Ch6: Unemployment

Mankiw: Macro Ch 6Mankiw: Econ Ch 28Abel & Bernake: Ch 3

勞動力之分類

臺灣地區總人口

未滿十五歲人口 十五歲以上人口

監管人口 武裝勞動力 （現役軍人）

民間人口

（民間）勞動力 非勞動力

就業者 失業者

Table Taiwan: the Labor-Market Experiences of Various Demographic Groups

Copyright©2004 South-Western

平均值 　 勞參率 男性勞

參率女性勞參率

實質 GDP 成長率-2006

廣義失業率 失業率

大學以上學歷失業率

20-24歲失業率

1978-2007

58.66 72.65 44.66 6.78 3.84 2.61 2.88 6.54

1978-90

　 59.30 76.02 42.46 8.36 2.90 1.95 2.57 5.02

1991-00

　 58.54 71.69 45.39 6.35 3.28 2.17 2.48 5.78

2001-07

　 57.65 67.77 47.68 4.09 6.38 4.45 4.03 10.48

Types of unemployment參考資料 : Economic Watch

http://www.economywatch.com/unemployment/types/

1. Frictional Unemployment

2. Structural Unemployment

3. Real Wage or Classical Unemployment

4. Cyclical Unemployment

5. Seasonal Unemployment

1. Frictional Unemployment摩擦性失業

It takes time for workers to search for the jobs that are best suit their tastes and skills.

Frictional Unemployment : the unemployment that results from the time to match qualified workers (U) with appropriate jobs (V).

U: ( 失業者 ) 找事的人，V ： Vacancy 缺工（空缺）U=V （一個蘿蔔一個坑）失業者最終都可以找到事，只是需費時去配對 -- It is not caused by a wage rate higher than equilibrium.

Frictional Unemployment Imperfect information may aggravate the problem of

frictional unemployment. The problem of frictional unemployment is

minimized with the development of efficient labor markets and of efficient communication technology. The time period of shifting from one job to another will be reduced.

2. Structural Unemployment結構性失業

窄義的結構性失業 Changes in the composition of demand among industries or re

gions are called sectoral shifts. 產業結構變遷：例如，台灣的紡織、製鞋、洋傘等產業外移至東南亞或是中國大陸，台灣製造業的工作機會便減少；此時取而代之的是電子、資訊及其相關產業。

For some sectors, Ui > Vi ， and for the others, Vj > Uj ， but

Ui have no skills for the jobs in sector j. 結構性失業通常較摩擦性失業期間長，因為結構性失業常表示人員需

要再訓練或是遷移才能找到工作。 此時政府可以提供失業者一些必須的技職訓練，促進就業。

CASE STUDY: Structural change over the long run

4.2%

28.0%9.9%

57.9%

Agriculture

Manufacturing

Other industry

Services

1960

1.6%

17.2%7.7%

73.5%

2000

Taiwan ： Structural change over the long run

1961年產業結構

農業27%

製造業19%

服務業46%

其他8%

農業 製造業 服務業 其他

1986年產業結構農業6%

製造業40%服務業

46%

其他8%

農業 製造業 服務業 其他

2006年產業結構農業2%

製造業23%

服務業71%

其他4%

農業 製造業 服務業 其他

3. Real Wage or Classical Unemployment（ Mankiw 課本 : Real-Wage Rigidity Unemployment

實質工資過高、工資僵固）

This type of unemployment problem arises when the wages rise above the equilibrium full employment level.

Wages are not flexible downwards which will imply that unemployment would persist for long. The sticky wage is set by minimun wage law or by negotiations in the union.

4. Cyclical Unemployment景氣型失業 （短期，不屬於 Ch5 討論範圍） It is fluctuations in unemployment around its natural

rate, associated with short-term ups and downs of the business cycle.

According to the Keynesian economists this type of unemployment occurs due to demand deficiency.

The demand for labor increases with the economy in the boom phase. Again, when the economy passes though recession, demand for labor contracts and the surplus is released as the unemployed labor force.

5. Seasonal Unemployment 季節性失業

There are certain kinds of unemployment that tend to concentrate in a particular time of the year and are known as seasonal unemployment. Seasonal unemployment is most common in industries like tourism, hotel, catering and fruit picking.

LR and SR Unemployment

1. Long-run: natural rate of unemployment ( 自然失業率 ) the amount of unemployment that the economy normally

experiences.

2. Short-run: cyclical rate of unemployment ( 景氣型失業 )

certain cyclical factors that can cause deviation of the economy from the natural rate of unemployment.

Gov’t may adopt expansionary macro policy in order to reduce the cyclical part of unemployment.

Natural Rate of Unemployment自然失業率 : 充分就業下的失業率 Milton Friedman and Edmund Phelps:1960s. It is basically the lowest unemployment rate that is consistent

with the long run aggregate production. It can also be defined as that low level of unemployment at which the economy faces a stable inflation rate. (Ch13: Phillips Curve)

Therefore , it cannot be lowered with the help of macro policies.

