Micro: Ch 15 16 17

Provide information about job vacancies to speed up the matching of workers with jobs

§aim to equip workers displaced from declining industries with the skills needed in growing industries.

A govt program that partially protects workers’ incomes when they become unemployed
UI increases frictional unemployment.

UI benefits end when a worker takes a job,
so workers have less incentive to search or
take jobs while eligible to receive benefits

§Reduces uncertainty over incomes §Gives the unemployed more time to search, resulting in better job matches and thus higher productivity

Structural unemployment
occurs when not enough jobs to
go around.
Occurs when wage
is kept above eq’m.
There are three reasons for this:

§The min. wage may exceed the eq’m wage
for the least skilled or experienced workers, causing structural unemployment. §But this group is a small part of the labor force, so the min. wage can’t explain most unemployment.

§a worker association that bargains with employers over wages, benefits, and working conditions §Unions exert their market power to negotiate higher wages for workers. §The typical union worker earns 20% higher wages and gets more benefits than a nonunion worker for the same type of work. §When unions raise the wage above eq’m, quantity of labor demanded falls and unemployment results.

§workers who remain employed,
are better off

§workers who lose their jobs,
are worse off
§Some outsiders go to non-unionized labor markets, which increases labor supply and reduces wages in those markets.

§Unions are cartels. They raise wages above eq’m, which causes unemployment and/or depresses wages in non-union labor markets.

Advocates:
Unions counter the market power of large firms, make firms more responsive to workers’ concerns

§The theory of efficiency wages:
Firms voluntarily pay above-equilibrium wages to boost worker productivity. §Different versions of efficiency wage theory suggest different reasons why firms pay high wages.

Worker health
In less developed countries, poor nutrition is a common problem. Paying higher wages allows workers to eat better, makes them healthier, more productive.

2. Worker turnover
Hiring & training new workers is costly.
Paying high wages gives workers more incentive to stay, reduces turnover