22. Unemployment from real wage rigidity If the real wage is stuck above the eq’m level, then there aren’t enough jobs to go around. Labor Real wage Supply Demand Unemployment Rigid real wage Amount of labor willing to work Amount of labor hired
23. Unemployment from real wage rigidity If the real wage is stuck above the eq’m level, then there aren’t enough jobs to go around. Then, firms must ration the scarce jobs among workers. Structural unemployment : the unemployment resulting from real wage rigidity and job rationing.
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28. Union membership and wage ratios by industry, 2001 RBU = nonunion workers represented by a union wage ratio = 100 (union + RBU wage)/(nonunion wage) slide 118.0 121.1 103.3 90.1 117.8 105.8 104.2 127.8 105.9 151.0 103.4 15.0% 41.8 6.8 2.8 5.0 5.9 23.7 25.4 15.5 19.0 12.9% 13.6% 37.4 5.9 2.1 4.5 5.5 22.6 24.1 14.6 18.4 12.3% 119,092 19,155 34,261 7,648 20,505 4,540 2,981 4,441 18,149 6,881 531 all government services fin, insu, and real est retail trade wholesale trade comm. and pub util transportation manufacturing construction mining wage ratio RBU % of total U % of total # employed (1000s) industry
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31. The duration of U.S. unemployment, average over 1993-2002 73.0% 30% 15 or more 20.5% 31% 5-14 6.5% 39% 1-4 amount of time these workers spent unemployed as % of total time all workers spent unemployed # of unemployed persons as % of total # of unemployed # of weeks unemployed
34. EXPLAINING THE TREND: The minimum wage The trend in the real minimum wage is similar to the behavior of the natural rate of unemployment.
35. EXPLAINING THE TREND: Union membership Since the early 1980s, the natural rate of unemploy-ment and union membership have both fallen. But, from 1950s to about 1980, the natural rate rose while union membership fell. 27% 1970 percent of labor force year 12% 1930 35% 1945 35% 1954 20.1% 1983 13.5% 2001 Union membership selected years
36. EXPLAINING THE TREND: Sectoral shifts Since mid-1980s, oil prices less volatile, so fewer sectoral shifts.
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38. The rise in European Unemployment 0 2 4 6 8 10 12
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Editor's Notes
Except for the material on economic growth (Chapters 7 and 8), this chapter completes our study of the economy’s behavior in the long run, when prices generally are flexible and markets clear.
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