The labour force is people with
a job or registered as looking
for work. The participation
rate is the fraction of the
population of working age who
are in the labour force. The
unemployment rate is fraction
of the labour force without a job
but registered as looking for
work.
Discouraged workers,
pessimistic about finding a job,
leave the labour force.
Frictional unemployment is
the irreducible minimum
unemployment in a dynamic
society.
Structural unemployment
arises from the mismatch of
skills and job opportunities as
the pattern of demand and
supply changes.
Demand-deficient
unemployment occurs when
output is below full capacity.
Classical unemployment
describes the unemployment
created when the wage is
deliberately maintained above
the level at which the labour
supply and labour demand
schedules intersect.
Equilibrium unemployment
(also called the natural rate of
unemployment) is the
unemployment rate when the
labour market is in equilibrium.
A worker is voluntarily
unemployed if, at the given
level of wages, she wishes to
be in the labour force but does
not yet wish to accept a job.
An involuntarily unemployed
worker would accept a job offer
at the going wage rate.
Supply-side economics is the
use of microeconomic
incentives to alter the level of
full employment, the level of
potential output and equilibrium
unemployment.
Mismatch occurs if the skills
that firms demand differ from
the skills the labour force
possesses.
The replacement rate is the
level of benefits relative to
wages in work
Trade union power is
measured by the ability of
unions to coordinate lower job
acceptances, thereby
increasing wages but reducing
employment.
The marginal tax rate is the
fraction of each extra pound of
income that the government
takes in tax. This creates a tax
wedge between the price the
purchaser pays and the price
the seller receives.
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