Teaching Unemployment with the Jobs Train

Abstract

The jobs train is an interactive classroom exercise designed to provide students with a concrete, intuitive understanding of why unemployment occurs naturally in a market economy. In a classroom economy simulation, students experience a contrived labor market regime that generates 0% unemployment. By contrasting the obviously unsatisfactory outcomes of the jobs train with real world labor markets, students observe clearly the market-based underpinnings of both frictional and structural unemployment. With this experience in mind, students are prepared to discuss the natural rate of unemployment, and gain an appreciation for labor market institutions that promote optimal job search and skill matching.

Keywords: unemployment, natural rate of unemployment, frictional unemployment, structural unemployment, economic education

JEL Classification: A22, E24, J24, J64