Labor

Market
Diagram
-
People we are
&

supply (Labor)
wagesWhe suring jobs
.

-
Demand
clabors
companies
S
seeking
employees .
Le

employment
Demand Cover factors constant)
Labor
mages
·

willingness
ability
.
Supply Labor <
Wages (other factors constant)
·

Gort fixes Minimum

wage (Price floor)
M

Slabor at MW .
Livel

wages "
i
Le Supplysand.
! -4
-
excess
DLabour Labor in

4 Leg
S
economy
Quantity of Labor
unemployment
 Classical economists

UE in the is due to Minimum and

economy
labour unious . wages
strong
Strong labour unions
Mint
wage legislations
3-stops Wh
from reaching eqb Level

Leads to
unemployment
Rate
K/a Wage Unemployment
Let Business do Business without
iemployment
solution to ->

regulations
CLaissez faire)

In short won't (Recall have

wage prices
run >
-
more .
:
we
read this

Run will settle at the

En
Long wage prices eventually
-

equilibriumlnd if Market is allowed

to
,
operate freely
But How
long
is this
long
Rm ?
-
former
PM

Quote .
 School
depression and
of Keynesian
the
The
great emergence
Great
depression in USA (1929)
classical solution- Laissez faire

Economist JM all dead

,
Keynes [ In longru
the we are

Different perspective on
Unemployment .

Keynesian theory of Unemployment

due to
UE is NOT
merely High wages.
4 also
depends on if firms are willing to Hire workers.

MKandaggregate demand Demand

deficit
Y unemployment
low
↓
very ex : Covid-19
y ↓
Firms will NOT low
wages but still
employ. unemployment
Keynesian UE- due to low
aggregate
demand.
 Aggregate Durand
S

why isie
How to restore
it levels ?
High
to

Business
Cycle . rate.

an growth
slowdown
7
M
a
Economy cyclical
is

Economy

· Revy Nature.
i
·

growth phase-High BD

3
·
Slowdown > LOWAD
Time > VE

(from cambridge
economics)
 However world - don't know where the
,

is at the
in the real
moment
,
we
economy
M

don't know

S-feronomy
Here we
Realop wil
a
(concept of Rolling
Y average
time .
 Therefore grow from
wherever
objective in the
economy
is to
-

are
you
to
grow-yAD .

keynes
as
per
periods
of High growth
>
, CONO VE

low
growth High ut
,

at this times Intervention needed

to
+ growth rate

↑ aggregate demand.

>
tin Quantity of Labor
↑ growth can be due to

↑ in
Quality of Labor
↑ in state
of technology
when
growth due a Quantity of labor
-

Temployment
only
· - to

Recession -> full in AD

employmentis
simply 4 AD-Not cause
will

set in the
of capacity economy
Damand has
a
to
beyond a set threshold -

only then
employment fa l s .
 UE due to
varying cycles of economy cyclical UF
-
.

shapes of economic
Recovery
·

.
recoveres -- Economy quickly
rises
.
crash
--- after an economic

z
>
Backexpected
-

snap
every
M

I
Economy
recovers
--" -

v shape lost ground

--

&

I
---

some
ecors
recovered
k .
didn't
snaped
some
---

>

-which
ofhe
e
How to YAD ? -

ES factors
a
can
during
(t M)-
recession
?
 Recession
Keynesian
solution -
during govt spending +
-

forthis govt must

will
at time
Boom
&
govt
need to
E

of recover this
later

3comecyl
Boom in
taxt
economy
·

Recession in
economy
,
Spend 4
·

policy

Types of UF

voluntary
Structural
frict
a gent
UE L

scasonal
unemployment
Natural rate
of unemployment
These 4
types
- .