1. © 2007 Thomson South-Western

2. IDENTIFYING UNEMPLOYMENT How Is Unemployment Measured? - Categories of Unemployment The problem of unemployment is usually divided into two categories, the long-run problem ( 長期失業 ) and the short-run problem ( 短期失業 ). The natural rate of unemployment ( 自然失業率 ). The cyclical rate of unemployment ( 短期失業率 ).

3. © 2007 Thomson South-Western How is Unemployment Measured? Natural Rate of Unemployment - The natural rate of unemployment is unemployment that does not go away on its own even in the long run. - It is the amount of unemployment that the economy normally experiences.

4. © 2007 Thomson South-Western Natural rate of unemployment in OECD countries

5. © 2007 Thomson South-Western How Is Unemployment Measured? Cyclical Unemployment - Cyclical unemployment refers to the year-to-year fluctuations in unemployment around its natural rate. - It is associated with with short-term ups and downs of the business cycle.

6. © 2007 Thomson South-Western How Is Unemployment Measured? Unemployment is measured by the Bureau of Labor Statistics (BLS). It surveys 60,000 randomly selected households every month. The survey is called the Current Population Survey.

7. © 2007 Thomson South-Western How Is Unemployment Measured? Based on the answers to the survey questions, the BLS places each adult into one of three categories: - Employed - Unemployed - Not in the labor force

8. © 2007 Thomson South-Western How Is Unemployment Measured? Employed vs. unemployed - The BLS considers a person an adult if he or she is over 16 years old. - A person is considered employed if he or she has spent some of the previous week working at a paid job. - A person is unemployed if he or she is on temporary layoff, is looking for a job, or is waiting for the start date of a new job. - A person who fits neither of these categories, such as a full- time student, homemaker, or retiree, is not in the labor force.

9. © 2007 Thomson South-Western How Is Unemployment Measured? Labor Force - The labor force is the total number of workers, including both the employed and the unemployed. - The BLS defines the labor force as the sum of the employed and the unemployed.

10. © 2007 Thomson South-Western How Is Unemployment Measured? Describing Unemployment: Three Basic Questions - How does government measure the economy ’ s rate of unemployment? - What problems arise in interpreting the unemployment data? - How long are the unemployed typically without work?

11. © 2007 Thomson South-Western The Breakdown of the Population in 2004 Adult Population (223.4 million) Labor Force (147.4 million) Employed (139.3 million) Not in labor force (76.0 million) Unemployed (8.1 million)

12. © 2007 Thomson South-Western How Is Unemployment Measured? The unemployment rate （失業率） is calculated as the percentage of the labor force that is unemployed.

13. © 2007 Thomson South-Western How Is Unemployment Measured? The labor-force participation rate （勞動參與 率） is the percentage of the adult population that is in the labor force. Labor force participation rate Labor force Adult population  100 X

14. © 2007 Thomson South-Western Unemployment Rate Since 1960 10 8 6 4 2 0 19701975196019651980198519902005 Percent of Labor Force 19952000 Natural rate of unemployment Unemployment rate

15. © 2007 Thomson South-Western The Labor-Market Experiences of Various Demographic Groups

16. © 2007 Thomson South-Western Labor Force Participation Rates for Men and Women Since 1950 100 80 60 40 20 0 1950195519601965197019751980198519902000 Labor-Force Participation Rate (in percent) Women Men 1995 2005

17. © 2007 Thomson South-Western 台灣勞動力的分類

18. 民間勞動力： 指在資料標準週內年滿 15 歲可以工作之民間人口，包括就業 者及失業者。 就業者： 指在資料標準週內年滿 15 歲從事有酬工作者，或從事 15 小時 以上之無酬家屬工作者。 失業者： 指在資料標準週內年滿 15 歲同時具有下列條件者： (1) 無工作； (2) 隨時可以工作； (3) 正在尋找工作或已找工 作在等待結果。此外，尚包括等待恢復工作者及找到職業而 未開始工作亦無報酬者。

19. © 2007 Thomson South-Western 非勞動力： 指在資料標準週內，年滿 15 歲不屬於勞動力之民間人 口，包括因就學、料理家務、高齡、身心障礙、想工 作而未找工作且隨時可以開始工作及其他原因等而未 工作亦未找工作者。 勞動力參與率：勞動力占 15 歲以上民間人口之比率。 失業率：失業者占勞動力之比率。

