3.1 NOCIONES BÁSICAS DE LOS VALORES
3.2.3 Educación familiar y desarrollo de valores
Long-Run Growth
Each month the U.S. Bureau of Labor Statistics (BLS) announces the value of the unemployment rate for the previous month. For exam-ple, on July 2, 2010, it announced that the unemployment rate for June 2010 was 9.5 percent. The unemployment rate is a key mea-sure of how the economy is doing.
This announcement is widely watched, and if the announced unemployment rate is different from what the financial markets expect, there can be large
move-ments in those markets. It is thus important to know how the BLS computes the unemployment rate. The first part of this chapter describes how the unemployment rate is computed and dis-cusses its various components.
Inflation is another key macroeconomic variable. The previous chapter discussed how the GDP deflator, the price deflator for the entire economy, is computed. The percentage change in the GDP deflator is a measure of inflation. There are, however, other measures of inflation, each pertaining to some part of the economy. The most widely followed price index is the consumer price index (CPI), and its measurement is discussed next in this chapter. The CPI is also announced monthly by the BLS, and this announcement is widely followed by the financial mar-kets as well. For example, on June 17, 2010, the BLS announced that the percentage change in the CPI for May 2010 was –1.9 percent at an annual rate. After discussing the measurement of the CPI, this chapter discusses various costs of inflation.
The last topic considered in this chapter is long-run growth. Although much of macro-economics is concerned with explaining business cycles, long-run growth is also a major concern.
The average yearly growth rate of U.S. real GDP depicted in Figure 5.2 on p. 99 is 3.3 percent. So while there were many ups and downs during the 110 years depicted in Figure 5.2, on average, the economy was growing at a 3.3 percent rate. In the last part of this chapter, we discuss the sources of this growth.
Keep in mind that this chapter is still descriptive. We begin our analysis of how the economy works in the next chapter.
Unemployment
We begin our discussion of unemployment with its measurement.
Measuring Unemployment
The unemployment data released each month by the BLS are based on a survey of households.
Each month the BLS draws a sample of 65,000 households and completes interviews with all but about 2,500 of them. Each interviewed household answers questions concerning the work
activity of household members 16 years of age or older during the calendar week that con-tains the twelfth of the month. (The survey is conducted in the week that concon-tains the twelfth of the month.)
If a household member 16 years of age or older worked 1 hour or more as a paid employee, either for someone else or in his or her own business or farm, the person is classified asemployed.
A household member is also considered employed if he or she worked 15 hours or more without pay in a family enterprise. Finally, a household member is counted as employed if the person held a job from which he or she was temporarily absent due to illness, bad weather, vacation, labor-management disputes, or personal reasons, regardless of whether he or she was paid.
Those who are not employed fall into one of two categories: (1) unemployed or (2) not in the labor force. To be considered unemployed, a person must be 16 years old or older, available for work, and have made specific efforts to find work during the previous 4 weeks. A person not looking for work because he or she does not want a job or has given up looking is classified as not in the labor force. People not in the labor force include full-time students, retirees, individuals in institutions, those staying home to take care of children, and discouraged job seekers.
The total labor forcein the economy is the number of people employed plus the number of unemployed:
employed Any person 16 years old or older (1) who works for pay, either for someone else or in his or her own business for 1 or more hours per week, (2) who works without pay for 15 or more hours per week in a family enterprise, or (3) who has a job but has been temporarily absent with or without pay.
unemployed A person 16 years old or older who is not working, is available for work, and has made specific efforts to find work during the previous 4 weeks.
not in the labor force A person who is not looking for work because he or she does not want a job or has given up looking.
labor force The number of people employed plus the number of unemployed.
labor force = employed + unemployed
The total population 16 years of age or older is equal to the number of people in the labor force plus the number not in the labor force:
population = labor force + not in labor force
With these numbers, several ratios can be calculated. The unemployment rateis the ratio of the number of people unemployed to the total number of people in the labor force:
unemployment rate The ratio of the number of people unemployed to the total number of people in the labor force.
unemployment rate
= unemployed employed + unemployed
In June 2010, the labor force contained 153.741 million people, 139.119 million of whom were employed and 14.623 million of whom were unemployed and looking for work. The unemploy-ment rate was 9.5 percent:
14.623
139.119 + 14.623 = 9.5%
The ratio of the labor force to the population 16 years old or over is called the labor force participation rate:
labor force participation rate The ratio of the labor force to the total population 16 years old or older.
labor force participation rate
= labor force population
In June 2010, the population of 16 years old or over was 237.690 million. So the labor force par-ticipation rate was .65 (= 153.741/237.690).
