1. Burda & WyploszMACROECONOMICS6 th edn Chapter 5 Labour Markets and Unemployment © Oxford University Press, 2012. All rights reserved.

2. Burda & WyploszMACROECONOMICS 6/e © Oxford University Press, 2012. All rights reserved. Figure 5.1: Household Preferences Household Preferences Fig. 5.1

3. Burda & WyploszMACROECONOMICS 6/e © Oxford University Press, 2012. All rights reserved. Figure 5.1 (a): Animation 1 (Indifference Curve) Houshold Preferences: A Household Indifference Curve Consumption 0 More leisure = less work pain gain Fig. 5.1 (a) Leisure Utility held constant

4. Burda & WyploszMACROECONOMICS 6/e © Oxford University Press, 2012. All rights reserved. Figure 5.1 (b): Animation 2 (Economic Intuition) ♦Slope. (<0) Substitution of leisure for consumption ♦Curve. Marginal rate of substitution is not constant. The less leisure you have, the less leisure you are willing to sacrifice for one more unit of consumption (holding utility constant). ♦Shift. Level of economic welfare (utility). Household Preferences: Economic Interpretation of the Geometry Fig. 5.1 (b)

5. Burda & WyploszMACROECONOMICS 6/e © Oxford University Press, 2012. All rights reserved. Figure 5.1 (c): Animation 3 (Higher/Lower Utility) Household Preferences Consumption 0 Higher utility Lower utility Fig. 5.1 (c) Leisure

6. Burda & WyploszMACROECONOMICS 6/e © Oxford University Press, 2012. All rights reserved. Figure 5.2: Budget Line and Choice Household Budget Line and Optimal Choice Fig. 5.2

7. Burda & WyploszMACROECONOMICS 6/e © Oxford University Press, 2012. All rights reserved. Figure 5.2 (b): Animation 2 (Tangency Condition) Consumption 0 B A Nice but we can’t afford it! We can do better than this! Fig. 5.2 (b) Leisure Highest attainable indifference curve is tangent to this budget constraint for those who work Budget Line and Choice: Tangency Condition

8. Burda & WyploszMACROECONOMICS 6/e © Oxford University Press, 2012. All rights reserved. Figure 5.2 (c): Animation 3 (Optimal Choice) Budget Line and Choice: Optimal Choice Consumption 0 R B A Work Consumption Leisure Fig. 5.2 (c) Leisure

9. Burda & WyploszMACROECONOMICS 6/e © Oxford University Press, 2012. All rights reserved. Figure 5.3: Wage Increase Reaction of the Household to a Wage Increase: Labour Supply Fig. 5.3

10. Burda & WyploszMACROECONOMICS 6/e © Oxford University Press, 2012. All rights reserved. Figure 5.3 (a): Animation 1 (Budget Line) Wage Increase: Effect on Budget Line Consumption 0 R B A R´ Fig. 5.3 (a) Leisure

11. Burda & WyploszMACROECONOMICS 6/e © Oxford University Press, 2012. All rights reserved. Table 5.1: Total Hours Worked and Real Wages Annual Total Hours Worked and Average Wages Table 5.1 Source: see text, p. 111 18701913193819731992200020072009 Annual hours worked per Person France29452588184820271695159115561558 Germany29412584231618701566147314301390 UK29842624226720161874171216731646 USA29642605206217971716173917091681 Sweden29452588220415641565164216181602 Real Wage (index: 1870=100) France10020533510481505161417141727 Germany1001852859441226132013091306 UK100157256439605691770767 USA100189325595696791860871 Sweden10027052112281523187421322085

12. Burda & WyploszMACROECONOMICS 6/e © Oxford University Press, 2012. All rights reserved. Figure 5.6: An Increase in Labour Productivity An Increase in Labour Productivity Fig. 5.6

13. Burda & WyploszMACROECONOMICS 6/e © Oxford University Press, 2012. All rights reserved. Figure 5.6 (a): Animation 1 (Labour Demand Shift) Real wage Labour Output (Y) Labour An Increase in Labour Productivity: Shift in Labour Demand MPL MPL´ Hold L constant Fig. 5.6 (a)

14. Burda & WyploszMACROECONOMICS 6/e © Oxford University Press, 2012. All rights reserved. Figure 5.8: Shifting Labour Demand and Supply Shifting Labour Demand and Supply Fig. 5.8

15. Burda & WyploszMACROECONOMICS 6/e © Oxford University Press, 2012. All rights reserved. Figure 5.8 (a): Animation 1 (Demand Shift) Shifting Labour Demand Real wage 0 A A´ w and L increase Labour hours Fig. 5.8 (a) MPL increases because of increase in A or K

16. Burda & WyploszMACROECONOMICS 6/e © Oxford University Press, 2012. All rights reserved. Figure 5.8 (b): Animation 2 (Supply Shift) Shifting Labour Supply Real wage 0 A A´ w falls, L rises Labour hours Fig. 5.8 (b) Labour supply increases e.g. through immigrants

