This document summarizes key concepts relating to the labor market and determination of unemployment rates and wages. It discusses:
1) Definitions of labor force, employment, unemployment, and alternative labor market statistics.
2) Factors that influence unemployment rates and wages, including bargaining power, efficiency wages, expected price levels, and labor market conditions.
3) The concept of a "natural rate of unemployment" which occurs at the equilibrium where the real wage chosen in wage setting equals the real wage implied by price setting. This rate depends on factors like unemployment benefits and market competition.
In Macroeconomics Income and Employment are interchangeable terms, since in the short-run National income depends on the total volume of employment or economic activity in the country. As income and employment are synonymous the employment theory is also called income theory.
It should be clear to readers that the classical economists did not formulate any specific theory of employment as such. They only laid down certain postulates which subsequently developed as a theory.
In Macroeconomics Income and Employment are interchangeable terms, since in the short-run National income depends on the total volume of employment or economic activity in the country. As income and employment are synonymous the employment theory is also called income theory.
It should be clear to readers that the classical economists did not formulate any specific theory of employment as such. They only laid down certain postulates which subsequently developed as a theory.
Wage theories - compensation management - Manu Melwin Joymanumelwin
Classical economists argue that wages—the price of labor—are determined (like all prices) by supply and demand. They call this the market theory of wage determination.
Market theory – wage theories - compensation management - Manu Melwin Joymanumelwin
Classical economists argue that wages—the price of labor—are determined (like all prices) by supply and demand. They call this the market theory of wage determination.
Wage theories - compensation management - Manu Melwin Joymanumelwin
Classical economists argue that wages—the price of labor—are determined (like all prices) by supply and demand. They call this the market theory of wage determination.
Market theory – wage theories - compensation management - Manu Melwin Joymanumelwin
Classical economists argue that wages—the price of labor—are determined (like all prices) by supply and demand. They call this the market theory of wage determination.
Running Head: Response ! 1
Final Project
by Julia Fernandez
Professor Heeyoung Kim
Rider University
August 6, 2018.
Running Head: Response ! 2
Background:
Manufacturing sector of USA is considered as the backbone of economy. This sector
contributes a lot in earning foreign exchange and maintaining the GDP of the company. As it also
plays an important role in inflation. If the goods that are produced under this sector sell in the
market at a reasonable price than keeps stability in economy and if the products are sell at high
prices than inflation arise that leads to create disability in the country. As we know that United
States is renowned for its high quality manufacturing products (Timothy E. Zimmer, 2017).
Therefore, US exported billion dollar products every year. It contributes a lot in earning foreign
exchange that keep the reserves of country always high. Hence, the role of manufacturing sector
plays a significant role in the development and progress of country towards prosperity.
Description of problem:
The problems that is intended to explore in this report is that, “how the expenditure of the
manufacturing companies are affected by number of employees and its productivity”. As we
know that these manufacturing sector are capital intensive and labor intensive companies that
require a lot of money and man power to operated (census.gov, 2016). Hence, every
manufacturing company struggles that how they can lower their expenditure are kept low by
increasing the productivity of employees. Thus, this relationship is investigated in this report. If
the companies are successful in lowering their expenses that they will be able to earn high profits
that benefits the company and country as well.
Why this topic interests me?
Running Head: Response ! 3
There are many reason due to which I select this sector as this is the biggest sector of
United States and my core interest is in the exploration of this sector. I want to explore those
variables that contributes in the success of manufacturing sector. Moreover, I want to explore
that whether number of employees have a direct impact on the productivity of company and on
expenditure as well. This research will help in promoting growth in this sector.
Methodology:
The methodology that is selected to investigate this topic is, data about the manufacturing
companies of United States is excessed through the US census that is the latest census which was
conducted in 2016.
Study unit:
The unit of study is the main body that is being analyzed in this study. In this study the
unit of analysis is the manu ...
