Types of Unemployment
unemployment
refers to people of working age who are actively looking for a job but who are not employed.
Labor Market Rigidities
factors preventing the forces of supply and demand from operating in the labor market
People who receive fixed incomes or wages
becomes worse off
inflation
is defined as a sustained increase in the general price level.
structural unemployment
occurs as a result of changes in demand for particular types of labor skills, changes in the geographical location of industries and therefore jobs, and labor market rigidities.
minimum wage legislation
leads to higher than equilibrium wages
holders of cash
become worse off (purchasing power of cash falls)
deflation
sustained decrease in the general price level
frictional unemployment
occurs when workers are between jobs. workers may leave their jobs because they have been fired, or because they are in search of a better job, or they may be waiting to start a new job.
labor union activities and wage bargaining with employers
resulting in higher than equilibrium wages
savers
generally become worse off
purchasing power
the quantity of goods and services that can be bought with money
seasonal unemployment
occurs when the demand for labor in certain industries changes on a seasonal basis because of variations in needs.
employment protection laws
make it costly for firms to fire workers, thus making firms more cautious about hiring
borrowers
better off
another term for purchasing power
real income-what your money can buy
cyclical unemployment
occurs during the downturns of the business cycle, when the economy is in a deflationary/recessionary gap.
generous unemployment benefits
increase the attractiveness of remaining unemployed and reduce incentives to work
payers of fixed incomes of wages
better off
deferred consumption
consumers postpone spending