Table 7.1 shows values of these variables for selected years since 1950. Although the unemployment rate has gone up and down over this period, the labor force participation rate grew steadily between 1950 and 2000. Much of this increase was due to the growth in the participation rate of women between the ages of 25 and 54. Column 3 in Table 7.1 shows how many new workers the U.S. economy has absorbed in recent years. The number of employed workers increased by 40.4 million between 1950 and 1980 and by 40.6 million between 1980 and 2009.
TABLE 7.2 Unemployment Rates by Demographic Group, 1982 and 2010
Years November 1982 June 2010
Total 10.8 9.5
White 9.6 8.6
Men 20+ 9.0 8.9
Women 20+ 8.1 7.1
Both sexes 16–19 21.3 23.2
African American 20.2 15.4
Men 20+ 19.3 17.4
Women 20+ 16.5 11.8
Both sexes 16–19 49.5 39.9
Source: U.S. Department of Labor, Bureau of Labor Statistics. Data are seasonally adjusted.
Components of the Unemployment Rate
The unemployment rate by itself conveys some but not all information about the unemployment picture. To get a better picture, it is useful to look at unemployment rates across groups of people, regions, and industries.
Unemployment Rates for Different Demographic Groups There are large dif-ferences in rates of unemployment across demographic groups. Table 7.2 shows the unemploy-ment rate for November 1982—the worst month of the recession in 1982—and for June 2010—also a month with high overall unemployment—broken down by race, sex, and age. In June 2010, when the overall unemployment rate hit 9.5 percent, the rate for whites was 8.6 percent while the rate for African Americans was almost twice that—15.4 percent.
During the recessions in both 1982 and 2010, men fared worse than women. For African Americans, 19.3 percent of men 20 years and over and 16.5 percent of women 20 years and over were unemployed in 1982, while the comparable numbers in 2010 are 17.4 for African American men and 11.8 for African American women. Teenagers between 16 and 19 years of age fared worst.
African Americans between 16 and 19 experienced an unemployment rate of 39.9 percent in June 2010. For whites between 16 and 19, the unemployment rate was 23.2 percent. The pattern was similar in November 1982.
Unemployment Rates in States and Regions Unemployment rates also vary by geo-graphic location. For a variety of reasons, not all states and regions have the same level of unem-ployment. States and regions have different combinations of industries, which do not all grow and decline at the same time and at the same rate. Also, the labor force is not completely mobile—workers often cannot or do not want to pack up and move to take advantage of job opportunities in other parts of the country.
TABLE 7.1 Employed, Unemployed, and the Labor Force, 1950–2009
(1) (2) (3) (4) (5) (6)
Population 16 Years Old or Over
(Millions)
Labor Force (Millions)
Employed (Millions)
Unemployed (Millions)
Labor Force Participation
Rate (Percentage
Points)
Unemployment Rate (Percentage
Points)
1950 105.0 62.2 58.9 3.3 59.2 5.3
1960 117.2 69.6 65.8 3.9 59.4 5.5
1970 137.1 82.8 78.7 4.1 60.4 4.9
1980 167.7 106.9 99.3 7.6 63.8 7.1
1990 189.2 125.8 118.8 7.0 66.5 5.6
2000 212.6 142.6 136.9 5.7 67.1 4.0
2009 235.8 154.1 139.9 14.3 65.4 9.3
Note:Figures are civilian only (military excluded).
Source:Economic Report of the President, 2010, Table B-35.
TABLE 7.3 Regional Differences in Unemployment, 1975, 1982, 1991, 2003, and 2010
1975 1982 1991 2003 2010
U.S. avg. 8.5 9.7 6.7 6.0 9.7
Cal. 9.9 9.9 7.5 6.7 12.4
Fla. 10.7 8.2 7.3 5.1 11.7
Ill. 7.1 11.3 7.1 6.7 10.8
Mass. 11.2 7.9 9.0 5.8 9.2
Mich. 12.5 15.5 9.2 7.3 13.6
N.J. 10.2 9.0 6.6 5.9 9.7
N.Y. 9.5 8.6 7.2 6.3 8.3
N.C. 8.6 9.0 5.8 6.5 10.3
Ohio 9.1 12.5 6.4 6.1 10.7
Tex. 5.6 6.9 6.6 6.8 8.3
Source:Statistical Abstract of the United States, various editions. 2010 data are for May.
