Cyclical Unemployment
This wk: More from Macro -- Cyclical unemployment, sticky wages, natural unemployment, and more.
Coming soon: Who works? Who doesn’t? Why? Get a big picture view on labor force participation.
Unemployment rates ebb and flow with business cycle phases. We all saw this when unemployment rates increased in the United States during the 2008 recession. What we observed was called cyclical unemployment, and it usually accompanies slow economic growth.
It can take many years for unemployment rates to return to pre-recession levels, even after real GDP per capita growth has bounced back. Why is that? For starters, supply and demand in labor markets have to deal with “sticky” wages. That is, wages that adjust more slowly, which in turn reduces an employer’s incentive to hire.
Why are wages sticky to begin with? Economists have many theories, but one that is fairly obvious is that employers are reluctant to lower wages out of fear that their employees may respond by working less or even causing disruptions in the workplace. Employers don’t want to risk a dip in morale. In short, wages take longer to adjust to changes in the labor market than goods may take to adjust to a change in price.
Other factors affecting wage adjustment could include minimum wages or union contracts, which put contractual limits on how low wages can go. Both of these factors affect the rate at which unemployed workers are rehired.
Another contributing factor to prolonged cyclical unemployment is that people are reluctant to take lower-wage, lower-skill jobs than they previously held. For example, an unemployed computer programmer may not want to accept a job as a barista, and will search for a long time to find a job that is more in line with their previous work.
As we’ve learned from this video, cyclical unemployment responds to booms and busts. But what causes these business cycle fluctuations? We’ll be covering that topic in future videos.
Subscribe for new videos: bit.ly/1Rib5V8
Macroeconomics Course: bit.ly/1R1PL5x
Next video: bit.ly/2eTze7Z
Пікірлер: 23
Finally, a video that goes into some detail as to why the labour market is different from most other markets for good and services. I would love to see more videos that show features that distinguish the labour market and the reasons why it is the way it is.
@MarginalRevolutionUniversity
7 жыл бұрын
Hey Cody! We're about to wrap-up this section of our Macro course, but please feel free to drop this in as a suggestion in our feedback forums where other learners can vote on what videos they'd like to see: feedback.mruniversity.com/ Thanks! Meg
@kingsolomon3332
7 жыл бұрын
I didn't like this video because the government's unemployment rates are a farce. 94 million out of the work force 46 million on food stamps, half of the population cant pay taxes, 70% have less than $1000 in savings but the official unemployment rate is 4.9%
these videos are awesome I don't understand why aren't more people are not watching these ?
Great video. A course I'm doing touched on this - great to see it explored clearly and in more depth. Will check out your other videos :)
Nice one! Thanks.
I believe that wages are sticky because of the salary system. People are paid rigid salaries, and those are rarely negotiated once the person starts working there. However, imagine if workers were paid a percentage of the company's profits every year, regardless of what that ended up being. Say a worker at Apple was paid .00001% of the company's profits. In a good year it would be like $70,000 per year, in a bad year, it would be $40,000 per year. People would be used to change and would keep working there. However, if people have the mentality that they would quit if their boss tried to reduce their salary, then bosses have to fire them if there is not enough money to pay them.
Awesome lecture
sir, i have a question- why this unemployment rate graph is so up and down? i mean,why it is not stable or flat sometimes?why the graph is so zigzag?what are the reasons?
What does it mean for the actual unemployment rate to be below the natural rate like in the 70s?
Why do none of the hypotheses macroeconomists propose ever seem to be followed up by an empirical validation? Are there places where the cultural expectation that wages will not decrease is not shared, and do those places have similar lags between recovery and the return to full employment? What about the many countries without minimum wages? Or with little to no union membership? Anyone can propose a hypothesis and then shrug their shoulders. Even contemporary historians seem more concerned with evidence, and they've got legitimate reasons to be content with unscientific methodology. This field doesn't.
You always about yo be fired. Thats life. Multiple streams of income is the key.
Well wouldn't it be better in the macro scale to not be focused on fixing unemployment but to provide meaningful work that is beneficial for their family. Growth is what's needed, not a spin up. Technology is going to transform this world, computer engineering has and will continue to free workers of there duties, great gains will be made in business. Top innovations have been, canals, roads/car, trains, telegraph/phone, electricity, computer, internet... for the future is the second generation of computation/Nero net, autonomous farming/travel/mining/fishing/logging/retail/warehousing, safe nuclear battery technology application on large scale, a decentralized shipping system, numerous chemicals that will be developed and there application for the farming/mining/construction industrys.
namaste
Where are his eyelashes? They must be unemployed.
@michaeldukes4108
4 жыл бұрын
Lame.
@loganreece3263
4 жыл бұрын
@@michaeldukes4108 No *you're lame* ameriburn.org/public-resources/find-a-burn-center/
appliance.academy