Lecture 6 - CHAPTER 6 The Labor Market 1 of 35 6-3 2 of 35...

Info icon This preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
CHAPTER 6 The Labor Market 1 of 35
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Wage Determination 2 of 35 Common forces at work in the determination of Common forces at work in the determination of wages include: wages include: A tendency for the wage to exceed the reservation wage , or the wage that make them indifferent between working or becoming unemployed. Dependency of wages on labor market conditions. Lower unemployment the higher the wages. 6-3
Image of page 2
Bargaining How much bargaining power a worker has depends on two factors: How costly it would be for the firm to replace him —the nature of the job.  Ex: If costly, bargaining power of worker rises How hard it would be for worker to find another  job—labor market conditions. Ex: If unemployment rate rises bargaining power of  worker falls and bargaining power of firm  increases. 3 of 35
Image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Efficiency Wages Efficiency wage theories are theories that link the productivity or the efficiency of workers to the wage they are paid. These theories also suggest that wages depend on both the nature of the job and on labor-market conditions: Firms that see employee morale and commitment as  essential to the quality of their work, will pay more than  firms in sectors where workers’ activities are more  routine. Labor market conditions will affect the wage. High  unemployment=lower bargaining power of workers, lower  wages. Low unemployment=higher quits, higher  bargaining power of workers, high wages. 4 of 35
Image of page 4
Wages, Prices, and  Unemployment 5 of 35
Image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Wages, Prices, and  Unemployment The aggregate nominal wage, W , depends on three factors: The expected price level,  P e The unemployment rate,  u A catchall variable, z, that catches all other  variables that may affect the outcome of wage  setting.
Image of page 6
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern