Questions and Answers of Contemporary Labor Economics

Go to the Bureau of Labor Statistics Web site ( http://www.bls.gov ) . Click on“Unemployment Rate.” This will retrieve the latest Bureau of Labor Statistics news release regarding the labor force
9. Examine critically this statement: “Unemployment in the United States can be resolved quickly and efficiently. The government should simply provide jobs for everyone who wants to work who cannot
8. Do you expect the natural rate of unemployment to (a) increase, (b) decrease, or (c) remain at the present level over the next decade? Explain your reasoning.
7. Assume that the official national unemployment rate rises from 4 percent to 8 percent because of a major recession. What impact do you predict this would have on(a) the African–American to white
6. Why are nominal wages inflexible downward? What is the implication of this characteristic for the ability of involuntary demand-deficient unemployment to persist for a considerable length of time?
5. Suppose you are an economic adviser to the president, who has asked you to design a program to reduce the amount of unemployment associated with displaced workers. What major elements would your
4. Define the term structural unemployment and distinguish it from frictional and demand-deficient unemployment. Why might structural unemployment fall when demand-deficient unemployment declines?
3. Use the basic model shown in Figure 18.5 to illustrate graphically each of the following: (a) demand-deficient unemployment and (b) temporary increases in output and employment beyond their
2. What factors tend to understate the extent to which the official unemployment rate accurately measures the degree of economic hardship in the nation? What factors lead some observers to conclude
1. Use the following data to calculate (a) the size of the labor force, (b) the official unemployment rate, and (c) the labor force participation rate (Chapter 3) for a hypothetical economy:
True or false? The unemployment rate of women typically has been twice that of men in recent years.
What factors cause the “official” unemployment rate to overstate the true extent of economic hardship in the United States? What factors cause it to understate economic hardship?
Go to the Bureau of Labor Statistics Web site (http://www.bls.gov) and in sequence select “Databases and Tables” and “Series Report.” Then enter the following ID series number: PRS84006091.
12. U.S. productivity growth accelerated in the second half of the 1990s. How do you account for this speedup? Why is it still impossible to know if this speedup is the start of a long-term trend or
11. Comment on each of the following statements:a. “Although most highly productive companies are profitable, not all profitable companies are highly productive.”b. “Increased public demand for
10. Assume that labor productivity is rising by 6 percent in the economy as a whole but by only 1 percent in industry X. Also assume that nominal wages for all industries rise in accordance with the
9. Explain the relationship between changes in (a) nominal wage rates, (b) productivity,(c) unit labor costs, and (d) product price. What does this relationship suggest about the expected impact of
8. Describe and explain the cyclic changes that occur in labor productivity. Of what significance are these changes?
7. Briefly comment in quantitative terms on the long-term trend of labor productivity in the United States; cite the three primary factors that contributed to that growth, and indicate the relative
6. Suppose in a given year a firm’s productivity increases by 2 percent and its nominal wages rise by 5 percent. What would you expect to happen to the firm’s unit labor costs and product price?
5. Discuss the relationship between aggregate productivity growth and price inflation.Draw a diagram (similar to Figure 17.8 ), putting average annual productivity growth on the horizontal axis and
4. Explain this statement: “High wage rates are both an effect and a cause of high labor productivity.”
3. How do you account for the close correlation between changes in the rate of productivity growth and changes in real wage rates for the economy as a whole?Does this relationship also hold true on
2. Suppose that in an economy 100 worker-hours produce 160 units of output in year 1. In years 2 and 3 worker-hours are 120 and 130 and units of output are 216 and 260, respectively. Using year 2 as
1. How is labor productivity defined? Comment on the shortcomings and advantages of the Bureau of Labor Statistics index of labor productivity.
Productivity growth in both 1990 and 1991 was 0.7 percent; in 1992 it rose to 3.4 percent.Can you think of a possible explanation for this abrupt change? (Hint: A recession occurred in 1990–1991.)
