Econ 1 Essay

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Unemployment • US rate is 7.3% current • BLS monthly survey o Employed- worked in the last week even if part time • Unemployed- did not work in the last week but did look for a job over the past month • Emplyed+Unemployed=labor force • Unemployment rate=number unemployed/number in labor force • Not in labor force- did not work in the last week or actively look for in the last job 2007 Population • 146 mill employed • 7.1 mil unemployed • 78.7 not in labor force Types of Unemployment • Frictional- people between jobs • as technology advances peole begin to loose their jobs b/c we are more efficient at less cost for a machine • Structural- between jobs to update skills in order to find a new job • Structural and Frictional are the natural rate of unemployment • Nat Rat unemployment is about 5% Factors which Influence the Natural Rate • Giverment policies o Training programs o can reduce structrual unemployment • ex. Trade adjustment assistance program o Unemployment compensation • The more benenfits you have the less likely you will want to find a job • Tends to raise frictional unemployment • Reduces the opportunity cost of unemployment • In US, equals about half the average wage for 6 ,onths  higher in Canda and Europe—70-80% of wage for 12+ months o Labor Market Policies • Legal restrictions o hours, vacations, retirement, and especially firing; especially restrictive in France o Minimum wages • Currently 7.25 nationally—higher in some states • Forces the wage to remain above the equilibrium  quantity of labor supplied> quantity of labor demand • Impact especially teenagers—10% increase in min wage-> 2% in teen unemployment • Not important for explaining nat rate unemployment o Labor unions • Bargain with employers over wages, working conditions, and benefits • important in airlines , auto, steel and telecom • Can keep wages

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