Book: The Labor Market Flashcards
What is the natural rate of unemployment
The rate at which wages demanded by workers are consistent with the price decisions by a firm
What is the non-institutional civilian population
Number of people available for civilian employment
What does economists mean by sclerosis
Bad markets with few transactions, like the medical term for har arteries that moves blood poorly
What are the reasons fir unemployment
Layoffs, quits and new entries that mostly arise from the fluctuating levels of demand among firms
What is the duration if unemployment
The time people stay unemployed either because they get a new one or stop looking
Why might the focus meatly on the unemployed be misguided
Because a large amount of those outside of the labor force are discouraged workers that would take a job if given to them
How can one get a better overview of workers available
By looking at the employment rate instead of the unemployment rate
Is the unemployment rate and the proportion of unemployed workers finding a job related
Yes, the graphs are inverse, the higher the rate the fewer find jobs
How are workers worse of during high unemployment
They face higher risk of layoffs and if they become unemployed it takes more time ti get employed
What is collective bargening
Wage negotiation between labor unions and employers
What is the reservation wage
The wage at which it is preferred to work rather than being unemployed
What affects a workers bargaining power
How costly it is fir the firm to find a replacement and how costly it is for the employee to find new employment, the labor market conditions
What are efficiency wage theiries
The seaming correlation between wages and productivity, that workers work harder and better for higher wages and that decreased turnover will allow for a greater focus on the core business a greater talent retention
How does unemployment affect wages
High unemployment lowers wages and low unemployment raises wages
What does this function mean
W=P(e)*F(u,z)
(-,+)
That wages are a the expected price level times a function of the unemployment rate that lowers the wage when higher and a catchall variable z that heightens it
Why does the expected price level affect nominal wages
Because people and firms care about real wages, workers care about the goods they can buy with their wage and firms care about how many goods the work costs and because wages are payed way after they are set
Give some examples of variables that may affect bargaining power of employees
Unemployment insurance, unions and employment protection
What is the production function
Y=AN
It states that production equals labor productivity aka output per worker times employment
What dies this function mean
P = (1+m)*W
That the price is the cost of production plus markup
What is the relationship between prices and wages
W/P = 1/(1+m)
An increase in markup decreases the real wages as it increases the prices in relation to wages
What does equilibrium in the labor market nececitate
That the real wages by price setting equals the real wages by wage setting
F(u,z)=1/(1+m)
What is the natural rate if unemployment
The unemployment rate required by the labor market equalibrium
What affects the natural rate of unemployment
The markup that the firms may create and the factors of z that increases the bargaining power if employees, higher markup will increase unemployment and increased z will also increase it
What determines output in the medium run
Natural output which is determined by equilibrium in the labor market
Why not simply use a labor supply demand graph
Because people are rarely willingly unemployed but at the prices that companies set they cannot survive on any wage so at higher wages people will not simply match demand in their willingness to work
This is a dumb card
Yea
