Question I continued b For any job labor market conditions a

Question I, continued b) For any job, labor market conditions affect a worker\'s bargaining power. Which one of the following labor market variables would you look to assess labor market conditions (circle one)? Headline unemployment rate (U3) Percent working part time for economic reasons Labor force participation rate Quits rate Average hourly earnings Temporary help employment How the variable you have chosen best summarize conditions in the labor market. ( points) Suppose that for given conditions in the labor market [the variable you identified in part (b) is unchanged], worker bargaining power throughout the economy increases. c) Why might worker bargaining power throughout the economy increase, other things equal, i.e., the unemployment rate, the quits rate , unchanged? (5 points) d) In the context of the Wage-Setting-Price-Setting model we have worked with, what effecet would an increase in labor bargaining power have on the real wage in the short- run? In the long-run? Explain. (5 points)

Solution

Ans

1 headline unemployment rate u3. It shows the no. Of unemployed divided by labour force. The unemployed or those who are without jobs and they have actively looked for jobs during past four weeks. This will show how much labour has bargaining power. Greater the unemployment rate lesser the bargaining power and vice versa

Also higher the unemployment rate higher the bad condition of labour market and vice versa

2 Because of many reasons like greater political pressure yielded by them, more coordination among labour which makes it more effective pressure group etc

C in shortrun real wage will rise but it will not result rise in longrun.