October 15, 2006Federal Reserve Bank of ClevelandUnder.docxcherishwinsland
October 15, 2006
Federal Reserve Bank of Cleveland
Understanding Unemployment
by Guillaume Rocheteau
ISSN 0428-1276
Modern economists have built models
of the labor market, which isolate the
market’s key drivers and describe
the way these interact to produce
particular levels of unemployment.
One of the most popular models used
by macroeconomists today is the
search-matching model of equilibrium
unemployment. We explain this model,
and show how it can be applied to
understand the way various policies,
such as unemployment benefits, taxes,
or technological changes, can affect the
unemployment rate.
Adisturbing feature of the labor mar-
ket is its seeming inability to clear. At
each instant in time, there are both
workers without jobs and jobs without
workers. How can it be that productive
resources are left unemployed in a well-
functioning market economy?
Economists attribute the failure of the
labor market to instantly allocate work-
ers to jobs to various “frictions.” These
frictions arise because labor, unlike gold
or oil, is not a homogenous commodity.
The services provided by a plumber are
different from those provided by a
lawyer—and even lawyers differ in the
services they offer; some specialize in
constitutional law, others in private law.
To match jobs and workers is far from a
trivial problem. The heterogeneity of
labor services also makes it hard for
employers to distinguish productive
from unproductive workers. And to
complicate things even more, the mere
process of moving labor services from
one job to another is not costless.
Over the past 25 years, economists have
developed a theory of the labor market
that takes into account the heterogeneity
of labor services and that describes the
matching process of workers and firms.
The theory, sometimes called the search-
matching theory of unemployment, is the
description that most economists have in
the back of their mind when thinking
about the labor market. In this Commen-
tary, we review this theory and show
how it can be applied to address several
issues related to unemployment.
■ Three Building Blocks for a
Theory of Unemployment
The search model of unemployment
contains three elements. Each element
characterizes a different aspect of the
labor market, and the three elements
together determine the behavior of the
overall labor market. The first element
describes how wages are set. The second
determines the number of vacancies that
firms decide to open, and the third
describes the process through which
unemployed workers and vacancies are
brought together, that is, the process of
creating jobs.
Setting Wages
Not all labor markets work the same, but
in many, wages are determined through a
bargaining process between workers and
their employers. The outcome of the bar-
gaining process depends on two things:
the bargaining power of each party and
the outside options of each. The party
with the most bargaining power—the
worker or the firm—is the one that can
extract a l.
We study experimental design in large-scale stochastic systems with substantial uncertainty and structured cross-unit interference. We consider the problem of a platform that seeks to optimize supply-side payments p in a centralized marketplace where different suppliers interact via their effects on the overall supply-demand equilibrium, and propose a class of local experimentation schemes that can be used to optimize these payments without perturbing the overall market equilibrium. We show that, as the system size grows, our scheme can estimate the gradient of the platform’s utility with respect to p while perturbing the overall market equilibrium by only a vanishingly small amount. We can then use these gradient estimates to optimize p via any stochastic first-order optimization method. These results stem from the insight that, while the system involves a large number of interacting units, any interference can only be channeled through a small number of key statistics, and this structure allows us to accurately predict feedback effects that arise from global system changes using only information collected while remaining in equilibrium.
Economics selection wages and discriminationtondion
a thorough analysis of the relationships between wages, workforce and productivity - issues of how to cope with discrimination related to various categories of workers
The Roman Empire A Historical Colossus.pdfkaushalkr1407
The Roman Empire, a vast and enduring power, stands as one of history's most remarkable civilizations, leaving an indelible imprint on the world. It emerged from the Roman Republic, transitioning into an imperial powerhouse under the leadership of Augustus Caesar in 27 BCE. This transformation marked the beginning of an era defined by unprecedented territorial expansion, architectural marvels, and profound cultural influence.
