| Asking Wage | The threshold wage that just induces an unemployed person to accept the job offer. Alternatively, it is the threshold wage such that any wage offer below it induces the unemployed individual to reject the job offer.
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| Cyclical Unemployment | A type of unemployment caused by insufficient total spending or by insufficient aggregate demand. Cyclical employment may occur when the economy is in a recession. Fewer workers are needed to supply smaller markets, creating an excess of qualified workers for a fixed number of jobs.
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| Frictional Unemployment | Unemployment that arises because both workers and firms need time to locate one another and to digest the information about the value of the job match, which leads to "time in between" jobs".
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| Imperfect Experience Rating | When the Unemployment Insurance system does not correctly impose the tax burden on employers who initiate the most layoffs. Specifically, while firms that have had high layoff rates in the past are assessed higher tax rates, the maximum tax rate a firm can be assessed is capped at some rate tMAX, such that employers who layoff many workers do not pay their "fair share" of the costs of unemployment and are instead subsidized by other firms.
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| Implicit Contracts | Unwritten and unspoken understandings (contracts) between workers and employers regarding how employment conditions will vary over time and over the business cycle.
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| Intertemporal Substitution Hypothesis | A hypothesis that workers have an incentive to allocate their time to work activities during those periods of the life cycle when the wage is high, and consume leisure when the wage is low and leisure is cheap.
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| Natural Rate of Unemployment | The unemployment rate that will be observed in the long run that yields neither an excess demand or an excess supply of labor in the aggregate labor market.
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| Non-Sequential Search | A job searching strategy in which a worker decides before he begins to search that he will randomly visit a certain number of firms in the labor market, and accept the job that pays the highest wage.
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| No-Shirking Supply Curve | The curve showing the number of workers that an industry can attract at various wages and who will not shirk.
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| Phillips Curve | A curve showing the relationship between the rate of inflation and the rate of unemployment. In the short run, the curve is predicted to have a negative slope, while, in the long run, it is predicted to be vertical at the natural rate of unemployment.
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| Replacement Ratio | The proportion of weekly earnings that are replaced by unemployment insurance benefit.
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| Seasonal Unemployment | Unemployment that arises from firm adjustments to output that occur at regular intervals.
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| Sectoral Shifts Hypothesis | The hypothesis that argues, because the skills of workers cannot be easily transferred across sectors, there will be a pool of workers who are unemployed for long spells because of an imbalance between the skills of unemployed workers and the skills that employers need.
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| Sequential Search | A job search strategy in which the worker decides the wage necessary to accept a job offer before the search process begins.
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| Structural Unemployment | Unemployment that arises either because there is an imbalance between the supply of workers and the demand for workers or, in the absence of an imbalance, there is a mismatch between the skills workers are supplying and the skills firms are demanding.
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| Temporary Layoffs | Unemployment in which those workers who are laid off return to their former employer at the end of the unemployment spell.
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| Wage Curve | The relationship within each country in which the wage tends to be high in regions where the unemployment rate is low, and the wage tends to be low in regions where the unemployment rate is high.
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| Wage Offer Distribution | The frequency distribution describing the various offers available to a particular unemployed worker in the labor market.
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