The document discusses different aspects of unemployment including how it is measured, types of unemployment (frictional, seasonal, structural), key unemployment rates (unemployment rate, labor force participation rate), and factors that influence wages such as minimum wage laws, unions, and efficiency wages.

1. Chapter 29
Unemployment

2. Key Terms
labor force structural unemployment
unemployment rate job search
labor-force participation rate unemployment insurance
natural rate of unemployment union
cyclical unemployment collective bargaining
discouraged workers strike
frictional unemployment efficiency wages

3. Unemployment
How is it measured?
Who measures it?
Central Department of Statistics and
Information
www.cdsi.gov.sa

4. Unemployment
Employed
Unemployed
Not in the Labor Force

5. Employed
paid employees
work in own business
unpaid workers in family business
full-time and part-time
jobs but temporary absence

6. Unemployed
not employed
available
tried to find a job in the last four
weeks
waiting to be recalled from layoff

7. Not in Labor Force
not employed or unemployed
full-time student
homemaker
retiree

8. Not in Labor Force
not employed or unemployed
full-time student
homemaker
retiree

9. Labor Force
Employed
and
Unemployed

10. Unemployment Rate
The percentage of the
labor force that is
unemployed

11. Unemployment Rate
Employed 140
Unemployed 22
Labor Force 162
Unemployment Rate 13.6%

12. Labor-Force
Participation Rate
The percentage of the
adult population that is
in the labor force

13. Labor-Force
Participation Rate
Labor Force 162
Adult Population 325
Participation Rate 49.8%

14. Rates
Employed 140
Unemployed 22
Labor Force 162
Unemployment Rate 13.6%
Adult Population 325
Participation Rate 49.8%

15. Natural Rate of
Unemployment
The normal rate of
unemployment around
which the unemployment
rate fluctuates

16. Cyclical
Unemployment
The deviation of
unemployment from its
natural rate

17. Discouraged
Workers
People who would like
to work but have given
up looking for a job

18. Problems
Overstate - Above actual
Cash workers
Understate - Below actual
Discouraged workers

19. Unemployment
Frictional
Seasonal
Structural

20. Frictional
Time to find a new job

21. Seasonal
Demand changes with
the season

22. Structural
Too many workers
Change in demand for
skills

23. Structural
Creative Destruction
10% a Year

24. Unemployment
Insurance
Government program to
provide income when
workers become
unemployed

25. Unemployment
Insurance
Unintended Consequence
Moral Hazard
May prolong unemployment

26. Why are wages too
high?
Minimum wage laws
Unions
Efficiency Wages

27. Minimum Wage Laws
Government sets a
minimum wage that can
legally be paid

28. Wage Minimum Wage Minimum Wage
40 workers 20 workers
4,000 20 jobs get a raise
20 unemployed 10 workers
Supply lose job
workers
3,000
Minimum 10 new
unemployed
Wage workers
2,000
Equilibrium
Wage
1,000
30 workers
30 jobs
no
Demand unemployment
0
0 10 20 30 40 50 60
Workers

29. Union
Worker association that
negotiates with
employers over wages,
benefits, and conditions

30. Union
One contract for all
employees
Strike
Conflicts between workers

31. Efficiency Wages
Higher wages make
more productive
employees

32. Efficiency Wages
Employee Wage Pizzas Productivity
Wage per Pizza
Ali 100 5 20.0
Abdullah 200 12 16.7

33. Efficiency Wages
More Healthy
Lower Turnover
Higher Quality
More Effort