A PowerPoint Tutorial

to Accompany macroeconomics, 5th ed.

N. Gregory Mankiw

CHAPTER SIX
Unemployment

Mannig J. Simidian

Chapter 1
Six
The average rate of unemployment around which the economy fluctuates
is called the natural rate of unemployment. The natural rate is the rate
of unemployment toward which the economy gravitates in the
long run. Lets start with some fundamental equations that will
build a model of labor-force dynamics that shows what
determines the natural rate.
Using this notation, the rate L = E + U
of unemployment is U/L.
force isiscomposed
Laborforce composed Numberof
Number of
Labor
of
of Unemployed
Unemployed
Now, well denote the workers
workers
rate of job separation as s. Numberofof
Number
Let f denote the rate of job Employed
Employed
finding. Together these determine theworkers
Chapter workers 2
Six rate of unemployment.
 f U=sE
Numberof
Number ofpeople
people Numberof
Number ofpeople
people
findingjobs
finding jobs loosingjobs
loosing jobs

Steady-state unemployment rate

From an earlier equation, we known that E = L U, that is the number of
employed equals the labor force minus the number of unemployed. If we
substitute (L-U) for E in the steady-state condition, we find:

f U = s (L U)
Then, divide both sides by L and to obtain:

f U/L = s (1-U/L)
Now solve for U/L for find :
Chapter
Six U/L = s / (s 3
Any
Anypolicy
policyaimed
aimedatatlowering
loweringthe thenatural
naturalrate
rateofofunemployment
unemployment
must
musteither
eitherreduce
reducethe
therate
rateofofjob
jobseparation
separationororincrease
increasethe
therate
rate
ofofjob
jobfinding.
finding. Similarly,
Similarly,any
anypolicy
policythat
thataffects
affectsthe
therate
rateofofjob
job
separation
separationororjob
jobfinding
findingalso
alsochanges
changesthethenatural
naturalrate
rateofof
unemployment.
unemployment.

Chapter 4
Six
The unemployment caused by the time it takes workers to search for a
job is called frictional unemployment.

Economists call a change in the composition of demand among

industries or regions a sectoral shift. Because sectoral shifts are
always occurring, and because it takes time for workers to change
sectors, there is always frictional unemployment.

In trying to reduce frictional unemployment, some policies inadvertently

increase the amount of frictional unemployment. One such program is
called unemployment insurance. In this program, workers can collect
a fraction of their wages for a certain period after losing their job.

Chapter 5
Six
Real Wage rigidity is the failure of
wage S wages to adjust until labor
supply equals labor demand.
U
The unemployment resulting
Rigid
from wage rigidity and job
real
rationing is called structural
wage
unemployment. Workers are
unemployed not because they
D cant find a job that best suits
Labor their skills, but rather, at the
If the real wage is stuck above the going wage, the supply of labor
equilibrium level, then the supply exceeds the demand. These
of labor exceeds the demand. workers are simply waiting for
Result: unemployment U. jobs to become available.
Chapter 6
Six
The government causes wage rigidity when it prevents wages from
falling to equilibrium levels. Economists believe that the minimum wage
has the greatest impact on teenage unemployment. Studies suggest that
a 10-percent increase in the minimum wage reduces teenage employment
by 1 to 3 percent.

Many economists and policymakers believe that tax credits are a better
way to increase the incomes of the working poor. The earned income
tax credit is an amount that poor working families are allowed to
subtract from the taxes they owe.

Chapter 7
Six
Another cause of wage rigidity is the monopoly power of unions.
In the US, only 16 percent of workers belong to unions. Often, union
contracts set wages above the equilibrium level and allow the firm to
decide how many workers to employ. Result: a decrease in the number
of workers hired, a lower rate of job finding, and an increase in
structural unemployment.
The unemployment caused by unions is an instance of conflict between
different groups of workers insiders and outsiders. In the US,
this is solved at the firm level through bargaining.
Chapter 8
Six
Efficiency-wage
theories hold that high wages make workers more
productive. So, though a wage reduction would lower a firms wage
bill, it would also lower worker productivity and the firms profits.
Another efficiency-wage theory contends that high wages reduce
labor turnover.
A third efficiency wage theory holds that the average
quality of a firms workforce depends on the wage it pays its
employees.
A fourth efficiency wage theory holds that a high wage
improves
Chapter
worker effort. 9
Six
 Natural rate of unemployment
Frictional unemployment
Sectoral shift
Unemployment insurance
Wage rigidity
Structural unemployment
Insiders versus outsiders
Discouraged workers

Chapter 10
Six
 Tugas Kelompok Diskusi Minggu Depan
(Pakai PPT untuk presentasi 25 menit)

Kelompok 1 menjelaskan perkembangan pertumbuhan ekonomi Indonesia beserta

komponennya dalam 5 tahun terakhir. Jelaskan faktor apa yang penting dalam
mempengaruhi pertumbuhan ekonomi Indonesia dalam 5 tahun tersebut. Pakai data BPS
Kelompok 2 menjelaskan perkembangan inflasi Indonesia selama 5 tahun terakhir. Buat
plot pertumbuhan supplai uang dan inlasi. Bedakan headline inflation dan core inflation.
Jelaskan faktor apa yang penting dalam mempengaruhi inflasi Indonesia dalam 5 tahun
terakhir. Pakai data BI/BPS
Kelompok 3 emenjelaskan mengenai pengangguran di Indonesia (Total, Menurut
Lapangan Usaha, Menurut Pendidikan, Menurut Propinsi, dsb baik dalam absolut
maupun dalam share dalam 5 tahun terakhir). Pakai data IMF/BPS. Berikan analisa
Kelompok 4 menjelaskan mengenai perdagangan di Indonesia (Total, trade balance dgn
ROW, menurut tujuan/asal, menurut sektor HS 2 Dijit, dsb baik nilai maupun
pertumbuhannya). Pakai data UNCOMTRADE/BPS.Tambahkan plot antara total
impor/PDB vs jumlah pengangguran/total tenaga kerja. Data dalam 5 tahun terakhir.
Berikan analisa

Chapter 11
Six
 Quiz National Income (Mankiw, Ch3 No 7)

Chapter 12
Six
 Quiz Money&Inflation
(Mankiw, Questions for Review)

Chapter 13
Six