20. © 2007 Thomson South-Western 失業率計算標準 我國目前失業人口之定義，係參採國際勞工組織（ ILO ）之 規定，與世界主要國家所公布之失業率定義相同，即凡在 資料標準週內，年滿 15 歲，同時具有 (1) 無工作； (2) 隨時可 以工作； (3) 正在尋找工作（尋找工作的方法包括託親友師 長介紹、向私立就業服務機構求職、應徵廣告、招貼、向 公立就業服務機構求職、參加政府考試分發等）或等待工 作結果等三項條件者，謂之失業人口，此外，尚包括等待 恢復工作者及找到職業而未開始工作亦無報酬者。

21. © 2007 Thomson South-Western 前述失業人口定義中第 (3) 項條件「正在尋找工作」，常被 廣義解釋為「有工作意願」即可，甚且被完全忽略，導致 「失業」認定標準不一，此或為外界質疑我國失業水準偏 低之關鍵。由於「想工作而未找工作且隨時可以開始工作 者」並無找工作之實際行動，依前揭失業定義應視為非勞 動力而不屬失業者，惟為完整呈現勞動力運用狀況，主計 處亦按月將「想工作而未找工作且隨時可以開始工作者」 併入失業人口計算「廣義失業率」。

22. © 2007 Thomson South-Western 台灣失業率 : 1982-2009

23. © 2007 Thomson South-Western

24. 男性勞動者參與率下降的原因 ─ 男性勞動者在學受教時間變長 ─ 男性勞動者退休時間提前 ─ 男性勞動者負起在家照顧子女的比率上升 女性勞動者參與率上升的原因 ─ 技術創新使得女性勞動者花費在家庭生產活動 的時間比率下降 ─ 子女數目減少 ─ 社會對女性參與勞動市場價值觀念改變

25. © 2007 Thomson South-Western Does the Unemployment Rate Measure What We Want It To? It is difficult to distinguish between a person who is unemployed and a person who is not in the labor force. Discouraged workers, people who would like to work but have given up looking for jobs after an unsuccessful search, don ’ t show up in unemployment statistics. Other people may claim to be unemployed in order to receive financial assistance, even though they aren ’ t looking for work.

26. © 2007 Thomson South-Western Alternative Measures of Labor Utilization

27. © 2007 Thomson South-Western

29. Unemployment rate and price level

30. © 2007 Thomson South-Western Inflation rate and unemployment rate

31. © 2007 Thomson South-Western

32. How Long Are the Unemployed without Work? Most spells of unemployment are short. Most unemployment observed at any given time is long-term. Most of the economy ’ s unemployment problem is attributable to relatively few workers who are jobless for long periods of time.

33. © 2007 Thomson South-Western Why Are There Always Some People Unemployed? In an ideal labor market, wages would adjust to balance the supply and demand for labor, ensuring that all workers would be fully employed. Quantity of labor Wage Labor Supply Labor Demand WEWE QEQE

34. © 2007 Thomson South-Western Why Are There Always Some People Unemployed? Frictional unemployment （摩擦性失業） refers to the unemployment that results from the time that it takes to match workers with jobs. In other words, it takes time for workers to search for the jobs that are best suit their tastes and skills. Structural unemployment （結構性失業） is the unemployment that results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one.

35. © 2007 Thomson South-Western A JOB SEARCH MODEL People allocate their time to three major economic activities: work, leisure, and job research. Some people specialize in job search, that is, they spend all of their non-leisure time in job search. These job searchers are interesting to us because they will be recorded as unemployed.

36. © 2007 Thomson South-Western A JOB SEARCH MODEL Job search is the process by which workers find appropriate jobs given their tastes and skills. It results from the fact that it takes time for qualified individuals to be matched with appropriate jobs.

37. © 2007 Thomson South-Western A JOB SEARCH MODEL This unemployment is different from the other types of unemployment. It is not caused by a wage rate higher than equilibrium. It is caused by the time spent searching for the “ right ” job.

38. © 2007 Thomson South-Western A JOB SEARCH MODEL The average real wage rate is a part of the opportunity cost of job search. The higher average real wage rate the higher would be the opportunity cost of job search activity. The real wage rate that would be obtained from the best job that could be found after an appropriate search process in part of benefit from job search. The higher the average real wage rate the higher that benefit will be.

39. © 2007 Thomson South-Western A JOB SEARCH MODEL Assume that the ratio of costs to benefits stays constant and the fraction of the labor force engaged in full time job search activity remains constant as the real wage rate rises. The larger the labor force the more people will be engaged in full-time search activities. Hence the number of people engaged in job search activity will rise as the real wage rate rises.