LR natural rate of unemployment= Frictional unemployment （摩擦性失業）＋ Structural Unemployment ( 窄義結構性失業 )

+ (Mankiw 課本 ) Real-Wage Rigidity Unemployment

Actual and natural rates of unemployment in the U.S., 1960-2006

Per

cent

of l

abor

forc

e

0

2

4

6

8

10

12

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Unemployment rate

Natural rate of unemployment

Taiwan: unemployment rateFIGURE The Unemployment Rate in Taiwan, 1978-2007

0

1

2

3

4

5

6

1981 1985 1989 1993 1997 2001 2005 Year

％

整體失業率 自然失業率

SR: U and GDP ， Deviations from Trends

Fig Deviations from Trend in the Unemployment Rate andPercentage Deviations from Trend in Real GDP

-1.0

-0.5

0.0

0.5

1.0

1.5

1978 1982 1986 1990 1994 1998 2002 2006

Year

Dev

iatio

n Fr

om T

rend

(% fo

r GD

P)

-0.08

-0.06

-0.04

-0.02

0.00

0.02

0.04

0.06

Unemployment Rate GDP

The duration of U.S. unemployment, average over 1/1990-5/2006

# of weeks unemployed

# of unemployed persons

as % of total # of unemployed

amount of time these workers spent unemployed

as % of total time all workers spent unemployed

1-4 38% 7.2%

5-14 31% 22.3%

15 or more 31% 70.5%

Taiwan: Duration of Unemployment

失業率 /失業期間 1999 2000 2001 2002 2003 2004 2005

失業率 2.92 2.99 4.57 5.17 4.99 4.44 4.13

平均失業週數(週 ) 23.0 24.7 25.7 29.3 31.1 30.5 29.4

長期失業人數(53+週，萬人 ) 3.0 3.9 5.8 9.4 10.5 10.5 8.7

占全體失業者比率 (%) 10.9 14.3 14.1 18.8 21.0 20.8 19.1

The duration of unemployment The data:

More spells of unemployment are short-term than medium-term or long-term.

Yet, most of the total time spent unemployed is attributable to the long-term unemployed.

This long-term unemployment is probably structural and/or due to sectoral shifts among vastly different industries.

Knowing this is important because it can help us craft policies that are more likely to work.

Theory: Job Loss, Job Finding, and the Natural Rate of Unemployment

Notation:

L = # of workers in labor force

E = # of employed workers

U = # of unemployed

L = E + U

U/L = unemployment rate

Assumptions:1. L is exogenously fixed.

2. During any given month, rate of job separations s:

fraction of employed workers that become separated from their jobs.

rate of job finding f :

fraction of unemployed workers that find jobs Assume both s and f are exogenous

The transitions between employment and unemployment

Employed Unemployed

s E

f U

The steady state condition The labor market is in steady state,

or long-run equilibrium, if the unemployment rate is constant.

The steady-state condition is:

s E = f U

# of employed people who lose or leave their jobs

# of unemployed people who find jobs

Determination of LR equilibrium unemployment rate(Natural rate of Unemployment)

f U = s E

= s (L – U )

= s L – s U

Solve for U/L:

(f + s) U = s L

so,

Example: Each month,

1% of employed workers lose their jobs (s = 0.01)

19% of unemployed workers find jobs (f = 0.19)

Find the natural rate of unemployment:

0 010 05, or 5%

0 01 0 19

U sL s f

..

. .

Policy implication

A policy will reduce the natural rate of unemployment only if it lowers s or increases f.

Public Policy related to Job Search

3 programs: ( 勞委會 )(1) Government-run employment agencies give out info

rmation about job vacancies in order to match workers and jobs more quickly. --- 公立就業服務機構

(2) Public job-training programs aim to ease the transition of workers from declining to growing industries and to help disadvantaged groups escape poverty.--- 職業訓練局

Public Policy related to Job Search(3) Unemployment insurance （失業保險）：

UI pays part of a worker’s former wages for a limited time after losing his/her job.

UI increases search unemployment, because it reduces the opportunity cost of being unemployed the urgency of finding work job-finding rate (f)

台灣失業保險制度1999 年：勞工保險開辦失業給付業務，2003 年：「就業保險法」，包含就業服務、職業訓練及失業保險三者。 勞委會網站：http://www.cla.gov.tw/cgi-in/SM_theme?page=416f8419

Public Policy related to Job SearchThe impacts of Unemployment insurance: It reduces the search efforts of the unemployed and increases t

he amount of search unemployment. It may improve the chances of workers being matched with the

right jobs.

台灣另外： (4) 勞動基準法：保障勞工權益，但造成勞資契約的僵固性。 新制可攜式勞退基金 （ 2005 年 7 月施行） 避免廠商關廠倒閉損害勞工權益，

並增加中老年齡就業機會

較廣義的結構性失業（ Mankiw 課本） Real-Wage Rigidity Unemployment

Ls > Ld when w > w* the number of jobs available in some labor markets is

insufficient to provide a job for everyone who wants one.

occurs when the quantity of labor supplied exceeds the quantity demanded.

caused by a wage rate higher than equilibrium.

