Chapter 15

Chapter 15 is titled “unemployment” and focuses on how unemployment is defined, measured, and what influences it. There is always a natural rate of unemployment, due to frictional unemployment due to time required for workers to find a suitable job, and structural unemployment due to an insufficient number of jobs available for everyone. There are other factors that influence unemployment and prolong it, such as the job search (affected by public policy and unemployment insurance), minimum-wage laws, unions and efficiency wages.

For the reasons above there will always be some level of unemployment, however there are some influences that increase this rate. For example, a public policy that influences this rate is unemployment insurance which pays employees who have been laid off because their services were no longer required, typically half of their original salary. This is necessary for people to be able to survive without a job, however it also allows for more leisure in the job search process because they have a source of income and are not as desperate to find a job immediately which can negatively affect the economy by increasing the unemployment rate.

Unions are a group of employees who use collective bargaining to obtain certain benefits or conditions. This affects the natural rate of unemployment by raising wages only for the people in the union and can result in other employees being let go as an expense. Human resource regulations have a similar affect because it protects certain employees at the expense of others who may be more costly for the company. These affect the cost of hiring employees in the same way as minimum-wage laws because by paying certain people more, you can’t hire as many people. However many times these regulations are in the best interest of the employees and will consequently be better for the business, allowing for the employees who were let go or not employed to find a new job they are suitable for.