Addison Wesley Longman, Inc. © 2000 Chapter 2 Overview of The Labor Market

Addison Wesley Longman, Inc. © 2000 Labor Force Status of the U.S. Adult Population, 1994Figure 2.1

Addison Wesley Longman, Inc. © 2000 Unemployment Rate = Unemployed/Labor Force Labor Force Participation Rate = Labor Force/Population

Addison Wesley Longman, Inc. © 2000 Unemployment Rates for the Civilian Labor Force, Figure 2.2

Addison Wesley Longman, Inc. © 2000 Employment Distribution by Major Industrial Sector, Figure 2.3

Addison Wesley Longman, Inc. © 2000 Relationship between Wages, Earnings, Compensations, and Income Figure 2.4

Addison Wesley Longman, Inc. © 2000 The Markets in Which Firms Must OperateFigure 2.5

Addison Wesley Longman, Inc. © 2000 LABOR DEMAND

Addison Wesley Longman, Inc. © 2000 Labor Demand Curve (based on data in Table 2.3)Figure 2.6

Addison Wesley Longman, Inc. © 2000 Shift in Demand for Labor Due to Increase in Product DemandFigure 2.7

Addison Wesley Longman, Inc. © 2000 Shifters of Demand Product Demand Prices of Substitutes and Complements Expectations Not Wages!!

Addison Wesley Longman, Inc. © 2000 Wages Rise/Employment Falls Scale Effect –Costs rise –Prices rise –Sell less of the product –Need fewer workers Substitution Effect –Switch to capital –Need fewer workers

Addison Wesley Longman, Inc. © 2000 Possible Shifts in Demand for Labor Due to Fall in Capital PricesFigure 2.8

Addison Wesley Longman, Inc. © 2000 Different Labor Markets Market – demand for attorneys Industry – university demand for law professors Firm – U of A demand for law profs. These are all affected by wages differently These all affect wages differently

Addison Wesley Longman, Inc. © 2000 LABOR SUPPLY

Addison Wesley Longman, Inc. © 2000 Market Supply Curve for SecretariesFigure 2.9

Addison Wesley Longman, Inc. © 2000 Shifters of Supply Wages in other professions Economy Population Costs/barriers such as education

Addison Wesley Longman, Inc. © 2000 Shift in Market Supply Curve for Secretaries As Salaries of Insurance Agents Rise Figure 2.10

Addison Wesley Longman, Inc. © 2000 Supply of Secretaries to a Firm at Alternative Market Wages (More Elastic) Figure 2.11

Addison Wesley Longman, Inc. © 2000 Market Demand and SupplyFigure 2.12

Addison Wesley Longman, Inc. © 2000 Demand and Supply at the “Market” and “Firm” LevelFigure 2.13

Addison Wesley Longman, Inc. © 2000 New Labor Market Equilibrium After Demand Shifts RightFigure 2.14

Addison Wesley Longman, Inc. © 2000 New Labor Market Equilibrium After Supply Shifts LeftFigure 2.15

Addison Wesley Longman, Inc. © 2000 New Labor Market Equilibrium After Supply Shifts RightFigure 2.16

Addison Wesley Longman, Inc. © 2000 New Labor Market Equilibrium After Supply and Demand Shift Left Figure 2.17

Addison Wesley Longman, Inc. © 2000 Effects on Labor Market Equilibrium of Industrywide UnionsFigure 2.18

Addison Wesley Longman, Inc. © 2000 How Unions That Control Supply of Labor to a Market Affect Labor Market Equilibrium Figure 2.19