Mankiw 6e. Experience it.
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Chapter 28: Unemployment and Its Natural Rate

Recent Posts
(Note: Page numbers referenced in posts prior to June 1, 2011 refer to 5th edition)

 

June 13

Almost back to (the new) normal?

The number of people unemployed plus the number of people out of the labor force who want a job equals the number of people available to work. The number of people available to work relative to the number of job openings is now back to its pre-crisis level. But that ignores the sharp decline in the labor force participation rate.

Textbook References:

Pages 594-602 “Identifying Unemployment”

May 30

Christopher Pissarides

The International Monetary Fund presents a profile of Christopher Pissarides. Pissarides won the Nobel Prize in Economics for his work on job search and the process of matching workers with jobs.

Textbook References:

Pages 602-606 “Job Search”

October 22

New Research on UI

A new paper from the National Bureau of Economic Research contends that the stubborn persistence of unemployment after the Great Recession is due to the extraordinary extensions of unemployment benefits. In other words, people respond to incentives.

Textbook References:

Pages 604-606 “Unemployment Insurance”

September 6

A Striking Labor Market Fact

In the first eight months of 2013, the U.S. economy created 848,000 new jobs. Unfortunately, 96% of them were part time.

Textbook References:

Pages 598-599 “Does the Unemployment Rate Measure What We Want It To?”

October 6

The Two Labor Market Surveys

The Bureau of Labor Statistics conducts two surveys to measure employment. One survey is of households, the other is of firms. The two measures do not provide the same results, which should remind us that all economic statistics are imperfect.

Textbook References:

Pages 594-598 “How Is Unemployment Measured?”

October 5

Monitoring the Recovery

A chart from the U.S. Department of Labor shows that the Civilian Employment to Population Ratio fell significantly during the recent recession, and has not recovered.

Textbook References:

Pages 598-599 “Does the Unemployment Rate Measure What We Want It To?”

July 7

Monitoring the So-Called Recovery

A chart shows that the U.S. civilian employment to population ratio, which fell during the recession, has stayed low ever since.

Textbook References:

Pages 598-599 “Does the Unemployment Rate Measure What We Want It To?”

February 25

Abbott and Costello explain unemployment

Quirks of the measured unemployment rate are dissected in the fashion of Abbott and Costello's famous "Who's on First?" routine.

Textbook References:

Pages 594-602 “Identifying Unemployment”

January 12

Judging Presidents

Presidents have far less influence on job creation than many people believe.

Textbook References:

Chapter 28 “Unemployment”
Chapter 33 “Aggregate Demand and Aggregate Supply”

October 16

The Increased Role of the Minimum Wage

The increase in the minimum wage means that it now covers a larger fraction of workers.

Textbook References:

Pages 117-119 “The Minimum Wage”
Page 428 “Minimum Wage Laws”
Pages 606-608 “Minimum Wage Laws”

September 10

A Plan for Zero Unemployment

Steve Allen suggests a novel plan to eliminate unemployment.

Textbook References:

Pages 7-9 “Principle 4: People Respond to Incentives”
Pages 604-605 “How Much Do the Unemployed Respond to Incentives?”

July 15

Why aren't businesses hiring?

Steven Davis identifies reasons why businesses are not hiring as fast as one might expect in a recovery. Reasons include uncertainty about government policy that reduces recruiting intensity and a skills mismatch.

Textbook References:

Chapter 28 “Unemployment”

July 8

The Disappointing Recovery

A chart shows that the civilian employment to population ratio remains roughly 5 percentage points below its pre-recession level.

Textbook References:

Pages 598-599 “Does the Unemployment Rate Measure What We Want It To?”
Pages 720-722 “Three Key Facts about Economic Fluctuations”
Pages 745-748 “The Recession of 2008-2009”

July 7

Rogoff on Inequality

Kenneth Rogoff argues that "technological innovation will lead ultimately to commoditization of many skills that now seem very precious and unique." That implies that what are now high-skilled, high-paying jobs will become routine and will make the income distribution more equal.

Textbook References:

Pages 376-382 “The Demand for Labor”
Chapter 20 “Income Inequality and Poverty”

April 27

Height Over Time

People are much taller than they used to be. A new book attributes it to technological advances that improved nutrition, sanitation, and medicine.

Textbook References:

Pages 550-554 “Economic Growth Around The World”
Pages 565-566 “Health and Nutrition”
Page 632 “Worker Health”

April 25

The World's Poor and Hungry

Abhijit Banerjee and Esther Duflo discuss why the issue of world hunger is much more complicated than most people think.