The empire's roots lie in the city of Rome, founded, according to legend, by Romulus in 753 BCE. Over centuries, Rome evolved from a small settlement to a formidable republic, characterized by a complex political system with elected officials and checks on power. However, internal strife, class conflicts, and military ambitions paved the way for the end of the Republic. Julius Caesar’s dictatorship and subsequent assassination in 44 BCE created a power vacuum, leading to a civil war. Octavian, later Augustus, emerged victorious, heralding the Roman Empire’s birth.
Under Augustus, the empire experienced the Pax Romana, a 200-year period of relative peace and stability. Augustus reformed the military, established efficient administrative systems, and initiated grand construction projects. The empire's borders expanded, encompassing territories from Britain to Egypt and from Spain to the Euphrates. Roman legions, renowned for their discipline and engineering prowess, secured and maintained these vast territories, building roads, fortifications, and cities that facilitated control and integration.
The Roman Empire’s society was hierarchical, with a rigid class system. At the top were the patricians, wealthy elites who held significant political power. Below them were the plebeians, free citizens with limited political influence, and the vast numbers of slaves who formed the backbone of the economy. The family unit was central, governed by the paterfamilias, the male head who held absolute authority.
Culturally, the Romans were eclectic, absorbing and adapting elements from the civilizations they encountered, particularly the Greeks. Roman art, literature, and philosophy reflected this synthesis, creating a rich cultural tapestry. Latin, the Roman language, became the lingua franca of the Western world, influencing numerous modern languages.
Roman architecture and engineering achievements were monumental. They perfected the arch, vault, and dome, constructing enduring structures like the Colosseum, Pantheon, and aqueducts. These engineering marvels not only showcased Roman ingenuity but also served practical purposes, from public entertainment to water supply.
How to Create Map Views in the Odoo 17 ERPCeline George
The map views are useful for providing a geographical representation of data. They allow users to visualize and analyze the data in a more intuitive manner.
Read| The latest issue of The Challenger is here! We are thrilled to announce that our school paper has qualified for the NATIONAL SCHOOLS PRESS CONFERENCE (NSPC) 2024. Thank you for your unwavering support and trust. Dive into the stories that made us stand out!
This is a presentation by Dada Robert in a Your Skill Boost masterclass organised by the Excellence Foundation for South Sudan (EFSS) on Saturday, the 25th and Sunday, the 26th of May 2024.
He discussed the concept of quality improvement, emphasizing its applicability to various aspects of life, including personal, project, and program improvements. He defined quality as doing the right thing at the right time in the right way to achieve the best possible results and discussed the concept of the "gap" between what we know and what we do, and how this gap represents the areas we need to improve. He explained the scientific approach to quality improvement, which involves systematic performance analysis, testing and learning, and implementing change ideas. He also highlighted the importance of client focus and a team approach to quality improvement.
How to Split Bills in the Odoo 17 POS ModuleCeline George
Bills have a main role in point of sale procedure. It will help to track sales, handling payments and giving receipts to customers. Bill splitting also has an important role in POS. For example, If some friends come together for dinner and if they want to divide the bill then it is possible by POS bill splitting. This slide will show how to split bills in odoo 17 POS.
Students, digital devices and success - Andreas Schleicher - 27 May 2024..pptxEduSkills OECD
Andreas Schleicher presents at the OECD webinar ‘Digital devices in schools: detrimental distraction or secret to success?’ on 27 May 2024. The presentation was based on findings from PISA 2022 results and the webinar helped launch the PISA in Focus ‘Managing screen time: How to protect and equip students against distraction’ https://www.oecd-ilibrary.org/education/managing-screen-time_7c225af4-en and the OECD Education Policy Perspective ‘Students, digital devices and success’ can be found here - https://oe.cd/il/5yV
The Indian economy is classified into different sectors to simplify the analysis and understanding of economic activities. For Class 10, it's essential to grasp the sectors of the Indian economy, understand their characteristics, and recognize their importance. This guide will provide detailed notes on the Sectors of the Indian Economy Class 10, using specific long-tail keywords to enhance comprehension.
