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Chapter 20: Problem 6

Discuss the likely effect of each of the following on the unemployment rate. a. The length of time workers are eligible to receive unemployment insurance payments doubles. b. The minimum wage is abolished. c. Most U.S. workers join labor unions. d. More companies make information about job openings easily available on Internet job sites.

Short Answer

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Doubling the length of unemployment insurance payments could potentially increase the unemployment rate. Abolishing the minimum wage might decrease the unemployment rate. If most U.S. workers join labor unions, the unemployment rate could either increase or decrease depending on the negotiations outcomes between unions and employers. More available information about job openings can likely reduce the unemployment rate.

Step by step solution

01

Effect of Unemployment Insurance Duration

Unemployment insurance can affect the unemployment rate. If the duration of payments doubles, more people might opt to remain unemployed until they find a job that suits them, instead of taking on any job they find. This might increase the unemployment rate.
02

Impact of Abolishing Minimum Wage

Minimum wage laws prevent employers from paying less than a certain amount to the workers. If the minimum wage is abolished, employers could hire more workers at lower wages, potentially reducing the unemployment rate.
03

Role of Labor Unions in Unemployment

Labor unions often demand higher wages and better working conditions for their members, which if acceded to by the employers, can lead to a decrease in employment levels. Conversely, a failure to agree on terms could lead to strikes and temporary unemployment. Therefore, if most workers join unions, it could lead to an increase in the unemployment rate.
04

Effect of Information on Job Openings

When companies make information about job openings easily available, it will likely reduce the search time necessary to find a new job and hence decrease the unemployment rate.

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