Question

Question 4 Lin is a hairdresser at a salon in a small town. In each of the following situations, explain Lin's type of job market situation with as much detail as possible, i.e. whether Lin is employed or unemployed and, if unemployed, what kind.

a) The local economy is in a minor recession and the salon lays Lin off. The owner assures her that she will be rehired when business picks up again. Lin waits to be re-hired. b) A large university, the major employer in the town, permanently closes, and this hurts all of the salons in town. The salon fires Lin because the owner can only afford to stay open on week-ends. c) Lin is dissatisfied with her schedule at the salon and quits her job. She is qualified to work at other salons and immediately begins to send her résumé to salons all over town. d) Lin quits her job and uses her savings to enroll in college full-time toward a marine biology B.A.

Answer 1

Lin's employment status and relevant explanations are as under:

a) The local economy is in a minor recession and the salon lays Lin off. The owner assures her that she will be rehired when business picks up again. Lin waits to be re-hired.

Cyclical unemployment

Lin is unemployed due to variations in the local business cycle. While she is waiting, she will be counted as unemployed.

This is involuntary for Lin.

b) A large university, the major employer in the town, permanently closes, and this hurts all of the salons in town. The salon fires Lin because the owner can only afford to stay open on week-ends.

Structural unemployment

A major problem has happened with the town's economy, with the major employer now closed. The whole employment scene of the town will now witness a major change.

This is involuntary for Lin.

c) Lin is dissatisfied with her schedule at the salon and quits her job. She is qualified to work at other salons and immediately begins to send her résumé to salons all over town.

Frictional unemployment

Lin is looking for a better job opportunity. The process of search and match takes time, and creates some friction in the job market.

This is voluntary for Lin.

d) Lin quits her job and uses her savings to enroll in college full-time toward a marine biology B.A.

Out of labor force and voluntary unemployment

Lin has left the labor force, to study further. She feels that this will enhance her employment prospects in the future.

This is voluntary for Lin.