Chapter 6- Wages and Unemployment

·      Thee Important Labor Market Trends- 1) over the 20th century, all industrial counties have enjoyed substantial growth in real wages, 2) since the early 1970s, however, the rate of real wage growth has stagnated, while both the number of people with jobs and the percentage of the population employed have grown substantially, and 3) recent decades have brought a pronounced increase in wage inequality in the United States

·      Diminishing returns to labor- if the amount of capital and other inputs in use is held constant, then the greater the quantity of labor already employed, the less each additional worker adds to production

·      Worker mobility- the movement of workers between jobs, firms, and industries

·      Skill biased technological change- technological change that affects the marginal products of higher-skilled workers differently from those of lower-skilled workers

·      Labor force- the total number of employed and unemployed people in the economy (E + U)

·      Unemployment rate- the number of unemployed people divided by the labor force (U / (E + U))

·      Participation rate- the percentage of the working-age population in the labor force (that is, the percentage that is either employed or looking for wage); (labor force / working age population)

·      Unemployment spell- a period during which an individual is continuously unemployed

·      Duration- the length of an unemployment spell; the duration of unemployment rises during recessions

·      Discouraged workers- people who say they would like to have a job but have not made an effort to find one in the past four weeks because they believe there are no jobs available for them

·      Frictional unemployment- the short-term unemployment associated with the process of matching workers with jobs

·      Structural unemployment- the long-term and chronic unemployment that exists even when the economy is producing at a normal rate; factors that contribute to structural unemployment include lack of skills, language barriers, discrimination, unions, and minimum wage laws

·      Cyclical unemployment- the extra unemployment that occurs during periods of recession