Fig Unemployment from a Wage Above the Equilibrium Level

Copyright©2003 Southwestern/Thomson Learning

Quantity ofLabor

0

Surplus of labor =Unemployment

Laborsupply

Labordemand

Wage

Minimumwage

LD LS

WE

LE

1. Minimum-Wage Laws

3 reasons for structural unem:

1. Minimum-wage laws

2. Unions

3. Efficiency wages Minimum-Wage Laws ：最低工資法

When the minimum wage is set above W*, it creates unemployment.

--- (Nominal) Wage Rigidity ( 工資僵固性 )

EXPLAINING THE TREND:The minimum wage

0

1

2

3

4

5

6

7

8

9

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Dol

lars

per

hou

r

minimum wage in current dollars

minimum wage in 2006 dollars

The trend in the real minimum wage is similar to that of the natural rate of unemployment.

The trend in the real minimum wage is similar to that of the natural rate of unemployment.

2. Unions and Collective Bargaining A union ( 工會 ) is a worker association that bargains

with employers over wages and working conditions. Unions exercise monopoly power to secure higher wa

ges for their members. When the union wage exceeds the equilibrium wage,

unemployment results. A union is a type of cartel attempting to exert its mar

ket power. collective bargaining ： the process by which unions

and firms agree on the terms of employment. （集體議價）

Unions and Collective Bargaining By acting as a cartel with ability to strike or otherwise

impose high costs on employers, unions usually achieve above-equilibrium wages for their members.

A strike ( 罷工 ) refers to when the union organizes a withdrawal of labor from the firm.

Union workers earn 10 to 20 percent more than nonunion workers.

Workers in unions (insiders) reap the benefits of collective bargaining, while workers not in the union (outsiders) bear some of the costs.

EXPLAINING THE TREND:Union membership

Since the early 1980s, the natural rate of unemploy-ment and union membership have both fallen.

But, from 1950s to about 1980, the natural rate rose while union membership fell.

Since the early 1980s, the natural rate of unemploy-ment and union membership have both fallen.

But, from 1950s to about 1980, the natural rate rose while union membership fell.

Union membershipselected years

year percent of labor force

1930 12%

1945 35%

1954 35%

1970 27%

1983 20.1%

2005 12.5%

105,508Private sector (total)

20,381Government (total)

14,045Health care

3,312Education

10,951Professional services

6,304Finance, insurance

4,379Transportation

14,973Retail trade

15,518Manufacturing

600Mining

122.3

121.7

115.1

112.7

90.6

90.7

129.2

114.0

107.8

113.7

156.9

8.5%

40.5

8

15.4

3.1

2.1

24.4

5.8

13.7

9.5

13.88,053Construction

wage ratioUnion %

of total# employed

(1000s)industry

wage ratio = 100(union wage)/(nonunion wage) slide 38

Union membership and wage ratios by industry, 2005

% workers covered by collective bargaining

United States 18%

United Kingdom 47

Switzerland 53

Spain 68

Sweden 83

Germany 90

France 92

Austria 98

slide 40

Unemployment in Europe, 1960-2005

Per

cent

of l

abor

forc

e

Italy

Germany

France

U.K.

0

3

6

9

12

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Are Unions Good or Bad for the Economy?

Critics argue that unions cause the allocation of labor to be inefficient and inequitable.

Advocates of unions claim that unions are important for helping firms respond efficiently to workers’ concerns.

eg, 法國 2006/2 ，反對「首次雇用契約」就業法案的抗議遊行。

eg, 台灣 2005/9

抗議合併，中小企業銀行員工罷工。

The rise in European unemployment Technological progress has shifted labor demand from

unskilled to skilled workers in recent decades. Effect in United States

An increase in the “skill premium” – the wage gap between skilled and unskilled workers.

Effect in EuropeHigher unemployment, due to generous govt benefits for unemployed workers and strong union presence.

3. The Theory of Efficiency Wages

Profits = P*F(E(ω), K)- ωL – other costs

E: effective labor ， ω: wages ， L: labor quantity

A firm may prefer higher than equilibrium wages for the following 4 reasons:

(1) Worker Health: Better paid workers eat a better diet and thus are more productive.

Increase effective labor and labor productivity

(2) Worker Quality: Higher wages attract a better pool of workers to apply for jobs.

Increase effective labor and labor productivity

The Theory of Efficiency Wages

(3) Worker Turnover: A higher paid worker is less likely to look for another job.

reduce firm’s hiring and training costs.

(4) Worker Effort: Higher wages increase the opportunity costs of shirking and give workers an incentive to put forward their best effort.

Reduce firm’s monitoring costs.

eg, Henry Ford and $5-a-day Wage (1914)

Efficiency Wage ： Real Wage Rigidity

Summary Labor force participation rate Unemployment rate Discouraged workers Duration of unemployment Natural rate of unemployment Frictional unemployment Structural unemployment Minimum Wages Union and Collective Bargaining Efficiency Wages