Macro 8

2. Macroeconomics
Lecture 8
Unemployment

3. Questions?

4. Three Types of
Unemployment
Frictional
Seasonal
Structural

5. Frictional
Unemployment
Time to find a new
job

6. Seasonal
Unemployment
Demand changes
with the season

7. Structural
Unemployment
Too many workers
Change in Demand

10. What kind of
unemployment
is caused by
smartphones?

11. Structural
Unemployment
Creative
Destruction
10% a year

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

13. Unemployment
Insurance
Unintended Consequence
Moral Hazard
May prolong unemployment

14. Minimum Wage Laws
Government sets a
minimum wage that can
legally be paid
Price Floor

15. $0
$5
$10
$15
$20
0 10 20 30 40 50 60
Supply
Demand
Wage
Workers
Equilibrium
Wage
30 workers
30 jobs
no
unemployment
Minimum Wage
40 workers
20 jobs
20 unemployed
workers
Minimum Wage
20 workers
get a raise
10 workers
lose job
10 new
unemployed
workers
Minimum
Wage

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

17. Labor Union
One contract
Strike
Conflict between workers

18. Efficiency Wages
Higher wages make more
productive employees

19. Efficiency Wages
Employee Wage Pizzas Productivity
Wage per Pizza
Bob $10 5 $2.00
Bill $20 12 $1.67

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

21. Exam 2