宏观经济 习题chapter 28

SOLUTIONS TO TEXT PROBLEMS:

Quick Quizzes

The answers to the Quick Quizzes can also be found near the end of the textbook. 1. The unemployment rate is measured through a survey of 60,000 households to determine the

percentage of the labor force that is unemployed. The unemployment rate overstates the

amount of joblessness because some of those who report being unemployed may not, in fact, be trying hard to find a job. But the unemployment rate may understate the amount of joblessness because discouraged workers are considered not in the labor force even though they are workers without jobs.

2. An increase in the world price of oil increases the amount of frictional unemployment as oil-producing firms increase output and employment, but other firms, such as those in the auto

industry, reduce output and employment. The sectoral shift from the auto industry to oil firms causes higher frictional unemployment for a time until workers have shifted from the auto

industry to the oil industry. Although no increase in unemployment is really desirable, this type of frictional unemployment is a natural outcome of the reallocation of resources between

different sectors. Public policies that might affect the unemployment caused by this change in the price of oil include government-run employment agencies, which can help autoworkers move into the oil industry, job-training programs to help workers adapt to a new industry, and

unemployment insurance, which keeps workers from suffering economic hardship while changing from one industry to another.

3. Figure 1 shows the supply curve (S) and the demand curve (D) for labor. The wage (W) is above

the equilibrium wage (WE). The result is unemployment, equal to the amount by which the quantity of labor supplied (LS) exceeds the quantity of labor demanded (LD).

1

2  Chapter 28/Unemployment

4.

Figure 1

A union in the auto industry raises the wages of workers employed by General Motors and Ford by threatening to strike. To prevent the costs of a strike, the firms generally pay higher wages than they would if there were no union. However, the higher wages reduce employment at General Motors and Ford. The unemployed autoworkers seek jobs elsewhere, reducing wages and increasing employment in the nonunion sector.

There are four reasons that firms might find it profitable to pay wages above the level that

balances the quantity of labor supplied and the quantity of labor demanded: (1) to ensure that workers are in good health so they will be more productive; (2) to reduce worker turnover because it is costly to hire new workers; (3) to make workers eager to keep their jobs, thus discouraging them from shirking; and (4) to attract a better pool of workers.

5.

Questions for Review 1. The BLS categorizes each adult (16 years of age and older) as either employed, unemployed, or

not in the labor force. The labor force consists of the sum of the employed and the unemployed. The unemployment rate is the percentage of the labor force that is unemployed. The labor-force participation rate is the percentage of the total adult population that is in the labor force.

2. Unemployment is typically short term. Most people who become unemployed are able to find new

jobs fairly quickly. But some unemployment is attributable to the relatively few workers who are jobless for long periods of time.

3. Frictional unemployment is inevitable because the economy is always changing. Some firms are

shrinking while others are expanding. Some regions are experiencing faster growth than other regions. Transitions of workers between firms and between regions are accompanied by temporary unemployment.

The government could help to reduce the amount of frictional unemployment through public policies that provide information about job vacancies in order to match workers and jobs more quickly, and through public training programs that help ease the transition of workers from declining to expanding industries and help disadvantaged groups escape poverty.

Chapter 28/Unemployment  3

4.

Minimum-wage laws are a better explanation for unemployment among teenagers than among college graduates. Teenagers have fewer job-related skills than college graduates do, so their wages are low enough to be affected by the minimum wage. College graduates' wages generally exceed the minimum wage.

Unions may affect the natural rate of unemployment via the effect on insiders and outsiders. Because unions raise the wage above the equilibrium level, the quantity of labor demanded

declines while the quantity supplied of labor rises, so there is unemployment. Insiders are those who keep their jobs. Outsiders, workers who become unemployed, have two choices: either get a job in a firm that is not unionized, or remain unemployed and wait for a job to open up in the union sector. As a result, the natural rate of unemployment is higher than it would be without unions.

Advocates of unions claim that unions are good for the economy because they are an antidote to the market power of the firms that hire workers and they are important for helping firms respond efficiently to workers' concerns.

Four reasons why a firm's profits might increase when it raises wages are: (1) better paid workers are healthier and more productive; (2) worker turnover is reduced; (3) the firm can attract higher quality workers; and (4) worker effort is increased.

5.

6. 7.

Problems and Applications 1. The labor force consists of the number of employed (141,481,000) plus the number of

unemployed (4,209,000), which equals 145,690,000.

To find the labor-force participation rate, we need to know the size of the adult population.

Adding the labor force (145,690,000) to the number of people not in the labor force (78,463,000) gives the adult population of 224,153,000. The labor-force participation rate is the labor force (145,690,000) divided by the adult population (224,153,000) times 100%, which equals 65%.

The unemployment rate is the number of unemployed (4,209,000) divided by the labor force (145,690,000) times 100%, which equals 2.9%.

