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Ch6: Unemployment
Mankiw: Macro Ch 6
Mankiw: Econ Ch 28
Abel & Bernake: Ch 3
勞動力之分類
臺灣地區總人口
未滿十五歲人口
武裝勞動力
十五歲以上人口
監管人口
民間人口
（現役軍人）
（民間）勞動力
就業者
非勞動力
失業者
Table Taiwan: the Labor-Market Experiences
of Various Demographic Groups
平均
值
實質
大學以 20-24
廣義失
男性勞 女性勞 GDP
上學歷 歲失業
勞參率
業率
失業率
參率
參率
成長率
失業率 率
-2006
19782007
58.66 72.65 44.66
6.78
3.84
2.61
2.88
6.54
197890
59.30 76.02 42.46
8.36
2.90
1.95
2.57
5.02
199100
58.54 71.69 45.39
6.35
3.28
2.17
2.48
5.78
200107
57.65 67.77 47.68
4.09
6.38
4.45
4.03 10.48
Copyright©2004 South-Western
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
regions 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
Agriculture
Manufacturing
Other industry
Services
1960
2000
73.5%
57.9%
4.2%
1.6%
9.9%
28.0%
7.7%
17.2%
Taiwan：
Structural change over the long run
1961年產業結構
其他
8%
農業
27%
服務業
46%
製造業
19%
農業
製造業
服務業
1986年產業結構
其他
8%
其他
農業
6%
製造業
40%
服務業
46%
2006年產業結構
農業
製造業
服務業
其他
農業
其他 2%
4%
製造業
23%
服務業
71%
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
Percent of labor force
12
10
Unemployment rate
8
6
4
Natural rate of
unemployment
2
0
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
Taiwan: unemployment rate
FIGURE The Unemployment Rate in Taiwan, 1978-2007
6
5
％
4
3
2
1
0
1981
1985
1989
整體失業率
1993
1997
2001
自然失業率
2005
Year
SR: U and GDP，Deviations from Trends
Fig Deviations from Trend in the Unemployment Rate and
Percentage Deviations from Trend in Real GDP
1.5
0.06
Deviation From Trend(% for GDP)
0.04
1.0
0.02
0.5
0.00
-0.02
0.0
1978
1982
1986
1990
1994
1998
2002
2006
-0.04
-0.5
-0.06
-1.0
-0.08
Year
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
23.0
24.7
25.7
29.3
31.1
30.5
29.4
3.0
3.9
5.8
9.4
10.5
10.5
8.7
10.9
14.3
14.1
18.8
21.0
20.8
19.1
平均失業週數
(週)
長期失業人數
(53+週，萬人)
占全體失業者
比率(%)
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
s E
Employed
Unemployed
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,
U
s

L sf
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:
U
s
0.01


 0.05, or 5%
L s  f 0.01  0.19
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
information 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 Search
The impacts of Unemployment insurance:
 It reduces the search efforts of the unemployed and increases
the 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
Wage
Labor
supply
Surplus of labor =
Unemployment
Minimum
wage
WE
Labor
demand
0
LD
LE
LS
Quantity of
Labor
Copyright©2003 Southwestern/Thomson Learning
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
9
The trend in the real
minimum wage is
similar to that of the
natural rate of
unemployment.
Dollars per hour
8
7
6
5
minimum wage
in 2006 dollars
4
3
2
minimum wage in
current dollars
1
0
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
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
wages for their members.
 When the union wage exceeds the equilibrium wage,
unemployment results.
 A union is a type of cartel attempting to exert its
market 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
Union membership
selected years
year
percent of labor force
1930
12%
1945
35%
1954
35%
1970
27%
1983
20.1%
2005
12.5%
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 membership and wage ratios by industry, 2005
industry
# employed
(1000s)
Union %
of total
wage ratio
Private sector (total)
105,508
8.5%
122.3
Government (total)
20,381
40.5
121.7
8,053
13.8
156.9
600
9.5
113.7
Manufacturing
15,518
13.7
107.8
Retail trade
14,973
5.8
114.0
Transportation
4,379
24.4
129.2
Finance, insurance
6,304
2.1
90.7
10,951
3.1
90.6
Education
3,312
15.4
112.7
Health care
14,045
8
115.1
Construction
Mining
Professional services
wage ratio = 100(union wage)/(nonunion wage)
slide 38
% workers covered by collective bargaining
United States
18%
United Kingdom
47
Switzerland
53
Spain
68
Sweden
83
Germany
90
France
92
Austria
98
Unemployment in Europe, 1960-2005
France
Percent of labor force
12
9
6
Italy
3
U.K.
Germany
0
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
slide 40
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 Europe
Higher 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