Chapter Two

Question 0

National labor market

Answer 0

If buyers and sellers are searching throughout the entire nation for each other

-doctors, mechanical engineers

Question 1

The market that allocates workers to jobs and coordinates employment decisions is the..?

Answer 1

Labor market! :)

Question 2

Local labor market

Answer 2

If buyers and sellers search only locally

-data entry clerks, automobile mechanics

Question 3

When we speak of a particular “labor market”- for taxi drivers,- we are using the term ……. To refer to the companies trying to hire people to drive their cabs and the people seeking employment as cab drivers.

Answer 3

Loosely

Question 4

Are all the different labor markets we can define on the basis of industry, occupation, geography, transaction rules, or job character interrelated?

Answer 4

Yes

Question 5

What is the type of labor market where the sellers of labor operate under a very formal set of rules that partly govern buyer-seller transactions?

Answer 5

Union/unionized

• for example, in the unionized construction trades employers must hire at the union hiring hall from a list of eligible Union members.
• in other unionized markets, the employer has discretion over who gets hired but is constrained by a Union-management agreement in such matters as the order in which employees may be laid off, procedures regarding employee complaints, and promotions.

Question 6

The markets for government jobs and jobs with large nonunion employers also tend to operate under rules that constrain the authority of management and ensure what?

Answer 6

Fair treatment of employees.

Question 7

When a formal set of rules and procedures guides and constrains the employment relationship WITHIN a firm, a what is said to exist?

Answer 7

Internal labor market

Question 8

The term “labor force” refers to…?

Answer 8

All those over 16 years of age who are employed, actively seeking work, or expecting recall fro, a layoff.

Question 9

Unemployed

Answer 9

Those in the labor force who are not employed for pay

Question 10

Who is not counted in the labor force?

Answer 10

People who are not employed and are not looking for work or waiting to be recalled from a layoff by their employers are not counted as a part of the labor force.

Question 11

The total labor force consists of..?

Answer 11

The employed and the unemployed

Question 12

There are four major flows between labor market states:

1) employed workers become unemployed by q……. voluntarily or being l… o..
2) unemployed workers obtain employment by being n…. h…. or being R……. to a job from which they were temporarily laid off
3) those in the labor force, whether employed or unemployed, can leave the labor force by r……. or otherwise deciding against taking or seeking work for pay (d……. o..)
4) those who have never worked or looked for a job expand the labor force by e……. it, while those who have dropped out to do so by R……… the labor force.

Answer 12

1) employed workers become unemployed by QUITTING voluntarily or being LAID OFF
2) unemployed workers obtain employment by being NEWLY HIRED or being RECALLED to a job from which they were temporarily laid off
3) those in the labor force, whether employed or unemployed, can leave the labor force by RETIRING or otherwise deciding against taking or seeking work for pay (DROPPING OUT)
4) those who have never worked or looked for a job expand the labor force by ENTERING it, while those who have dropped out to do so by REENTERING the labor force.

Question 13

How do you calculate the labor force participation rate?

Answer 13

Labor force (divided by) the population

Question 14

The ratio of those unemployed to those in the labor force is the….?

Answer 14

Unemployment rate

-it is the most widely cited measure of labor market conditions

Question 15

When the unemployment rate is around 5% in the United States, the labor market is considered ….., indicating that jobs in general are plentiful and hard for employers to fill and most of those who are unemployed will find other work quickly.

Answer 15

Tight

To say it is tight can still mean that in some occupations or places the number of those seeking work exceeds the number of jobs available at the prevailing wage.

Question 16

When the unemployment rate is higher, 7 percent or above, the labor market is described as ….., in the sense that workers are abundant and jobs are relatively easy for employers to fill.

Answer 16

Loose

To say that the labor market is loose does not imply that no shortages can be found anywhere

Question 17

The actions of buyers and sellers in the labor market serve both to a……. and to set p….. for various kinds of labor.