2. Many answers are possible. 3. Men age 55 and over experienced the greatest decline in labor-force participation. This was

because of increased Social Security benefits and retirement income, encouraging retirement at an earlier age.

4. Younger women experienced a bigger increase in labor-force participation than older women

because more of them have entered the labor force (in part because of social changes), so there are more two-career families. In addition, women have delayed having children until later in life and have reduced the number of children they have, so they are in the labor force for a greater proportion of their lives than was the case previously.

5. The fact that employment increased 1.5 million while unemployment declined 0.6 million is

consistent with growth in the labor force of 0.9 million workers. The labor force constantly increases as the population grows and as labor-force participation increases, so the increase in the number of people employed may always exceed the reduction in the number unemployed.

4  Chapter 28/Unemployment 6.

b.

a.

A construction worker who is laid off because of bad weather is likely to experience short-term unemployment, because the worker will be back to work as soon as the weather clears up.

A manufacturing worker who loses her job at a plant in an isolated area is likely to

experience long-term unemployment, because there are probably few other employment opportunities in the area. She may need to move somewhere else to find a suitable job, which means she will be out of work for some time.

A worker in the stagecoach industry who was laid off because of the growth of railroads is likely to be unemployed for a long time. The worker will have a lot of trouble finding another job because his entire industry is shrinking. He will probably need to gain additional training or skills to get a job in a different industry.

A short-order cook who loses his job when a new restaurant opens is likely to find another job fairly quickly, perhaps even at the new restaurant, and thus will probably have only a short spell of unemployment.

An expert welder with little education who loses her job when the company installs automatic welding machinery is likely to be without a job for a long time, because she lacks the technological skills to keep up with the latest equipment. To remain in the welding industry, she may need to go back to school and learn the newest techniques.

c.

d.

e.

7.

Figure 2 shows a diagram of the labor market with a binding minimum wage. At the initial minimum wage (m1), the quantity of labor supplied L1S is greater than the quantity of labor

demanded L1D, and unemployment is equal to L1S − L1D. An increase in the minimum wage to m2 leads to an increase in the quantity of labor supplied to L2S and a decrease in the quantity of labor demanded to L2D. As a result, unemployment increases as the minimum wage rises.

8.

Figure 2

a.

Figure 3 illustrates the effect of a union being established in the manufacturing labor market. In the figure on the left, the wage rises from w1U to w2U and the quantity of labor demanded declines from U1 to U2D. Because the wage is higher, the quantity supplied of labor increases to U2S, so there are U2S − U2D unemployed workers in the

b.

9. a.

b.

c.

10.

a. b.

Chapter 28/Unemployment  5

unionized manufacturing sector.

When those workers who become unemployed in the manufacturing sector seek

employment in the service labor market, shown in the figure on the right, the supply of labor shifts to the right from S1 to S2. The result is a decline in the wage in the nonunionized service sector from w1N to w2N and an increase in employment in the nonunionized service sector from N1 to N2.

Figure 3

When the Japanese developed a strong auto industry, U.S. auto demand became more elastic as a result of increased competition. With more elastic demand for autos, the elasticity of demand for American autoworkers increased.

Because the rise in auto imports made the demand for autoworkers more elastic, to

maintain a higher-than-competitive wage rate requires a greater reduction in the quantity of labor demanded. So the union had to choose between allowing the union wage to decline or facing the loss of many jobs.

Given the trade-off faced by the union, the growth of the Japanese auto industry forced the union wage to move closer to the competitive wage.

If a firm was not providing such benefits prior to the legislation, the curve showing the demand for labor would shift down by exactly $4 at each quantity of labor, because the firm would not be willing to pay as high a wage given the increased cost of the benefits. If employees value the benefit by exactly $4 per hour, they would be willing to work the same amount for a wage that's $4 less per hour, so the supply curve of labor shifts down by exactly $4.

6  Chapter 28/Unemployment

c.

Figure 4

Figure 4 shows the equilibrium in the labor market. Because the demand and supply

curves of labor both shift down by $4, the equilibrium quantity of labor is unchanged and the wage rate declines by $4. Both employees and employers are just as well off as before.

If the minimum wage prevents the wage from falling, the result will be increased

unemployment, as Figure 5 shows. Initially, the equilibrium quantity of labor is L1 and the equilibrium wage is w1, which is $3 lower than the minimum wage wm. After the law is passed, demand falls to D2 and supply rises to S2. Because of the minimum wage, the quantity of labor demanded (L2D) will be smaller than the quantity supplied (L2S). Thus, there will be unemployment equal to L2S – L2D.

d.

Figure 5

Chapter 28/Unemployment  7

e.

Figure 6

If the workers do not value the mandated benefit at all, the supply curve of labor does not shift down. As a result, the wage rate will decline by less than $4 and the equilibrium quantity of labor will decline, as shown in Figure 6. Employers are worse off, because they now pay a greater total wage plus benefits for fewer workers. Employees are worse off, because they get a lower wage and fewer are employed.