40. © 2007 Thomson South-Western A JOB SEARCH MODEL J supply of job search Wage W0W0 B J0J0

41. © 2007 Thomson South-Western A JOB SEARCH MODEL The labor force is defined as the supply of labor plus the supply of job search. The supply of labor is defined as the number of people who, at a given real wage rate, are willing to supply their labor services to a full job immediately without further search.

42. © 2007 Thomson South-Western A JOB SEARCH MODEL N,L Labor force Wage WEWE NENE LELE W1W1 LDLD LsLs B D A C 0

43. © 2007 Thomson South-Western A JOB SEARCH MODEL If the real wage rate was W E, the supply of labor will be N E and the labor force would be L E. That is, at W E the number of people who engage in job search in L E – N E. If the real wage rate was marginally below W E, the last person to become employed at N E would quit and begins to search for a job. Hence the distance AC measures the value that this marginal worker places on job search.

44. © 2007 Thomson South-Western A JOB SEARCH MODEL At W E, the person at L E feels that it is just worth while searching for a job. The value that this person places on job search is the distance DB. Hence W 1 would be necessary to induce this person to actually accept a job without further search.

45. © 2007 Thomson South-Western A JOB SEARCH MODEL Given the labor demand curve L D, W E will be the equilibrium real wage rate. There will always be a certain number of people searching for jobs due to incomplete information about job opportunities.

46. © 2007 Thomson South-Western A JOB SEARCH MODEL An increase in the income while unemployed motivates job seekers to raise their value placed on job search (the distance DB). Hence, for a group workers, the job finding rate falls, and the expected duration of unemployment increases. A favorable shock to firm’s production functions causes a rightward shift in L D. The last person to become employment at N E.

47. © 2007 Thomson South-Western N,L Labor force Wage W E NENE LELE LDLD LsLs B A 0 A’ L s’ W’ E N’ E L’ E (2) (1)

48. © 2007 Thomson South-Western A more generous program of unemployment insurance make more people stay longer in job search activity, which cause the left-ward shift in labor supply curve (1). A more generous program of unemployment insurance attract more people to enter the labor force, which cause the right-ward shift in labor force curve (2).

49. © 2007 Thomson South-Western In equilibrium, - real wage rate increases:, - the total number of employment decrease: - and the number of unemployment increases:

50. © 2007 Thomson South-Western Why Some Frictional Unemployment Is Inevitable Search unemployment is inevitable because the economy is always changing. Changes in the composition of demand among industries or regions are called sectoral shifts. It takes time for workers to search for and find jobs in new sectors.

51. © 2007 Thomson South-Western Public Policy and Job Search Government programs can affect the time it takes unemployed workers to find new jobs. These programs include the following: Government-run employment agencies Public training programs Unemployment insurance

52. © 2007 Thomson South-Western Public Policy and Job Search Government-run employment agencies give out information about job vacancies in order to match workers and jobs more quickly. Public training programs aim to ease the transition of workers from declining to growing industries and to help disadvantaged groups escape poverty.

53. © 2007 Thomson South-Western Public Policy and Job Search Unemployment insurance is a government program that partially protects workers ’ incomes when they become unemployed. Offers workers partial protection against job losses. Offers partial payment of former wages for a limited time to those who are laid off.

54. © 2007 Thomson South-Western Public Policy and Job Search Unemployment insurance increases the amount of search unemployment. reduces the search efforts of the unemployed. may improve the chances of workers being matched with the right jobs.

55. © 2007 Thomson South-Western Public Policy and Job Search Structural unemployment occurs when the quantity of labor supplied exceeds the quantity demanded. Structural unemployment is often thought to explain longer spells of unemployment. Why is there Structural Unemployment? Minimum-wage laws Unions Efficiency wages

56. © 2007 Thomson South-Western MINIMUM-WAGE LAWS When the minimum wage is set above the level that balances supply and demand, it creates unemployment.

57. © 2007 Thomson South-Western Figure 4 Unemployment from a Wage Above the Equilibrium Level 0 Labor Quantity of Labor Surplus of labor = Unemployment supply demand Wage Minimum wage LDLD LSLS WEWE LELE

58. © 2007 Thomson South-Western UNIONS AND COLLECTIVE BARGAINING A union is a worker association that bargains with employers over wages, benefits and working conditions. In the 1940s and 1950s, when unions were at their peak, about a third of the U.S. labor force was unionized. A union is a type of cartel attempting to exert its market power.

