copyright © 2009 pearson education, inc. chapter 2 overview of the labor market

Copyright © 2009 Pearson Education, Inc.

Chapter 2

Overview of the Labor Market

Copyright © 2009 Pearson Education, Inc. 2- 2

Figure 2.5: The Markets in which Firms Must Operate


Labor Market Internal Labor Market Labor Force Out-of-Labor Force Labor Force Participation Rate Unemployment Rate Primary, Secondary, and Tertiary Sectors Pareto Efficiency

Important Definitions - Labor Markets


Figure 2.1: Labor Force Status of the U.S. Adult Civilian Population, April 2007


Table 2.1: Labor Force Participation Rates by Gender, 1950-2007


Figure 2.2: Unemployment Rates for the Civilian Labor Force, 1946-2006

(detailed data in table on next slide)


Unemployment Rates for the Civilian Labor

Force, 1946-2006 (Data displayed

Graphically in Figure 2.2)


Figure 2.3: Employment Distribution by Major Nonfarm Sector, 1954-2007

(detailed data in table on next slide)


Employment Distribution by Major Nonfarm Sector, 1954-2007

(data displayed graphically in Figure 2.3)


Nominal Wages Real Wages Consumer Price Index Earnings Payments In Kind Deferred Payments Total Compensation Income

Important Definitions - Earnings of Labor


Table 2.2: Nominal and Real Hourly Earnings, U.S. Nonsupervisory Workers

in the Private Sector, 1980-2006


Figure 2.4: Relationship between Wages, Earnings, Compensation and Income


Substitution Effect Scale Effect Change In Demand Change in Quantity Demanded Market, Industry, and Firm Labor Demand Long Run vs. Short Run Labor Demand

Important Definitions - The Demand for Labor


Table 2.3: Labor Demand Schedule for a Hypothetical Industry


Figure 2.6: Labor Demand Curve (based on Table 2.3)


Figure 2.7: Shift in Demand for Labor Due to Increase in Product Demand


Figure 2.8: Possible Shifts in Demand for Labor Due to Fall in Capital Prices


Change in Quantity Supplied Change in Supply Comparable vs. Noncomparable Jobs Market Supply of Labor Supply of Labor to the Firm Wage Taker

Important Definitions - The Supply of Labor


Figure 2.9: Market Supply Curve for Paralegals


Figure 2.10: Shift in Market SupplyCurve for Paralegals as Salaries of

Insurance Agents Rise


Figure 2.11: Supply of Paralegals to a Firm at Alternative Market Wages


Equilibrium or Market Clearing Wage Disequilibrium Excess Demand and Excess Supply Nonmarket Influences on the Labor Market Collective Bargaining Agreement Economic Rent Reservation Wage

Important Definitions - Wage Determination


Figure 2.12: Market Demand and Supply


Figure 2.13: Demand and Supply at the “Market” and “Firm” Levels


Figure 2.14: New Labor Market Equilibrium after Demand Shifts Right


Figure 2.15: New Labor Market Equilibrium after Supply Shifts Left


Figure 2.16: New Labor Market Equilibrium after Supply Shifts Right


Figure 2.17: Effects of an Above-Market Wage


Figure 2.18: Effects of a Below-Equilibrium Wage


Figure 2.19: Labor Supply to the Military: Different Preferences Imply

Different “Rents”


Table 2.4: Unemployment and Long-Term Unemployment, Selected European and

North American Countries, 2005

copyright © 2009 pearson education, inc. chapter 2 overview of the labor market

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