week 3 Flashcards
real wage
- nominal wage measured relative to the general price level
increase in goods relative price
- price of computers increase
- value of marginal product of labour increases
- firm is able to hire more workers and earn profits
- graph shifts to the right
labour supply curve
- higher real wage
- greater you are willingly to supply labour
- real wage is the opportunity cost of leisure and rewards to working
shifts in the supply of labour
- australia’s pension reform of postponing retirement age
- > increase labour supply
- factors which lead to changes in the share of working-age population
increase in productivity
- raises real wage
- demand curve goes to the right
- real wage increases and goes up, relative to supply curve
increasing wage inequality
- wages of less skilled and less educated have fallen further behind those of better trained workers
- sectoral shift
- globalisation
- technological change
sectoral shift
- boom in investment -> increase in demand for labour
- causes demand for labour shift right
globalisation and demand for workers
- wages in 2 industries are equal
- increase inports cause domestic production to lower wages and employment
- the exporting industry increases, raising wages and employment
why unemployment is a problem
- lost incomes and production
- lost human capital
- not everyone receives unemployment benefits
measuring unemployment
- employed = have a job
- unemployed = who do not currently have a job but are actively looking for work
- labour force = employed + unemployed
unemployment rate
- number of ppl employed / labor force * 100
eg. 12mil in labour force
0. 6 mil unemployed
= 5% unemployment
labour force participation rate
labour force / working age population
- eg. 12mil, working age 18.3
65. 6 percent
natural rate of unemployment
- no cyclical unemployment
- frictional + structural
minimum wage laws
- reduction of wage prohibited by law
- unemployment last forever
- price floor
impediments to full employment
- labour unions
- > call a strike, causes production, sales, profits to decrease
- > higher wages accepted
marginal benefit
- value of additional worker’s marginal product
- > price of the good produced by the firm
- > workers marginal product
- -> how much production increases after an additional worker is hired
structural unemployment
unemployment that results from a mismatch between skill and desired skills by businesses
frictional unemployment
- arises from normal labor market turnover
- swapping of jobs
cyclical unemployment
- arises from when a worker is laid off because of a recession / economy not doing well
unemployment benefits
- give unemployed people more options
- increases time spent searching for an acceptable job
- increase their reservation wage
- should be set so that a) gives people more time to search but b) should not remove incentive to seek work actively