Unemployment. Sherif Khalifa. Sherif Khalifa () Unemployment 1 / 24
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1 Sherif Khalifa Sherif Khalifa () Unemployment 1 / 24
2 "It is a recession when your neighbor loses his job; it s a depression when you lose yours." Harry Truman. Sherif Khalifa () Unemployment 2 / 24
3 People rely on their labor earnings to enjoy their living standards. People get from their work a sense of personal accomplishment. Unemployment means lower living standards, anxiety about the future, and diminished self esteem. The unemployed are not contributing to the entire economy s production of goods and services. Sherif Khalifa () Unemployment 3 / 24
4 Definition The Employed includes those who worked as paid employees, worked in their own business, or worked in a family member s business. It also includes those who were not working but who had jobs from which they were temporarily absent because of vacation, illness or bad weather. Definition The Unemployed includes those who were not employed, were available for work, and had tried to find employment during the previous 4 weeks. It also includes those waiting to be recalled to a job from which they had been laid off. Definition Labor force is the sum of the employed and the unemployed. Sherif Khalifa () Unemployment 4 / 24
5 Civilian Population Non Civilian Population Labor Force Not in Labor Force Employed Unemployed Sherif Khalifa () Unemployment 5 / 24
6 I live in a mental hospital since I started watching too much Dr. Phill. Sherif Khalifa () Unemployment 6 / 24
7 I live in a mental hospital since I started watching too much Dr. Phill. Non civilian population. Sherif Khalifa () Unemployment 6 / 24
8 I live in a mental hospital since I started watching too much Dr. Phill. Non civilian population. Iam in prison for selling fake IDs. Sherif Khalifa () Unemployment 6 / 24
9 I live in a mental hospital since I started watching too much Dr. Phill. Non civilian population. Iam in prison for selling fake IDs. Non civilian population. Sherif Khalifa () Unemployment 6 / 24
10 I live in a mental hospital since I started watching too much Dr. Phill. Non civilian population. Iam in prison for selling fake IDs. Non civilian population. I fly F-16s for the US army. Sherif Khalifa () Unemployment 6 / 24
11 I live in a mental hospital since I started watching too much Dr. Phill. Non civilian population. Iam in prison for selling fake IDs. Non civilian population. I fly F-16s for the US army. Non civilian population. Sherif Khalifa () Unemployment 6 / 24
12 I live with my parents, and only look for work when they yell at me which they have not done in a month. Sherif Khalifa () Unemployment 7 / 24
13 I live with my parents, and only look for work when they yell at me which they have not done in a month. Not in labor force. Sherif Khalifa () Unemployment 7 / 24
14 I live with my parents, and only look for work when they yell at me which they have not done in a month. Not in labor force. Iam at home taking care of my kids full time. Sherif Khalifa () Unemployment 7 / 24
15 I live with my parents, and only look for work when they yell at me which they have not done in a month. Not in labor force. Iam at home taking care of my kids full time. Not in labor force. Sherif Khalifa () Unemployment 7 / 24
16 I live with my parents, and only look for work when they yell at me which they have not done in a month. Not in labor force. Iam at home taking care of my kids full time. Not in labor force. I stay at home all week watching Jerry Springer and do not look for work. Sherif Khalifa () Unemployment 7 / 24
17 I live with my parents, and only look for work when they yell at me which they have not done in a month. Not in labor force. Iam at home taking care of my kids full time. Not in labor force. I stay at home all week watching Jerry Springer and do not look for work. Not in labor force. Sherif Khalifa () Unemployment 7 / 24
18 I live with my parents, and only look for work when they yell at me which they have not done in a month. Not in labor force. Iam at home taking care of my kids full time. Not in labor force. I stay at home all week watching Jerry Springer and do not look for work. Not in labor force. Iam a star basketball player at a University. Sherif Khalifa () Unemployment 7 / 24
19 I live with my parents, and only look for work when they yell at me which they have not done in a month. Not in labor force. Iam at home taking care of my kids full time. Not in labor force. I stay at home all week watching Jerry Springer and do not look for work. Not in labor force. Iam a star basketball player at a University. Not in labor force. Sherif Khalifa () Unemployment 7 / 24
20 Iam a basketball coach at a University. Sherif Khalifa () Unemployment 8 / 24
21 Iam a basketball coach at a University. Employed. Sherif Khalifa () Unemployment 8 / 24
22 Iam a basketball coach at a University. Employed. Iam an overworked senior partner in a law firm, who is now in a vacation in the Bahamas. Sherif Khalifa () Unemployment 8 / 24
23 Iam a basketball coach at a University. Employed. Iam an overworked senior partner in a law firm, who is now in a vacation in the Bahamas. Employed. Sherif Khalifa () Unemployment 8 / 24
24 Iam a basketball coach at a University. Employed. Iam an overworked senior partner in a law firm, who is now in a vacation in the Bahamas. Employed. I work as Goofy in Disney Land. Sherif Khalifa () Unemployment 8 / 24
25 Iam a basketball coach at a University. Employed. Iam an overworked senior partner in a law firm, who is now in a vacation in the Bahamas. Employed. I work as Goofy in Disney Land. Employed. Sherif Khalifa () Unemployment 8 / 24
26 Iam a basketball coach at a University. Employed. Iam an overworked senior partner in a law firm, who is now in a vacation in the Bahamas. Employed. I work as Goofy in Disney Land. Employed. Iam a struggling comedian looking for work, but Iam not very funny. Sherif Khalifa () Unemployment 8 / 24
27 Iam a basketball coach at a University. Employed. Iam an overworked senior partner in a law firm, who is now in a vacation in the Bahamas. Employed. I work as Goofy in Disney Land. Employed. Iam a struggling comedian looking for work, but Iam not very funny. Unemployed. Sherif Khalifa () Unemployment 8 / 24