59. © 2007 Thomson South-Western UNIONS AND COLLECTIVE BARGAINING The process by which unions and firms agree on the terms of employment is called collective bargaining.

60. © 2007 Thomson South-Western UNIONS AND COLLECTIVE BARGAINING A strike will be organized if the union and the firm cannot reach an agreement. –A strike occurs when the union organizes a withdrawal of labor from the firm.

61. © 2007 Thomson South-Western UNIONS AND COLLECTIVE BARGAINING A strike makes some workers better off and other workers worse off. Workers in unions (insiders) reap the benefits of collective bargaining, while workers not in the union (outsiders) bear some of the costs.

62. © 2007 Thomson South-Western UNIONS AND COLLECTIVE BARGAINING By acting as a cartel with ability to strike or otherwise impose high costs on employers, unions usually achieve above-equilibrium wages for their members. Union workers earn 10 to 20 percent more than nonunion workers.

63. © 2007 Thomson South-Western Are Unions Good or Bad for the Economy? Critics argue that unions cause the allocation of labor to be inefficient and inequitable. Wages above the competitive level reduce the quantity of labor demanded and cause unemployment. Some workers benefit at the expense of other workers.

64. © 2007 Thomson South-Western Are Unions Good or Bad for the Economy? Advocates of unions contend that unions are a necessary antidote to the market power of firms that hire workers. They claim that unions are important for helping firms respond efficiently to workers ’ concerns.

65. © 2007 Thomson South-Western The Natural Unemployment Rate Let N be the number of people employed, and U be the number unemployed. Assume that the labor force does not change over time. N N U U s f

66. © 2007 Thomson South-Western f is the job finding rate and s is the job separation rate. Then the change in the number employed during a period is given by

67. © 2007 Thomson South-Western fU is the number of unemployed who find jobs during a period, while sN is the number of employed who lose jobs. Natural rate of unemployment is determined by : and using the condition that labor force is fixed at, we find that

68. © 2007 Thomson South-Western Solving this equation for U gives therefore the natural rate of unemployment is

69. © 2007 Thomson South-Western The Determinants of Natural Unemployment Rate Unemployment Insurance. - The existence of unemployment insurance makes the unemployed who are receiving benefits less eager to accept jobs or leave the labor force. - The unemployment insurance makes the employed persons who will be eligible for benefits more willing to accept job separation.

70. © 2007 Thomson South-Western - A more generous program of unemployment insurance lends to a higher natural rate of unemployment. The Minimum Wage - A higher minimum wage reduces the incentive of employers to hire low productivity workers in sectors covered by the minimum wage. - While the adverse effect of the minimum wage on the employment of low productivity worker is clear, the effect on the unemployment these worker depends also on the response of labor force participation.

71. © 2007 Thomson South-Western THE THEORY OF EFFICIENCY WAGES Efficiency wages are above-equilibrium wages paid by firms in order to increase worker productivity. The theory of efficiency wages states that firms operate more efficiently if wages are above the equilibrium level.

72. © 2007 Thomson South-Western THE THEORY OF EFFICIENCY WAGES A firm may prefer higher than equilibrium wages for the following reasons: –Worker health: Better paid workers eat a better diet and thus are more productive. –Worker turnover: A higher paid worker is less likely to look for another job. –Worker quality: Higher wages attract a better pool of workers to apply for jobs. –Worker effort: Higher wages motivate workers to put forward their best effort.

73. Summary © 2007 Thomson South-Western The unemployment rate is the percentage of those who would like to work but don ’ t have jobs. The Bureau of Labor Statistics calculates this statistic monthly. The unemployment rate is an imperfect measure of joblessness.

74. Summary © 2007 Thomson South-Western In the U.S. economy, most people who become unemployed find work within a short period of time. Most unemployment observed at any given time is attributable to a few people who are unemployed for long periods of time.

75. Summary © 2007 Thomson South-Western One reason for unemployment is the time it takes for workers to search for jobs that best suit their tastes and skills. A second reason why our economy always has some unemployment is minimum-wage laws. Minimum-wage laws raise the quantity of labor supplied and reduce the quantity demanded.

76. Summary © 2007 Thomson South-Western A third reason for unemployment is the market power of unions. A fourth reason for unemployment is suggested by the theory of efficiency wages. High wages can improve worker health, lower worker turnover, increase worker effort, and raise worker quality.