Unemployment (cont’d)
• Structural Unemployment Workers lack jobs because of a permanent
mismatch of skills.
• Usually the result of a change in the structure of the economy.
• The government often tries to retrain structurally displaced workers.
Provide re-training programs
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Types of Unemployment (cont’d)
• Cyclical Unemployment Broad downturn in economic activity.
• Government tries to fight with policies aimed at promoting economic growth and minimizing fluctuations in economic activity.
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The Meaning of Full Employment
• It is unlikely that the unemployment rate will be zero percent in a market-based economy.
• Even after we account for seasonal unemployment, there will still be both frictional and structural unemployment.
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The Meaning of Full Employment (cont’d)
• The economy reaches full employment when cyclical unemployment has been eliminated. Does not mean that everyone that wants a job
can find one!
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The Meaning of Full Employment (cont’d)
• Economist believe that between 4% and 5% of the U.S. labor force is frictionally or structurally unemployed.
• Full employment unemployment rate lies between 4% and 5%. Where are we now??
• 4.7% in August 2006
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Full Employment rates have changed
• During the 1970s and 80s, more women and baby boomers entered the labor market, causing more ___________unemployment.
frictional
• The decline of the U.S. auto industry in the 1970s and 80s lead to more _________ unemployment.
structural
• In the 1990s, fewer people entered the labor force (smaller population changes), reducing _________unemployment.
frictional
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Why Unemployment is Not Always Bad
• Structural unemployment could be from technological advances Create new jobs based on the new technology.
• Creation of typewriter put copyists out of work; the creation of the computer put typists out of work
• Frictional unemployment may also serve a broader social purpose. Can lead to better employment matches, higher pay
for the worker and greater output for society. Look longer may find a better job