Chapter 7. Unemployment

Homework: pp. 201-02 # 3, 6, 7

Link to syllabus

Fig. 7-1, p. 178. Unemployment Rate and Natural Rate of Unemployment

Fig. 7-2, p. 179. The Transition between Employment and Unemployment

K/W text. p. 221 Labor Market Flows/month 2007

mt views this as suggesting that the big action isn’t jobs into unemployment, but is people dropping out of the labor force.

Monthly Flows

Source: Blanchard Text

Natural Rate of Unemployment

(Not constant). Explained in terms of job separation and job finding

Separation ‘s’ depends on E. Finding ‘f’ is function of U

U/L = s/(s+f) p. 179

S reflects job destruction, job loss, transitions. Destruction, in turn, would depend on trade policy, competition; even factors such as sector specific rates, and regional rates. Transition depends on demography (age, gender, race), education, etc.

Finding function of job search, will depend on wage rigidity, unionization, minimum wage, unemployment benefits, efficiency wages. Sometimes economists speak of ‘insiders’ and ‘outsiders’ – academics have ‘tenure’.

Job Destruction in Manufacturing-Blanchard text

Fig. 7-3, p. 183. Real-Wage Rigidity and Labor Rationing

Table 7-1 p. 186. Percent of Workers Covered by Collective Bargaining

Figure 7-4 P. 191. Median Duration of Unemployment

Table 7-2, p. 192. Unemployment Rate by Demographic Group

Table 7-3, p. 194 . Alternative measures of Labor Underutilization

Fig. 7-5, p. 195. Unemployment in Europe

Figure 7-6 p. 198. Annual Hours Worked per Person