28 Definition The unemployment rate is the percentage of the labor force that is unemployed. Unemployment rate = Unemployed Labor Force x100 Definition The labor force participation rate is the percentage of the civilian population that is in the labor force. Labor force participation rate = Labor Force Civilian Population x100 Sherif Khalifa () Unemployment 9 / 24
29 Civilian Population: Mn. Employed: Mn. Unemployed: 8.1 Mn. Unemployment rate = 8.1 x100 = 5.5% ( ) Labor force participation rate = ( ) x100 = 66% Sherif Khalifa () Unemployment 10 / 24
30 Sherif Khalifa () Unemployment 11 / 24
31 12 (percentage of labor force) Sherif Khalifa () Unemployment 12 / 24
32 Definition The natural rate of unemployment is the average unemployment rate over a long period of time and is the normal rate of unemployment around which the unemployment rate fluctuates. Definition The cyclical unemployment is the deviation of unemployment from its natural rate, and refers to the year to year fluctuations in unemployment around its natural rate. Sherif Khalifa () Unemployment 13 / 24
33 The unemployment rate is not a perfect indicator of joblessness or the health of the labor market as: It does not consider discouraged workers or individuals who would like to work but have given up looking for a job. It does not consider people working part time only because full time jobs are not available. It does not consider skill mismatch, or the mismatch between worker s qualifications and the skill requirement of the job. It does not distinguish between short term and long term unemployment. Sherif Khalifa () Unemployment 14 / 24
34 Sherif Khalifa () Unemployment 15 / 24
35 Frictional Unemployment Definition Frictional unemployment is the unemployment that occurs because it takes time for workers to search for the jobs that best suits their skills. Workers differ in their characteristics, and jobs differ in their attributes. Information about job candidates and vacancies is disseminated slowly in the economy. As the economy changes, jobs are created in some firms and destroyed in others. Workers in declining industries found themselves out of work and searching for new jobs. It takes time for searching workers to be matched with new available vacancies. Sherif Khalifa () Unemployment 16 / 24
36 Unemployment Insurance Definition Unemployment insurance is a government program that partially protects worker s incomes when they become unemployed. Unemployment insurance decreases the hardship of unemployment, but increases unemployment. Unemployment benefits make workers have less incentive to search for jobs while eligible to collect benefits. Unemployment insurance makes workers less likely to seek guarantees of job security as they negotiate with employers. Unemployment insurance causes workers to turn down unattractive job offers and remain unemployed. Unemployment benefits allow workers to have the opportunity to look for jobs that better suit their qualifications. Sherif Khalifa () Unemployment 17 / 24
37 Definition Structural unemployment is unemployment that occurs because the number of jobs available in some labor markets is insuffi cient to provide a job for everyone who wants one. Structural unemployment occurs because of wage rigidity. Wage rigidity means that wages are stuck above equilibrium. Wage rigidity causes supply to be higher than demand. Sherif Khalifa () Unemployment 18 / 24
38 W 1 W unemployment S actual wage W E D L Sherif Khalifa () Unemployment 19 / 24
39 Minimum Wages Definition The minimum wage law forces the wage to remain above the level that balances supply and demand. Minimum wages increase the quantity of labor supplied and decrease the quantity of labor demanded compared to equilibrium. Because there are more workers willing to work than there are available jobs, some workers are unemployed. Most employed workers in the labor force have wages well above the legal minimum wage. Minimum wage laws matter most for the least skilled and least experienced members of the labor force. Sherif Khalifa () Unemployment 20 / 24
40 Union Wages Definition A Union is a worker association that bargains with employers over wages, benefits, and working conditions. Collective bargaining is the process by which unions and firms agree on the terms of employment. Unions help workers improve working conditions, and help firms react effi ciently to workers concerns. Unions bargain with firms for higher wages, otherwise they go on labor strike. A labor strike is the organized withdrawal of labor from a firm by a labor union. Unions cause conflict between the insiders who benefit from high union wages and the outsiders who do not get the jobs. Sherif Khalifa () Unemployment 21 / 24
41 Effi ciency Wages Definition Effi ciency wages are above-equilibrium wages paid by firms to increase worker productivity. Paying high wages may be profitable because they increase the effi ciency of a firm s workers. Better paid workers eat a more nutritious diet, are healthier, and are more productive. The more a firm pays its workers, the less often its workers will choose to leave to other firms. The more a firm pays its workers, the better pool of workers it attracts to apply for its jobs and the better the quality of the workforce. High wages make workers more eager to keep their jobs and give them an incentive to put forward their best effort. Sherif Khalifa () Unemployment 22 / 24
42 Automation Definition Automation means that the workforce is being replaced by robots and artificial intelligence. Wave of economic dislocations will come from the relentless pace of automation. Routine and repititive tasks are easier and cheaper to automate. Robots threaten many more traditional assembly line jobs, and replace low skilled workers. Automation also creates new jobs for high skilled workers. Sherif Khalifa () Unemployment 23 / 24
43 Automation Definition Outsourcing involves the contracting out of a business process and operations to another party. Outsourcing is an agreement in which one company contracts its own internal activity to a different company. This includes offshoring or relocating a business to a distant country in search of cheaper labor. This can lead to loss of jobs as domestic workers are substituted by foreign workers in the offshore facility. Sherif Khalifa () Unemployment 24 / 24
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