Michigan is another interesting state. As you probably know, Michigan is highly dependent on the automotive industry. Michigan has suffered unemployment rates above the national aver-age for decades as the American automobile industry has lost share to foreign competition, and the state economy has been relatively slow to attract new industries. It should not surprise you that Michigan has one of the highest unemployment rates in 2010, given the state of the U.S. auto industry in the recent period.
Finally, consider Texas. Texas produces about 20 percent of the oil in the United States. (Alaska is another large oil producer.) For most of the last 35 years oil has done well, and for most of this period Texas has had relatively low unemployment rates. In Table 7.3, only in 2003 was Texas’
unemployment rate greater than the national average.
Discouraged-Worker Effects Many people believe that the unemployment rate under-estimates the fraction of people who are involuntarily out of work. People who stop looking for work are classified as having dropped out of the labor force instead of being unemployed. During recessions, people may become discouraged about finding a job and stop looking. This lowers the unemployment rate as calculated by the BLS because those no longer looking for work are no longer counted as unemployed.
To demonstrate how this discouraged-worker effectlowers the unemployment rate, suppose there are 10 million unemployed out of a labor force of 100 million. This means an unemployment rate of 10/100 = .10, or 10 percent. If 1 million of these 10 million unemployed people stopped looking for work and dropped out of the labor force, 9 million would be unemployed out of a labor force of 99 million. The unemployment rate would then drop to 9/99 = .091, or 9.1 percent.
The BLS survey provides some evidence on the size of the discouraged-worker effect.
Respondents who indicate that they have stopped searching for work are asked why they stopped.
If the respondent cites inability to find employment as the sole reason for not searching, that per-son might be classified as a discouraged worker.
The number of discouraged workers seems to hover around 1 percent of the size of the labor force in normal times. During the 1980–1982 recession, the number of discouraged workers increased steadily to a peak of 1.5 percent. In June 2010 there were estimated to be 1.2 million dis-couraged workers, about 0.8 percent of the size of the labor force. Some economists argue that As Table 7.3 shows, in the last 35 years remarkable changes have occurred in the relative prosperity of regions. In the 1970s Massachusetts was still quite dependent on its industrial base. As textile mills, leather goods plants, and furniture factories closed in the face of competi-tion both from abroad and from lower wage southern states, Massachusetts experienced rela-tively high unemployment. By the 1980s, the state had moved into more high-technology areas with the birth of firms like Wang Laboratories and Digital Equipment and later by biotech firms like Genentech; state unemployment rates also were relatively low. In 2010 Massachusetts was close to the national average for unemployment.
discouraged-worker effect The decline in the measured unemployment rate that results when people who want to work but cannot find jobs grow discouraged and stop looking, thus dropping out of the ranks of the unemployed and the labor force.
E C O N O M I C S I N P R A C T I C E
A Quiet Revolution: Women Join the Labor Force
Table 7.1 shows that the labor force participation rate in the United States increased from 59.2 percent in 1950 to 65.4 percent in 2009.
Much of this increase was due to the increased participation of women in the labor force. In 1955, the labor force participation rate of women was 36 percent. For married women, the rate was even lower at 29 percent. By the 1990s, these numbers shifted consider-ably. In 1996, the labor force participation rate was 60 percent for all women and 62 percent for married women. The reasons for these changes are complex. Certainly, in the 1960s, there was a change in society’s attitude toward women and paid work. In addi-tion, the baby boom became the baby bust as greater availability of birth control led to fewer births.
By comparison, the participation rate for men declined over this period—from 85 percent in 1955 to 75 percent in 1996. Why the labor force participation rate for men fell is less clear than why the women’s rate rose. No doubt, some men dropped out to assume more traditional women’s roles, such as child care. Whatever the causes, the economy grew in a way that absorbed virtually all the new entrants during the period in question.
As women began joining the labor force in greater numbers in the 1970s and 1980s, their wages relative to men’s wages actually fell. Most economists attribute this decline to the fact that less expe-rienced women were entering the labor force, pointing out the
importance of correcting for factors such as experience and educa-tion when we analyze labor markets.
At least some of the women entering the labor force at this time hired housecleaners and child care workers to perform tasks they had once done themselves. As we learned in Chapter 6, the salaries of daycare staff and cleaning people are counted in GDP, while the value of these tasks when done by a husband or wife in a household is not part of GDP.
If you are interested in learning more about the economic his-tory of American women, read the book Understanding the Gender Gap: An Economic History of American Women by Harvard University economist Claudia Goldin.
adding the number of discouraged workers to the number who are now classified as unemployed gives a better picture of the unemployment situation.
