Employment and Unemployment
Supplementary resources for high school students
Definitions and Basics
Unemployment, from the Concise Encyclopedia of Economics
Each month, the federal government’s Bureau of Labor Statistics randomly surveys sixty thousand individuals around the nation. If respondents say they are both out of work and seeking employment, they are counted as unemployed members of the labor force. Jobless respondents who have chosen not to continue looking for work are considered out of the labor force and therefore are not counted as unemployed….
Defining the Unemployment Rate, at Marginal Revolution University
Full Employment: Business Cycles, from the Concise Encyclopedia of Economics
Just as there is no regularity in the timing of business cycles, there is no reason why cycles have to occur at all. The prevailing view among economists is that there is a level of economic activity, often referred to as full employment, at which the economy theoretically could stay forever. Full employment refers to a level of production at which all the inputs to the production process are being used, but not so intensively that they wear out, break down, or insist on higher wages and more vacations. If nothing disturbs the economy, the full-employment level of output, which naturally tends to grow as the population increases and new technologies are discovered, can be maintained forever. There is no reason why a time of full employment has to give way to either a full-fledged boom or a recession….
Unemployment Insurance, from the Concise Encyclopedia of Economics
The United States unemployment insurance program is intended to offset income lost by workers who lose their jobs as a result of employer cutbacks. The program, launched by the Social Security Act of 1935, is the government’s single most important source of assistance to the jobless.
A second goal of the program is to counter the negative impacts on the national economy, and especially on local economies, of major layoffs, seasonal cutbacks, or a recession. Unemployment benefits help sustain the level of income and hence the demand for goods and services in areas hard hit by unemployment. In short, unemployment insurance supports consumer buying power….
In the News and Examples
Russ Roberts on the Least Pleasant Jobs. EconTalk podcast episode, April 21, 2008.
EconTalk host Russ Roberts talks about the claim that for capitalism to succeed there have to be people at the bottom to do the unpleasant tasks and that the rich thrive because of the suffering of those at the bottom. He critiques the idea that capitalism is a zero sum game where to get ahead, someone has to fall back. He also looks at the evolution of the least pleasant jobs over time and how technology interacts with rising productivity to make the least pleasant jobs more pleasant….
Heartbreak in the Heartland. EconTalk Extra, March 30, 2018.
Despite low official unemployment rates, economist Edward Glaeser, argues that joblessness is “the great American domestic crisis of the 21st century.” What accounts for this seemingly unprecedented economic and social crisis? And what’s different about changing patterns of employment today? We don’t bemoan the loss of blacksmiths, but the loss of manufacturing and mining jobs in America’s heartland seems much more tragic.
Women Working: What’s the Pill Got to do with It? at Marginal Revolution University
Ed Leamer on Outsourcing and Globalization. EconTalk podcast episode, July 09, 2007.
Is outsourcing good for America? How does foreign competition affect wages in the United States? Ed Leamer, professor of economics at UCLA, talks about the effects of outsourcing on wages, jobs, and the U.S. standard of living….
Ed Leamer on Manufacturing, Effort, and Inequality. EconTalk podcast episode, April 13, 2020.
Economist Ed Leamer of UCLA talks about manufacturing, effort, and inequality with EconTalk host Russ Roberts. The conversation draws on recent empirical work of Leamer’s on how measured inequality is affected by the work effort of Americans at different levels of education. The conversation ends with a discussion of how education can be transformed when it is more personal and allows the student to explore and discover under the guidance of a teacher.
Labor Unions, from the Concise Encyclopedia of Economics
Many unions have won higher wages and better working conditions for their members. In doing so, however, they have reduced the number of jobs available….
Minimum Wages, from the Concise Encyclopedia of Economics
In reality, minimum wage laws place additional obstacles in the path of the most unskilled workers who are struggling to reach the lowest rungs of the economic ladder. According to a 1978 article in American Economic Review, the American Economic Association’s main journal, fully 90 percent of the economists surveyed agreed that the minimum wage increases unemployment among low-skilled workers. It also reduces the on-the-job training offered by employers and shrinks the number of positions offering fringe benefits. To those who lose their jobs, their training opportunities, or their fringe benefits as a result of the minimum wage, the law is simply one more example of good intentions producing hellish results….
A Little History: Primary Sources and References
Great Depression, from the Concise Encyclopedia of Economics
The Great Depression of the thirties remains the most important economic event in American history. It caused enormous hardship for tens of millions of people and the failure of a large fraction of the nation’s banks, businesses, and farms. It transformed national politics by vastly expanding government, which was increasingly expected to stabilize the economy and to prevent suffering…. President Franklin Roosevelt’s New Deal gave birth to the American version of the welfare state. Social Security, unemployment insurance, and federal family assistance all began in the thirties….
It is hard for those who did not live through it to grasp the full force of the worldwide depression. Between 1930 and 1939 U.S. unemployment averaged 18.2 percent.
Phelps on Unemployment and the State of Macroeconomics. EconTalk podcast episode, February 15, 2010.
Nobel Laureate Edmund Phelps of Columbia University talks with EconTalk host Russ Roberts about the market for labor, unemployment, and the evolution of macroeconomics over the past century. The conversation begins with a discussion of Phelps’s early contributions to the understanding of unemployment and the importance of imperfect information. Phelps put his contribution into the context of the evolution of macroeconomics showing how his models were related to those of Keynes, the Austrian School, and rational expectations. The conversation then turns to the issue of whether macroeconomics is making progress, particularly in understanding business cycles. The discussion concludes with the satisfactions of work and the role of creativity and dynamism.
John Maynard Keynes, biography from the Concise Encyclopedia of Economics
Keynes’s ideas took a dramatic change, however, as unemployment in Britain dragged on during the interwar period, reaching levels as high as 20 percent. Keynes investigated other causes of Britain’s economic woes, and The General Theory of Employment, Interest and Money was the result….
Labor Force Participation, at Marginal Revolution University
Phillips Curve, from the Concise Encyclopedia of Economics
The Phillips curve represents the relationship between the rate of inflation and the unemployment rate. Although he had precursors, A. W. H. Phillips’s study of wage inflation and unemployment in the United Kingdom from 1861 to 1957 is a milestone in the development of macroeconomics. Phillips found a consistent inverse relationship: when unemployment was high, wages increased slowly; when unemployment was low, wages rose rapidly.
Phillips conjectured that the lower the unemployment rate, the tighter the labor market and, therefore, the faster firms must raise wages to attract scarce labor. At higher rates of unemployment, the pressure abated. Phillips’s “curve” represented the average relationship between unemployment and wage behavior over the business cycle.