For more information, visit-www.vavaclasses.com
The Art Pastor's Guide to Sabbath | Steve ThomasonSteve Thomason
What is the purpose of the Sabbath Law in the Torah. It is interesting to compare how the context of the law shifts from Exodus to Deuteronomy. Who gets to rest, and why?
The Art Pastor's Guide to Sabbath | Steve Thomason
Ch.6.pdf
1. Econ105A, Dongwon Lee
1
Lecture 5: Ch.6 The Labor Market
6.0 Transition from the Short-Run to the Medium-Run
• The price level P is “fixed” in the IS-LM model, which is thus called a short-run
macroeconomic model. We now move toward the medium run, at which inflation and
unemployment are determined.
6.1 A Tour of the Labor Market
• (Adult) Population = Labor force + Out of the labor force
• Labor force = # of employed + # of unemployed
• Unemployment rate (u) =
# ୭ ୬ୣ୫୮୪୭୷ୣୢ
# ୭ ୟୠ୭୰ ୭୰ୡୣ
× 100
2. Econ105A, Dongwon Lee
2
• Unemployment rate (u) is not the best estimate of the number of people available for work
because it excludes discouraged workers that are classified as “out of the labor force”.
• Alternative labor market statistics:
Participation rate =
ୟୠ୭୰ ୭୰ୡୣ
୭୮୳୪ୟ୲୧୭୬
× 100
Non-employment rate =
୭୮୳୪ୟ୲୧୭୬ି୫୮୪୭୷୫ୣ୬୲
୭୮୳୪ୟ୲୧୭୬
× 100
4. Econ105A, Dongwon Lee
4
6.2 Movements in Unemployment
• The fluctuations in the unemployment rate affect i) workers’ welfare and ii) wages.
• Higher unemployment is associated with both a lower chance of finding a job if a person is
unemployed and a higher chance of losing it if a person is already employed.
• Movements in the U.S. Unemployment Rate between 1948 and 2010
5. Econ105A, Dongwon Lee
5
• Unemployment Rate and the Proportion of Unemployed Finding Jobs, 1994-2010
(Note: The scale on the right is an inverse scale.)
6. Econ105A, Dongwon Lee
6
• Unemployment Rate and Monthly Separation Rate from Employment, 1994-2010
(Note: Separations = Quits + Layoffs)
7. Econ105A, Dongwon Lee
7
6.3 Wage Determination
• Common forces at work in the determination of wages include:
1) Reservation wage: making workers indifferent b/w working or being unemployed
2) Labor market conditions: The lower the unemployment rate (u), the higher the wages.
• Economists have focused on two broad lines of explanation:
i) bargaining power and ii) efficiency wages.
6.3.1 Bargaining
• How much bargaining power a worker has depends on two factors:
1) How costly it would be for the firm to replace him (the nature of the job), and
2) How hard it would be for him to find another job (labor market conditions).
• When the unemployment rate is low, it is more difficult for firms to find acceptable
replacement workers. At the same time, it is easier for workers to find other jobs.
8. Econ105A, Dongwon Lee
8
6.3.2 Efficiency Wages
• According to the theory of efficiency wages, firms want to pay more than the reservation
wage regardless of workers’ bargaining power. Why?
1) Paying high wages gives workers more incentive to stay, reducing turnover.
2) Offering higher wages attracts better job applicants, increasing quality of firm workforce.
3) Workers with high wages have more incentive to work, not shirk, increasing productivity.
6.3.3 Wages, Prices, and Unemployment
• Consider the following equation for the nominal wage:
ܹ = ܲ
ܨሺ,ݑ ݖሻ,
(−,+)
where W is the nominal wage, Pe
is the expected price level, u is the unemployment rate
and z is a catchall variable that includes all other variables that may affect the nominal wage.
9. Econ105A, Dongwon Lee
9
• Why does the expected price level Pe
matter (not the actual price level P)?
• Why does the unemployment rate u matter?