The Duration of Unemployment The unemployment rate measures unemployment at a given point in time. It tells us nothing about how long the average unemployed worker is out of work. With a labor force of 1,000 people and an annual unemployment rate of 10 percent, we know that at any moment 100 people are unemployed. But a very different picture emerges if it turns out that the same 100 people are unemployed all year, as opposed to a situation in which each of the 1,000 people has a brief spell of unemployment of a few weeks during the year. The duration statistics give us information on this feature of unemployment. Table 7.4 shows that
TABLE 7.4 Average Duration of Unemployment, 1970–2009
Weeks Weeks Weeks
1970 8.6 1984 18.2 1997 15.8
1971 11.3 1985 15.6 1998 14.5
1972 12.0 1986 15.0 1999 13.4
1973 10.0 1987 14.5 2000 12.6
1974 9.8 1988 13.5 2001 13.1
1975 14.2 1989 11.9 2002 16.6
1976 15.8 1990 12.0 2003 19.2
1977 14.3 1991 13.7 2004 19.6
1978 11.9 1992 17.7 2005 18.4
1979 10.8 1993 18.0 2006 16.8
1980 11.9 1994 18.8 2007 16.8
1981 13.7 1995 16.6 2008 17.9
1982 15.6 1996 16.7 2009 24.4
1983 20.0
Source: Economic Report of the President, 2010, Table B-44.
frictional unemployment The portion of unemployment that is due to the normal turnover in the labor market;
used to denote short-run job/skill-matching problems.
during recessionary periods, the average duration of unemployment rises. Between 1979 and 1983, the average duration of unemployment rose from 10.8 weeks to 20.0 weeks. The slow growth following the 1990–1991 recession resulted in an increase in duration of unemployment to 17.7 weeks in 1992 and to 18.8 weeks in 1994. In 2000, average duration was down to 12.6 weeks, which then rose to 19.6 weeks in 2004. Between 2007 and 2009 average duration rose sharply from 16.8 weeks to 24.4 weeks.
The Costs of Unemployment
In the Employment Act of 1946, Congress declared that it was the
continuing policy and responsibility of the federal government to use all practicable means...to promote maximum employment, production, and purchasing power.
In 1978, Congress passed the Full Employment and Balanced Growth Act, commonly referred to as the Humphrey-Hawkins Act, which formally established a specific unemployment rate target of 4 percent. Why should full employment be a policy objective of the federal government? What costs does unemployment impose on society?
Some Unemployment Is Inevitable Before we discuss the costs of unemployment, we must realize that some unemployment is simply part of the natural workings of the labor market.
Remember, to be classified as unemployed, a person must be looking for a job. Every year thou-sands of people enter the labor force for the first time. Some have dropped out of high school, some are high school or college graduates, and still others are finishing graduate programs. At the same time, new firms are starting up and others are expanding and creating new jobs while other firms are contracting or going out of business.
At any moment, there is a set of job seekers and a set of jobs that must be matched with one another. It is important that the right people end up in the right jobs. The right job for a person will depend on that person’s skills, preferences concerning work environment (large firm or small, formal or informal), location of the individual’s home, and willingness to commute. At the same time, firms want workers who can meet the requirements of the job and grow with the company.
To make a good match, workers must acquire information on job availability, wage rates, location, and work environment. Firms must acquire information on worker availability and skills. Information gathering consumes time and resources. The search may involve travel, inter-views, preparation of a résumé, telephone calls, and hours going through the newspaper. To the extent that these efforts lead to a better match of workers and jobs, they are well spent. As long as the gains to firms and workers exceed the costs of search, the result is efficient.
When we consider the various costs of unemployment, it is useful to categorize unemploy-ment into three types:
왎Frictional unemployment
왎Structural unemployment
왎Cyclical unemployment
Frictional, Structural, and Cyclical Unemployment When the BLS does its sur-vey about work activity for the week containing the twelfth of each month, it interviews many people who are involved in the normal search for work. Some are either entering the labor force or switching jobs. This unemployment is both natural and beneficial for the economy.
The portion of unemployment due to the normal turnover in the labor market is called frictional unemployment. The frictional unemployment rate can never be zero. It may, how-ever, change over time. As jobs become more differentiated and the number of required skills increases, matching skills and jobs becomes more complex and the frictional unemployment rate may rise.
The concept of frictional unemployment is somewhat vague because it is hard to know what
“the normal turnover in the labor market” means. The industrial structure of the U.S. economy is continually changing. Manufacturing, for instance, has yielded part of its share of total employ-ment to services and to finance, insurance, and real estate. Within the manufacturing sector, the steel and textile industries have contracted sharply, while high-technology sectors such as electronic