17. Burda & WyploszMACROECONOMICS 6/e © Oxford University Press, 2012. All rights reserved. Table 5.2: Weekly Hours p. P. of Working Age Table 5.2 Source: International Labour Office

18. Burda & WyploszMACROECONOMICS 6/e © Oxford University Press, 2012. All rights reserved. Figure 5.9: Involuntary Unemployment Involuntary Unemployment Fig. 5.9

19. Burda & WyploszMACROECONOMICS 6/e © Oxford University Press, 2012. All rights reserved. B Figure 5.9 (a): Animation 1 Involuntary Unemployment: Wage Fixed above Market-Clearing Level Real wage 0 A It’s a free market, so the short-side determines actual employment. Labour Fig. 5.9 (a)

20. Burda & WyploszMACROECONOMICS 6/e © Oxford University Press, 2012. All rights reserved. Table 5.4 (a): Trade Unions: Membership and Coverage Table 5.4 (a) Source: www.eurofound.europa.eu/eiro/country_index.htm European Trade Unions: Membership and Coverage, 1950-2007 Union membership (%) Union coverage (%) CountryStructure1950197019902007 UKMostly crafts (TUC)4550432834.6 Germany (West Germany until 1990) Umbrella/industrial (DGB, IG, Metall, Ver.di) 3832362261 Portugal Party, religious/ Umbrella (DGTP, UGT) ——402290 NetherlandsParty, religious (FNV, CNV, MHP)433724 84 Greece occupational/ sectoral (GSEE, ADEDY) ——3428100 Spain Industrial, company level (CC.OO, UGT, ELA, CIGA) ——121760.3 France Party, religious (CGT, CFDT, CGT-FO, CFTC, CFE-CGC) 302014890 Memo: USMostly local plant-level (AFL-CIO)———n/a

21. Burda & WyploszMACROECONOMICS 6/e © Oxford University Press, 2012. All rights reserved. Table 5.4 (b): Trade Unions: Membership and Coverage Table 5.4 (b) Source: www.eurofound.europa.eu/eiro/country_index.htm European Trade Unions: Membership and Coverage, 1950-2007 Union membership (%) Union coverage (%) CountryStructure1950197019902007 SwedenUmbrella (ILO, TCO, SAGO)67 826891 FinlandUmbrella (SAK, STTK, AKAVA)3051737490 DenmarkUmbrella (ILO, HK, FTF)5663756983 NorwayUmbrella (LO, AF, YS)4550565274 Belgium Party, religious (ACV/ CSC, ABVV/ FGTB, ACLVB/ CGSLB) 43425051.596 Ireland Mostly crafts in the ICTU, fragmented 4259 31.444 AustriaUmbrella/industrial (öGB)6257473598–99 ItalyParty, religious (CGIL, CISL, UIL)45373935.680

22. Burda & WyploszMACROECONOMICS 6/e © Oxford University Press, 2012. All rights reserved. Figure 5.10: Trade Unions' Indifference Curves Trade Unions’ Indifference Curves Fig. 5.10

23. Burda & WyploszMACROECONOMICS 6/e © Oxford University Press, 2012. All rights reserved. Figure 5.10 (a): Animation 1 (3 Different Curves) Trade Unions’ Indifference Curves Employment Real wage Employment Real wage Employment Real wage (a) Average (b) Hard-line (c) Jobs-first Fig. 5.10 (a)

24. Burda & WyploszMACROECONOMICS 6/e © Oxford University Press, 2012. All rights reserved. Figure 5.12: Labour Market Equilibrium with a Trade Union Labour Market Equilibrium with a Trade Union Fig. 5.12

25. Burda & WyploszMACROECONOMICS 6/e © Oxford University Press, 2012. All rights reserved. Table 5.5: Standardized Unemployment Rates Table 5.5 Source: OECD

26. Burda & WyploszMACROECONOMICS 6/e © Oxford University Press, 2012. All rights reserved. Figure 5.13: Minimum Wages Minimum Wages Fig. 5.13

27. Burda & WyploszMACROECONOMICS 6/e © Oxford University Press, 2012. All rights reserved. Figure 5.13 (a): Animation 1 (No Unions, No Minimum Wage) (a) No Unions, No Minimum Wage Real wage 0 A w L Labour Fig. 5.13 (a)

28. Burda & WyploszMACROECONOMICS 6/e © Oxford University Press, 2012. All rights reserved. Figure 5.13 (b): Animation 2 (Unions, No Minimum Wage) (b) Unions, No Minimum Wage Real wage 0 A w L B Union-voluntary, individual-involuntary unemployment Labour Fig. 5.13 (b)

29. Burda & WyploszMACROECONOMICS 6/e © Oxford University Press, 2012. All rights reserved. Figure 5.13 (c): Animation 3 (Minimum Wage above Union Wage) Minimum Wage above Union Wage Real wage 0 A w L B C Unemployment under a minimum wage Labour Fig. 5.13 (c)