• What are the other factors z? One example is unemployment insurance. If there is no
unemployment insurance, then you would be willing to accept very low wages to avoid
being unemployed. Other examples of z include the minimum wage.
6.4 Price Determination
The prices set by firms depend on the costs they face. These costs depend, in turn, on the
nature of the production function.
• Assuming that firms produce goods using labor only, the production can be written as:
Y = AN,
where Y is output, A is labor productivity and N is employment level. Let’s normalize A = 1.
This means that one worker produces one unit of output. Then the production function
10. Econ105A, Dongwon Lee
10
becomes:
Y = N
• What will be the price level P if the firms are in a perfectly competitive market? Firms set
their price according to the zero-profit condition, P = W, where W is wage.
• What will be the price level P if the firms are not in a competitive market? Firms set their
price according to
P = (1 + m)W,
where m is the markup of the price over the cost.
• In general, m > 0 due to market imperfection and firms’ market power.
11. Econ105A, Dongwon Lee
11
6.5 The Natural Rate of Unemployment
• Let’s now look at the implications of wage and price determination for unemployment. For
now, assume that expected price level is the same as the actual price level (Pe
=P ) to
simplify the matter. Then, we have
ܹ
ܲ
= ܨሺ,ݑ ݖሻ ∶ ܖܗܑܜ܉ܔ܍ܚ ܁܅
• This is a condition for a real wage setting; people care about real wages (W/P) because they
do not care about how many dollars they receive but about how many goods they can buy
with those dollars.
• Wage-setting (WS) relation tells us that the real wage
ௐ
decreases with unemployment
rate u and increases with other factors z.
12. Econ105A, Dongwon Lee
12
• From the price-determination equation P = (1 + m)W, we can derive
ܹ
ܲ
=
1
ሺ1 + ݉ሻ
∶ ܖܗܑܜ܉ܔ܍ܚ ܁۾
• Price-setting (PS) relation determines the real wage paid by firms.
• Equilibrium in the labor market is achieved
when the real wage chosen in wage setting
is equal to the real wage implied by price
setting.
13. Econ105A, Dongwon Lee
13
• The equilibrium condition can be written as
ܨሺݑ, ݖሻ =
1
1 + ݉
where un is the unemployment rate at which the labor market is in equilibrium.
• We call un the natural rate of unemployment.
• un depends on both z and m. See the next page for examples.
14. Econ105A, Dongwon Lee
14
Example 1
1) What is the effect of an increase in unemployment benefits on the real wage and on the
natural rate of unemployment?
2) Consider a less stringent enforcement of antitrust legislation that causes markets to become
less competitive. What will happen to the real wage and to the natural rate of
unemployment?
15. Econ105A, Dongwon Lee
15
• Because the equilibrium rate of unemployment reflects the structure of the economy, a
better name for the natural rate of unemployment is the structural rate of unemployment.
• Labor market equilibrium in terms of the natural level of output
Let U denote unemployment, N denote employment, and L the labor force, then
ݑ ≡
ܷ
ܮ
=
ܮ − ܰ
ܮ
= 1 −
ܰ
ܮ
From this result, we can define the natural level of employment as
ܰ = ܮሺ1 − ݑሻ
Likewise, since Y = N (from our earlier assumption), we have the natural level of output
ܻ = ܰ = ܮሺ1 − ݑሻ
Finally, we can write the labor market equilibrium condition in terms of the natural level of
output:
ܨሺݑ, ݖሻ =
1
1 + ݉
→ ܨ ൬1 −
ܻ
ܮ
, ݖ൰ =
1
1 + ݉
16. Econ105A, Dongwon Lee
16
Practice Problem
1. Use the WS and PS relations to examine the effects of the following events on the natural
rate of unemployment and on the real wage. Be sure to explain the effects of the event on
the WS and PS relations.
a. reduction in unemployment insurance
b. more stringent antitrust legislation
c. increase in the minimum wage