Answer 17

Allocate, prices

Question 18

From a social perspective, these prices act as signals or incentives in the allocation process, a process that relies primarily on i……… And v…….. Decisions

Answer 18

Individual and voluntary

Question 19

1) Wage rate
2) nominal wage
3) real wages

Answer 19

1) Price of labor per working hour

2) what workers get paid per hour in current dollars
- most useful in comparing the pay of various workers at a given time

3) nominal wages divided by some measure of prices, suggest how much can be purchased with workers nominal wages
- if a worker earns $64 daily, and a pair of shoes costs $32, we could say the worker earns the equivalent of two pairs of shoes a day
- real wage = $64/$32=2
- useful in calculating purchasing power of individuals overtime when both nominal wages and product prices are changing
- a method of accounting for price inflation must be used in calculating real wages

Question 20

The most widely used measure for comparing the prices consumers face over several years is the…?

Answer 20

Consumer Price Index (CPI)

Question 21

There are several ways to calculate real wages.

The most straight forward way is to divide the nominal wage by…..?

Answer 21

The CPI for each year and multiply by 100

Or you could multiply each years nominal wage rate by the price increase between two different years.

Question 22

A debate exists on whether real-wage calculations based on the CPI are accurate indicators of changes in the purchasing power of an hour of work for the ordinary American.

The issues center on two problems associated with using a fixed bundle of goods and services to compare prices from year to year.

1) consumers c….. The bundle of goods and services they actually buy over time, partly in response to changes in prices
2) (more difficult issue) the q…… Of goods and services

Answer 22

1) consumers change The bundle of goods and services they actually buy over time, partly in response to changes in prices
- price of beef rises, won’t buy beef, will buy chicken because it’s least expensive.
- pricing a fixed bundle may underestimate the purchasing power of current dollars because it assumes that consumers still purchase former quantities of beef

2) (more difficult issue) the quality Of goods and services
- hospital costs could rise because of new technology, reflecting availability of new services or quality improvements… Not s reduction in the purchasing power

**because of these problems economists estimate that the CPI has overestimated inflation by as much as 1% per year

Question 23

Payments received by workers who are paid on a salaried basis (monthly) rather than on an hourly basis.

Payment for a unit of time

Answer 23

Wages

Question 24

Wages multiplied by the number of time units (typically hours) worked.

Answer 24

Earnings

Depend on both wages and the length of time the employee works

Question 25

Both wages and earnings are normally defined and measured in terms of direct m……. P……. To e……..

Answer 25

Direct Monetary payments to employees

(Before taxes for which the employee is liable

Question 26

Consists of earnings plus employee benefits

Answer 26

Total compensation

Question 27

Benefits that are either payments in kind or deferred

Answer 27

Employee benefits

Question 28

Employer-provided health care and health insurance, wherein the employee receives a service or an insurance policy rather than money

Paid vacation time is in this category too because employees are given days off instead of cash

Answer 28

Payments in kind

Employee benefits

Question 29

Employer-financed retirement benefits, including social security taxes, for which employers set aside money now that enables their employees to receive pensions later

Answer 29

Deferred payments

Employee benefits

Question 30

The total command over resources of a person or family during some time period (usually a year)

Includes earnings, benefits, and unearned income

Answer 30

Income

Question 31

Dividends or interest received on investments and transfer payments received from the government in the form of food stamps, welfare payments, unemployment compensation, and the like.

Answer 31

Unearned income

Question 32

Wage rate X units of time worked = ?

Plus employee benefits = ?

Plus unearned income = ?

Answer 32

Earnings

Total compensation

Income

Question 33

The labor market is one of three markets in which firms must successfully operate if they are to survive

The other two are?

Answer 33

Capital markets and the product market

• the labor and capital markets are the major ones in which firms inputs are purchased, and the product market is the one in which output is sold
• a firm may deal in many different labor, capital, or product markets simultaneously

Question 34

Study of the labor market begins and ends with an analysis of the d….. for and s….. of labor

Answer 34

Demand, supply

On the demand side of the labor market are employers, whose decisions about the hiring of labor are influenced by conditions in all three markets

On the supply side of the labor market are workers and potential workers, whose decisions about where (and whether) to work must take into account their other options for how to spend time.

Question 35

The major labor market outcomes are related to:

1) wages, compensation levels, working conditions (t…. Of e………)
2) L….. Of e………

Answer 35

Terms of employment

And

Levels of employment