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Measuring Unemployment
Frictional Unemployment
Structural Unemployment
Job Search Theory
Minimum-Wage Laws
Unions and Collective Bargaining
Theory of Efficiency Wages
Costs of unemployment:
Loss of income and output
Unemployed workers lose income.
Total output falls because fewer workers are productively employed.
Personal, psychological, and social costs
Workers suffering long spells of unemployment lose their skills and self-
esteem, and suffer from stress.
Unemployment and crime.
Labour force: the total number of workers, including both the employed
and the unemployed.
Labour force = number of employed + number of unemployed
Unemployment rate: the percentage of the labour force that is
unemployed.
number of unemployed
Unemployment rate = 100%
labour force
Labour-force participation rate: the percentage of the adult population
that is in the labour force.
labour force
Labour force participation rate = 100%
adult population
1) Unions push the wages that workers receive above the equilibrium
wage, resulting in unemployment.
2) The supply of workers in nonunionized labour market will increase,
pushing wages in non-union firms down.
Economists disagree.
Critics:
Unions are cartels. They raise wages above the equilibrium level,
which causes unemployment and depresses wages in nonunionized
labour markets.
Advocates:
Unions counter the market power of large firms, make firms more
responsive to workers concerns.