Unemployment:
1. The Bureau of Labor Statistics announced that in December 1998, of all adult Americans, 138,547,000 were employed, 6,021,000 were unemployed, and 67,723,000 were not in the labor force. How big was the labor force? What was the labor-force participation rate? What was the unemployment rate?
Labor force= employed + unemployed
=1.3857.000+6.021000 = 144.568.000
Labor force participation rate= labor force/ adult population
- Adult population= 138.547.000+ 6.021.000+ 76.723.000= 212.291.000
= 144.568.000/ 212.291.000* 100= 68.09%
Unemployment rate= number of unemployed/labor force * 100
= 6.021.000/144.568.000 *100= 4.1648%
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2. As shown in Figure 26-3, the overall labor-force participation rate of men declined between 1970 and
1990. This overall decline reflects different patterns for different age groups, however, as shown in the following table.
All men Men (16-24) Men (25-54) Men 55 and over
1970 80% 69% 96% 56%
1990 76 72 93 40
Which group experienced the largest decline? Given this information, what factor may have played an important role in the decline in overall male labor-force participation over this period?
The men 55 and over are experienced the largest decline which is from 56% to 40%.
Since labor force participation rate decline, the adult population will increase (negative relation between population and labor force participation).
When population increase, the labor force participation decline.
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3. The labor-force participation rate of women increased sharply between 1970 and 1990, as shown in Figure 26-3.
As with men, however, there were different patterns for different age groups, as shown in this table.
all women women (25-54) women (25-34) Women (35-44) Women (45-54)
1970 43% 50% 45% 51% 54%
1990 58 74 74 77 71
Why do you think that younger women experienced a bigger increase in labor-force participation than older women?
The percent of labor force for women increase. So, the unemployment rate for women decreases.
Young women have higher education, more skills and experiences than the older women.
So, the demand to hire young women increase.
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4. Between 1997 and 1998, total U.S. employment increased by 2.1 million workers, but the number of unemployed workers declined by only 0.5 million. How are these numbers consistent with each other?
Why might one expect a reduction in the number of people counted as unemployed to be smaller than the increase in the number of people employed?
a. Every year, new people enter the labor force, school leavers, immigrants, people going back to work from a break (for example women who temporarily halted their careers to take care of their children).
Hence while 6.8m jobs were created, (6.8m-1.1m) 5.7m new people entered the job market.
b. Because new workers entering the workforce. Minors who turn 18, graduating students, population growth and immigration.
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5. Are the following workers more likely to experience short-term or long-term unemployment?
Explain.
A) A construction worker lay off because of bad weather
Short term, because the weather will change.
B) A manufacturing worker who loses her job at a plant in an isolated area
Long term, there may be no other suitable work in the area
c) A stagecoach-industry worker lay off because of competition from railroads
Long term, because the stage-coach work has become outdated by new technology and will be in national and fundamental decline.
d) A short-order cook who loses his job when a new restaurant opens across the street
Short term, if she is willing to move, because there will be other restaurant wanting a cook elsewhere in the country but not necessarily in that town
e) An expert welder with little formal education who loses her job when the company installs automatic welding machinery
Long term, because the job has been doing is no longer in demand.
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6. Using a diagram of the labor market, show the effect of an increase in the minimum wage on the wage paid to workers, the number of workers supplied, the number of workers demanded, and the amount of
unemployment.
7. Do you think that firms in small towns or cities have more market power in hiring? Do you think that firms generally have more market power in hiring today than 50 years ago, or less? How do you think this change over time has affected the role of unions in the economy? Explain.
A. firms in small town have more market power in hiring because there are fewer opportunities for workers to find jobs. But in big cities, people are more educated and have more skills, so if they don’t want to work in some company, they can go to another one.
Or,
In cities, there are multinational companies, so they people have power to choose and they also have many alternatives. If they don’t like their job, they have options to change especially if they have unique education or skills.
B. firms have market power in hiring people less than 50 because now employees can easily travel to work in another country. Firms generally have less market power now than it used to be.
C. this chance in market power of firm’s has reduced the need for unions. Since the competition with other firms keep worker wages and benefits high and reduce the need of collective bargaining. For example, some companies hire non Saudi people because they require less salary and maybe they have a better qualification. But the unions put Saudization system to decrease the number of unemployment rate for Saudis.
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8. Consider an economy with two labor markets, neither of which is unionized. Now suppose a union is established in one market.
a. Show the effect of the union on the market in which it is formed. In what sense is the quantity of labor employed in this market an inefficient quantity?
b. Show the effect of the union on the nonunionized market. What happens to the equilibrium wage in this market?
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