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32 Cards in this Set
- Front
- Back
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Four Important Labor Market Trends |
1) All Industrial countries have enjoyed growth in real wages 2) The rate of real wage growth has slowed 3) Recent decades have brought a pronounced increase in wage inequality in the U.S., Growing gap in real wages between skilled and unskilled workers, two tier labor system where there is jobs for people who have skills but not really for those who are uneducated 4) The number of people with jobs has grown substantially in recent decades |
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Demand for Labor |
Depends on the productivity of labor as well as the price that the market sets on workers output or the product itself |
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Diminishing Returns to Labor |
As you add more people they slowly become less effective Ex/ BBC will hire an extra worker if the value of that worker’s marginal product exceeds the wage BBC must pay—so if paid $60,000 per year they will hire until the amount they're producing is worth less than $60,000 The lower the wage they have to pay the less ppl they will hire The higher the wage the fewer workers an industry will demand |
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Shift in Demand for Labor |
Any factor that raises the marginal product of BBC workers will shift that curve to the right (increase) Factors: Increase in the price of a company’s output, increase in the productivity of workers (this is often new technology) |
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Supply of Labor |
Workers are suppliers Decide if they will work based on their reservation price Most important factor affecting the supply of labor is the size of the working population |
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Increase in Real Wages |
This has improved standards of living Results from growth in productivity Dramatic technological changes There are large increases in capital which provided waker tin more and better tools to work with This shifted the employment demand up |
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Real Wage Slowing after 70’s |
Decide in the pace of productivity gains—not too much more new stuff to be pumped out Slower growth in labor demand because productivity slowed and growth in labor supply because women entered the workforce explain why real wage growth has slowed |
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Wage Inequality |
Markets for many goods and services going international means that consumers stop buying domestic goods which means no jobs domestically |
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Export Markets |
Increases demand for domestic software for example, so shifts demand curve to the right, but lowers the demand curve for textile industries because that is a basic thing that can be seen in another country—this is an example of globalization hurting an economy and helping in other ways |
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Globalization (Jobs Overseas) |
Necessity for helping labor market adjust to the affects of globalization |
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Worker Mobility |
The movement of workers between jobs, firms and industries |
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Transition Aid |
Helping workers to move to a different sector and train for new jobs |
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Skill-Biased Technological Change |
Technological change that affects the marginal product of higher skilled workers differently than lower skilled—usually favors higher skilled workers Consumer demands for luxury items means that once jobs that required little skill (like car building) now requires much more skill Lower demand for skilled workers=wage gap increase |
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Measuring Unemployment |
Employed-have a job full time or part time during the past week Unemployed- did not work in the preceding week but made effort to find work in the past four weeks Out of Labor force- has not looked for a join the past four weeksWorking age population is 16 and up |
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Labor Force |
Total number of employed and unemployed people in the economy |
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Unemployment Rate |
#employed/labor force |
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Participation Rate |
labor force/working age population (16+ people) |
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Costs of Unemployment |
Labor force not fully utilized Incomes fall (consumption falls) Workers who are unemployed stop paying taxes and receive government help Psychologically suckslow self esteemdiscouraged worker is an out of labor force worker!Costs society because they most pick up slack of not having those ppl pay taxes |
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Unemployment Spell |
Continuously unemployed |
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Involuntary Part-Time |
Want to work full time but cannot |
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Frictional Unemployment |
Short term unemployment that is the result of someone trying to find a job that matches their skills—leads to higher output in the long run |
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Structural Unemployment |
Long term and chronic unemployment that occurs when economy is producing at a normal rate, people never stay in one job, hard to find a job because it requires a skill they don’t have |
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Cyclical Unemployment |
occurs during recession, from large declines in GDP |
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Impediments to Full Employment |
Minimum wage laws: those who are lucky enough to find jobs at minimum wage and those who are shut out because the minimum wage exceeds market clearing wage Labor unions: a union wage is higher than market clearing wage leads to unemployment |
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Unemployment Insurance |
Unemployment insurance provides an important social benefit that may keep people from feeling the need to attempt to get a job because they have something to fall back on |
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Shifts on Labor Demand Curve |
New Factory so people produce more: RIGHT SHIFTPrice of Product Increases: RIGHT SHIFT |
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Shifts on Labor Supply Curve |
Working age population increases: RIGHT SHIFT (decreases) |
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Cyclical Unemployment |
Extra employment in addition to frictional and structural |
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Shifts on Labor Demand Curve |
New Factory so people produce more: RIGHT SHIFT Price of Product Increases: RIGHT SHIFT |
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Shifts on Labor Supply Curve |
Working age population increases: RIGHT SHIFT (decreases) |
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Labor Market Trends |
-Increased productivity: shifts demand right, increases wages -Since 70’s real wage has slowed: larger labor force (baby boomers/women), shifted supply curve right so wages do not increase -Wage inequality has increased: shift left in demand for toy factory, shift right in demand for software company, unskilled vs. skilled workers -Before recession number of people with jobs increasing: increased productivity shifted demand curve right, employment when up |
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Beverige Curve |
Relates job openings (y-axis) with unemployment (x-axis) |
