Bài giảng Macroeconomics - Chapter 13: Wages and Unemployment

Chapter 13: Wages and UnemploymentDiscuss the four important trends that have characterized labor markets in the U.S. since 1960Apply a supply-and-demand model to understand the labor marketExplain how changes in the supply of and demand for labor explain trends in real wages and employment since 1960Define and calculate the unemployment rate and the participation rateDifferentiate among the three types of unemployment and the costs associated with eachIncreasing Real WagesSlower Growth Rate Since 1973Increased Wage Inequality in USIncreasing Unemployment in the USUnemployment in Western EuropeFive Important Labor Market TrendsThe Labor MarketSupply and demand analysis can be used to find the price of labor (real wages) and the quantity (employment)Analysis will consider the number of workers employed, not work-hours per yearLabor market is an input marketFirms buy labor to produce goods and servicesMacroeconomics look at aggregate levels of employment and real wagesMicroeconomics looks at wage determination for a category of workersWages and Demand for LaborThe demand for labor depends upon:The productivity of workersGreater productivity increases employmentThe price of the worker’s outputA higher real price increases employmentDiminishing returns to labor Assumes non-labor inputs are held constantAdding one worker increases output but by less than the previous worker addedValue of Marginal Product (VMP) is extra revenue that an added worker generatesShifting Demand for LaborDemand shifts when the value of the marginal product of a worker changesTwo factors determine the demand (VMP) for laborThe price of the company’s outputAn increase in market demandThe productivity of the workersGreater quantity of non-labor inputsOrganizational changeTraining and educationHigher ProductivityIncreases in productivity increase VMPDemand curve shifts rightEmployers hire more workers at any given wageEmploymentReal WageLabor Demand(before productivity increase)Labor Demand(after productivityincrease)Individual Labor SupplyReservation wage is the lowest wage a worker would accept for a given jobOpportunity cost of working is your leisure activityWork compensates you for lost leisureIf working conditions are unpleasant or dangerous, a premium for that would be included in the wageCost – Benefit Principle at workAggregate Labor SupplyMacroeconomic determinants of labor supplySize of the working age populationDomestic birthrateImmigration and emigrationAges when people enter and retire from the workforceShare of working-age population willing to workThe Supply of LaborEmploymentReal WageLabor SupplyThe labor supply curve slopes up because at a higher real wage, more people are willing to workTrend 1: Increasing Real WagesIndustrialized countries have had sustained growth in productivity in the 20th centuryIncreases demand for laborBoth real wages and employment increasedProductivity increases were due toTechnological progressIncreases in capital EmploymentReal WageSDWNW'N'D'Trend 2: Slower Wage Growth Since 1970Slower growth in real wages could be either Slower growth in demand for labor ORFaster growth in the supply of laborProductivity growth and real wages move togetherSlower demand growth explains slower wage growthDoes not explain rapid growth in employmentSupply of labor must have increased as wellIncreased participation by women, Baby Boom, high rates of immigrationLooking forward, labor supply growth will slowPartly depends on whether productivity growth continuesTrend 3: Increased Wage Inequality in USGlobalization results in an expansion of many markets to worldwide supplyIncreasing ease of goods and services crossing national bordersBenefit of globalization is increased specialization and efficiencyPrinciple of Comparative AdvantageGlobalization also means that some goods produced domestically are no longer competitiveSome domestic sectors shrinkWhen wages in importing industries fall and wages in exporting industries rise, wage inequality increasesLow-skill industries in the US face the toughest international competitionPolitical resistance to free trade growsWorker mobility is the movement of workers between jobs, firms, and industriesMarket incentives move workers out of textiles and into softwareTransition aid by government can assist workers to make the changeTrend 3: Increased Wage Inequality in USTrend 3: Increased Wage Inequality in USTechnological change can be a source of increasing wage inequalityOccurs if technical change favors higher-skilled or better-educated workersSome innovation renders old skills less valuableAddition and the calculator and computerSkill-biased technological change affects the marginal products of higher skilled workers differently from those of lower-skilled workersRecent changes favor higher skilled workersAutomobile production lines increasingly use robotsTypes of UnemploymentFrictional unemployment occurs when workers are between jobsShort duration, low economic costMay increase economic efficiencyCyclical unemployment is the increase in unemployment during economic slow-downsUsually short durationEconomic cost is the decline in real GDPStructural unemployment is long-term, chronic unemployment in a well-functioning economyLack of skills, language barriers, or discriminationStructural shifts in production create a long-term mismatch between workers and market needsBarriers to employment such as minimum wages, unions, and unemployment insuranceHigh economic, psychological, and social costsStructural Barriers to EmploymentUnemployment insurance are government transfers to unemployed workersHelps to reduce the costs of unemploymentMay give the unemployed an incentive to search longer and less intenselyTo work efficiently, unemployment benefits should beFor a limited time and less than the income received when working Other Government RegulationsHealth and safety regulations can reduce the demand for labor by increasing employer costs and reducing productivityThe reduction in demand will increase unemployment and lower wages