1. Measures Relating to Labor Employment zThis chapter -- looks at measures relating to wages, labor productivity, and labor employment.

2. Measures of Labor Compensation zWages and Salaries -- Total amount of monetary payment received by labor for their services over a given year. zLabor Compensation -- Total wages, salaries, and benefits received by labor over a given year. zLabor Compensation – the precise measure of the cost of labor.

3. The Nominal Wage Rate zNominal Wage Rate (w) w = (Total Labor Compensation) (Total Labor Hours) zGrowth closely watched, high growth viewed as sign of potential inflation.

4. Labor Productivity Productivity = (Total Output) (Total Labor Hours) zSustained high growth viewed as potentially increasing the average standard of living without bringing on inflation.

5. Labor Employment Measures zRecall: definitions of Employed, Unemployed, and the Labor Force. zEmployment-Population Ratio = (Employed)/(Population 16 and Over) zLabor Force Participation Rate = (Labor Force)/(Population 16 and Over)

6. Is the Women’s Labor Movement For Real? zApplication -- Have women in the US steadily moved “out of the home” and into the workforce? And is it still going on? zTo investigate this question, consider the labor force participation rate (male and female).

7. US Labor Force Participation Rate (in %) Year Overall Male Female 1960 59.4 83.3 37.7 1970 60.4 79.7 43.3 1980 63.8 77.4 51.5 1990 66.5 76.4 57.5 1999 67.1 74.7 60.0 zSource: Economic Report of the President, February 2000.

8. A Return to The Unemployment Rate (u) u = (# of people unemployed) (total labor force) Does not measure -- discouraged workers -- part-time versus full-time employment -- people with multiple jobs

9. Types of Unemployment zTotal Unemployment = Frictional + Structural + Demand-Deficient zFrictional Unemployment -- Unemployment due to time involved to matching unemployed and appropriate jobs.

10. Structural and Demand- Deficient Unemployment zStructural Unemployment -- Unemployment due to a mismatch of available workers and jobs. zDemand-Deficient Unemployment -- Unemployment due to a generally sluggish economy. There are not enough jobs for everyone who wants one.

11. The Natural Rate of Unemployment Revisited zNatural Rate of Unemployment (u N ) -- The unemployment rate in which inflation has no tendency to accelerate or decelerate. zAnother Interpretation -- u N is the unemployment rate with zero demand-deficient unemployment. zEconomy at u N : “full employment”

12. Interpretation: u versus u N zu = u N  Desired Situation zu > u N  Sluggish Economy zu < u N  Inflationary Economy