Exercises: Labor Market Changes, Technology, and Gig Work

Classify each situation as cyclical, structural (caused by technology or industry change), or frictional unemployment:

(a) a car factory lays off workers during a recession;

(b) a bookstore clerk loses her job because customers shop online;

(c) a recent graduate is searching for a first job.

Gig work means short-term, task-based jobs, often found through an app. Which of these are gig work?

(a) driving for a rideshare app;

(b) a full-time cashier with a set schedule;

(c) a freelance graphic designer who takes projects from different clients;

(d) a delivery driver paid per order through an app.

Give one advantage and one disadvantage of gig work.

Liam delivers food through an app. Last week he earned $\$480$ in total and worked 24 hours. Calculate his gross earnings per hour. Explain why this number is not the same as his take-home pay per hour.

A warehouse installs robots. The robots eliminate 200 jobs that paid $\$17$ per hour. The company creates 60 new technician jobs that pay $\$25$ per hour. All jobs are 40 hours a week.

(a) Calculate the net change in the number of jobs.

(b) Calculate the weekly pay for a former warehouse worker and for a technician.

(c) Explain which workers benefit from the change, which are harmed, and why.

In a labor force of 5,000,000 people, the unemployment rate rises from 4% to 8% during a recession.

(a) How many more people are unemployed?

(b) Explain why a recession often hits young workers and workers with less education harder than others.

(c) Describe one way a worker's income could fall even without losing a job.

Priya drives for a rideshare company. Last week she worked 30 hours.

• She collected $\$900$ in fares.

• The company kept 20% of the fares.

• She spent $\$130$ on gas and $\$70$ on car wear and maintenance.

• As an independent worker she must pay self-employment tax of 15.3% of her net earnings (assume this base).

(a) Calculate her net earnings after the company fee and expenses.

(b) Calculate the self-employment tax and her net per hour after it.

(c) Compare this with a job paying $\$15$ per hour where she pays 7.65% in FICA. Which pays more per hour, and what benefits might the job offer that gig work does not?

Mateo wants to open a food truck.

• Startup costs are $\$30{,}000$, which he has saved.

• In a typical month he expects $\$12{,}000$ in revenue and $\$7{,}500$ in costs for food, fuel, permits, and insurance.

• He expects to work about 217 hours a month.

• His alternative is a job at $\$16$ per hour, 40 hours a week (use 4.33 weeks per month).

(a) Calculate his expected monthly profit and his profit per hour worked.

(b) How many months will it take to earn back the startup cost?

(c) Calculate his monthly profit if revenue falls 30% while costs stay the same.

(d) Argue whether you would advise him to open the truck, discussing risk and opportunity cost.

A store is replacing most cashiers with self-checkout kiosks. A cashier named Camila earns $\$15$ per hour, working 2,000 hours a year. She is considering a retraining program for a logistics technician job.

• The program costs $\$5{,}400$ in tuition.

• It takes 6 months, during which she will lose $\$8{,}000$ in wages.

• Afterward she expects $\$21$ per hour for 2,000 hours a year.

(a) Calculate her current yearly pay and her expected yearly pay after retraining.

(b) Calculate the total cost of retraining, and how long it takes to recover it.

(c) Analyze how technology and an economic downturn could affect Camila differently from a worker with a college degree.