Textbook References:

Pages 550-554 “Economic Growth Around The World”
Pages 565-566 “Health and Nutrition”
Page 632 “Worker Health”

April 2

A V, 2 Us, and an L

The U.S. Department of Labor presents a graph of the civilian employment to population ratio.

Textbook References:

Pages 614-623 “Identifying Unemployment”
Pages 740-742 “Key Facts About Economic Fluctuations”

March 6

Richard Freeman on Unions

Richard B. Freeman recommends five books about labor unions. He argues that unions are, on net, a positive force in the economy.

Textbook References:

Pages 421-422 “Above-Equilibrium Wages: Minimum-Wage Laws, Unions, and Efficiency Wages”
Pages 629-631 “Unions and Collective Bargaining”

February 28

Barro on Unions

Robert Barro argues that states with right-to-work laws have much higher growth in manufacturing employment than states without such laws.

Textbook References:

Pages 629-631 “Unions and Collective Bargaining”


February 4

The Jobs Report

Dilbert illustrates an effect of high unemployment on the employed.

Textbook References:

Chapter 28 “Unemployment”


January 10

How much unemployment is structural?

Raghuram Rajan argues that up to 3 percentage points of unemployment may be structural. A large chunk of the unemployed are in construction and related industries. No increase in aggregate demand will revive the construction industry in the foreseeable future, so funds would be better spent retraining these workers..

Textbook References:

Page 622 “Why Are There Always Some People Unemployed”


December 16

The Economics of Seinfeld

Clips from the TV show "Seinfeld" are used to illustrate a variety of economic concepts.

Textbook References:

Pages 4-5 “Principle 1: People Face Trade-offs”
Pages 5-6 “Principle 2: The Cost of Something is What You Give Up to Get It”
Page 6 “Principle 3: Rational People Think at the Margin”
Pages 7-8 “Principle 4: People Respond to Incentives”
Pages 10-12 “Principle 7: Governments Can Sometimes Improve Market Outcomes”
Chapter 3 “Interdependence and the Gains from Trade”
Pages 67-72 “Demand”
Pages 73-76 “Supply”
Pages 144-153 “Controls on Prices”
Chapter 10 “Externalities”
Pages 226-227 “The Different Kinds of Goods”
Pages 227-232 “Public Goods”
Pages 230-232 “The Difficult Job of Cost-Benefit Analysis”
Pages 232-237 “Common Resources”
Pages 274-275 “Fixed and Variable Costs”
Page 281 “Economies and Diseconomies of Scale”
Pages 312-315 “Why Monopolies Arise”
Chapter 16 “Monopolistic Competition”
Pages 370-378 “The Economics of Cooperation”
Pages 399-400 “The Supply of Labor”
Page 414 “Compensating Differentials”
Page 442 “Utility”
Page 465 “Utility: An Alternative Way to Describe Preferences and Optimization”
Pages 484-489 “Asymmetric Information”
Pages 556-558 “Technological Knowledge”
Pages 578-580 “Financial Intermediaries”
Pages 598-600 “Present Value: Measuring the Time Value of Money”
Pages 603-604 “Diversification of Firm-Specific Risk”
Pages 606-609 “The Efficient Market Hypothesis”
Pages 630-631 “The Economics of Unions”
Pages 703-705 “The Prices for International Transactions: Real and Nominal Exchange Rates”
Pages 707-708 “The Basic Logic of Purchasing Power Parity”
Page 833 “Time Inconsistency”

December 4

My Agnosticism about UI

Mankiw discusses the pros and cons of unemployment insurance. He also mentions that we do not know enough to determine the optimal length for unemployment insurance.

Textbook References:

Pages 625-626 “Unemployment Insurance”
Pages 626-627 “Unemployment Policy At Home and Abroad”
Page 797 “Automatic Stabilizers”


August 5

President Obama's Pro-Union Stance

Gary Becker claims that the threat of pro-union policy harms the recovery.

Textbook References:

Pages 421-422 “Above-Equilibrium Wages: Minimum-Wage Laws, Unions, and Efficiency Wages”
Pages 629-631 “Unions And Collective Bargaining”


July 19

The Principle of Comparative Advantage Applies Even To Union Picketing

Non-union workers are earning minimum wage picketing for a union. The union is upset that its employer has hired non-union workers.

Textbook References:

Pages 54-57 “Comparative Advantage: The Driving Force of Specialization”
Pages 629-631 “Unions and Collective Bargaining”

July 16

Median Duration of Unemployment

The Bureau of Labor Statistics reports that the median duration of unemployment in this recession is much higher than in previous recessions.

