Labour Market

Question 1

What do Kuhn and Mansour say about IJS (Employment)?

Answer 1

• Re-employed 25% faster (2005-08) [Slower beforehand by 0.3 months]
• But, people are more likely to enter a non-beneficial market (less allocative efficiency)
• Weak correlation between wage growth and IJS

Question 2

What does the MRU say about Frictional Unemployment?

Answer 2

• Short-term unemployment due to difficulties moving jobs
• NET number of people joining and leaving a job is hidden by sheer volume of trades
• Movement of resources to low value sectors to high value sectors
• Frictional Unemployment is needed for change and growth

Question 3

What does Autor say about “Wiring the Labour Market”?

Answer 3

• There are challenges to forecasting how workers will behave with jobs
• More so than ever before because of the Internet; affects finding a job, the Demand for Labour and delivery of the job
• Gains are non-linear and realising them presents their issues (Problematic Institutions)

Question 4

What does the MRU say about whether Trade Unions increase wage rates?

Answer 4

• Not for every worker, but they can raise it for some
• By restricting labour supply, this pushes the wage rate up
• However, this leads to greater real-wage unemployment
• This can make people move to lower-paying jobs and hinder long-term Economic Growth- meaning lower overall wage rates all told
• Unions help workers in other fashions, which should be more of a priority

Question 5

What does the MRU say about choosing the right job?

Answer 5

• People with degrees do not have high unemployment, but they experience skill mismatch
• Changes in the Labour Market have held wages down for the lower end of society, but increased wages at the top end
• Finishing a degree is no longer enough for a high paying job

Question 6

Explain the Wage-Offer Distribution and why people may not always take the most optimal wage rate

Answer 6

• Takes the form of a normal; distribution curve
• The unemployed know the shape of the curve and their optimal wage rate (x)
• However, they do not know what the future holds, as searching takes time and money
• MU = MC for consumers, hence when these two are equal, the worker will accept the wage rate

Question 7

What are the theories of discrimination?

Answer 7

• Customer Discrimination
• Employer Discrimination
• Statistical Discrimination