Textbook References:

Page 621-622 “How Long Are the Unemployed Without Work”
Pages 740-742 “Three Key Facts About Economic Fluctuations”

April 5

Is "Unpaid" Below the Minimum Wage?

The U.S. Labor Department claims that unpaid internships violate minimum wage laws.

Textbook References:

Pages 119-121 “The Minimum Wage”
Page 446 “Minimum Wage Laws”
Pages 627-629 “Minimum Wage Laws”

February 21

What Unions Are Getting

The Economist magazine argues that the Obama administration's policy towards unions has raised costs so that taxpayers are getting less for their money.

Textbook References:

Pages 421-422 “Above-Equilibrium Wages: Minimum-Wage Laws, Unions and Efficiency Wages”
Pages 629-631 “Unions And Collective Bargaining”


November 30

How to Create Jobs

Nobel laureates Paul Krugman and Gary Becker offer different advice on how to create jobs.

Textbook References:

Pages 8-10 “Principle 6: Markets are Usually a Good Way to Organize Economic Activity”
Pages 10-12 “Principle 7: Governments can Sometimes Improve Market Outcomes”
Pages 400-405 “Equilibrium in the Labor Market”
Pages 614-623 “Identifying Unemployment”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”

September 10

Judging Downturns II

The discussion of how severe the recession is that strated on September 9 continues.

Textbook References:

Chapter 23 “Measuring a Nation’s Income”
Pages 614-623 “Identifying Unemployment”
Pages 740-742 “Three Key Facts About Economic Fluctuations”


September 9

Judging Downturns

The current recession is not nearly as bad as the Great Depression.

Textbook References:

Chapter 23 “Measuring a Nation’s Income”
Pages 614-623 “Identifying Unemployment”
Pages 740-742 “Three Key Facts About Economic Fluctuations”

Chapter 28: Unemployment and Its Natural Rate
Archived Posts

 

September 6

Unemployment Update

Unemployment is higher than the administration predicted.

Textbook References:

Pages 392-399 “The Demand for Labor”
Pages 399-400 “The Supply of Labor”
Pages 400-405 “Equilibrium in the Labor Market”
Chapter 28 “Unemployment”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?


July 02

Unemployment Update

The administration predicted that, with its stimulus package, the unemployment rate would be much lower than it actually is.

Textbook References:

Chapter 28 “Unemployment”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?”


June 12

The Case Against a Minimum Wage Hike

The minimum wage is scheduled to increase in July, David Neumark argues that a recession is an especially bad time to increase the minimum wage.

Textbook References:

Pages 118-121 “How Price Floors Affect Market Outcomes”
Chapter 18 “The Markets for the Factors of Production”
Pages 627-629 “Minimum-Wage Laws”


June 08

This Recession’s Gender Gap

The male unemployment rate is much higher than the female unemployment rate.

Textbook References:

Chapter 28 “Unemployment”


May 12

Measuring Jobs Created or Saved

Congress passed a bill that requires the Council of Economic Advisors to report on the number of jobs saved or created by the stimulus package. It is an impossible task.

Textbook References:

Pages 392-399 “The Demand for Labor”
Pages 399-400 “The Supply of Labor”
Pages 400-405 “Equilibrium in the Labor Market”
Chapter 28 “Unemployment”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?


Apr. 4

Hoover Did It!

Lee Ohanian argues that higher wages, which were paid to prevent unions from organizing, was an important cause of the Great Depression.

Textbook References:

Pages7-8 “Principle 4: People Respond to Incentives”
Pages 8-10 “Principle 6: Markets Are Usually A Good Way To Organize Economic Activity”
Pages 10-12 “Principle 7: Governments Can Sometimes Improve Market Outcomes”
Pages 118-121 “How Price Floors Affect Market Outcomes”
Pages 421-422 “Above-Equilibrium Wages: Minimum-Wage Laws, Unions, and Efficiency Wages”
Pages 629-631 “Unions and Collective Bargaining”


Feb. 12

Labor Market Conditions

Mankiw presents a graph of initial and continued unemployment claims from January 1971 to January 2009.

Textbook References:

Chapter 28 “Unemployment”
Pages 740-742 “Three Key Facts About Economic Fluctuations”
Page 797 “Automatic Stabilizers”


Jan. 31

Summers vs Obama

Before becoming economic advisor to Obama, Larry Summers wrote that unions are a cause of long-term unemployment. Obama claims that unions are part of the solution.

Textbook References:

Pages 32-33 “Why Economists’ Advice is not Always Followed”
Pages 421-422 “Above-Equilibrium Wages: Minimum-Wage Laws, Unions, and Efficiency Wages”
Pages 629-631 “Unions and Collective Bargaining”