Suppose real output in a hypothetical economy is 10 units, 5 units of labor are needed to produce this output, and the price of labor is $2 per unit. What is the economy’s labor productivity? What
Go to the Economic Policy Institute National Data Zone Web site ( http://www.epi.org/content.cfm/datazone_dznational ) . Under Wages and Compensation Trends, click on “Hourly wage decile cutoffs
9. In light of the information presented in this chapter, answer Question 11 at the end of Chapter 4.
8. Which two of the text’s possible explanations for increasing wage and salary inequality seem least consistent with the following fact? The distribution of earnings has become more unequal within
7. What has happened to the location of the Lorenz curve of annual earnings over the past 30 years? Make a case that the Lorenz curve will shift leftward over the next 30 years. Make a case that it
6. Explain how both ability and family background can directly influence earnings, independently of education and training. How do ability and family background indirectly determine earnings through
5. Speculate about how successful attempts by government to tighten the distribution of family income through transfers might inadvertently make the distribution of annual earnings more unequal.
4. Critically evaluate this statement: “Lifetime earnings are less equally distributed than annual earnings.”
3. Why do people who have more formal education than others also in general tend to receive more on-the-job training during their careers? What is the implication of this fact for the distribution of
2. Speculate about why a given Gini coefficient is compatible with more than one particular Lorenz curve. Illustrate graphically.
1. Suppose a hypothetical economy consists of 20 nonunionized private sector workers who have the following annual earnings: $18,000, $9,000, $82,000, $12,000,$13,000, $76,000, $61,000, $14,000,
Of all the factors explaining earnings inequality, which one do you think is the most significant?
Suppose the Lorenz curve of earnings moves closer to the diagonal line. What has likely happened to the histogram of earnings and the Gini coefficient?
How do unexpected inflation, anticipated inflation, and unemployment insurance each affect the optimal length of a person’s job search?
Go to the Bureau of Labor Statistics Current Population Survey Web site ( http://www.bls.gov/cps/home.htm ) . Click on “Employee Tenure” under the heading “CPS News Releases.”Go to the table
7. Do you think internal labor markets enhance or detract from efficiency? How might one argue that the realization of dynamic efficiency is more important than achieving static efficiency? Do you
6. Explain the following statement: “Unions are both a consequence and a cause of internal labor markets.” Why might the presence of internal labor markets in a firm encourage unionization?
5. How does a worker search for a better job in an internal labor market? What is the employer’s search process within internal labor markets?
4. How do you explain the existence of internal labor markets? What are their advantages to employers? To workers?
3. Explain how each of the following would affect the probability that a job searcher will accept the next wage offer and thus affect the expected length of his or her unemployment: (a) a decline in
2. What is meant by the term acceptance wage? How does a job seeker determine his or her acceptance wage? Why might the acceptance wage for one new college graduate differ from that of another new
1. What are the benefits and costs of job search? Why don’t job seekers endlessly search for a higher wage offer?
1+++Have you worked in a firm that has a clearly defined job ladder? If so, how much upward mobility did you observe along the ladder?
Go to the Census Bureau Historical Income Web site ( http://www.census.gov/hhes/www/income/histinc/histinctb.html ) . Under the Current Population Survey heading, click on “People.” Then click on
16. Although the labor market opportunities for women have improved greatly over the past 30 years, poverty has become increasingly concentrated among women. How can you reconcile these two
15. Critically evaluate each of the following statements:a. “Affirmative action plans have not worked; there is no evidence that they have increased African–American or female employment and
14. Some economists have argued that the unemployment effects associated with the minimum wage have been greater for African–Americans than for whites.Explain why this might be the case.
13. “Wage differences between men and women reflect not discrimination but rather differences in job continuity and rational decisions with respect to education and on-the-job training.” Explain
12. It has been argued that to correct the inequalities of past discrimination, African–Americans and females should be given preference in employment and promotion.Do you agree? In the famous
11. There has been considerable controversy over the fact that certain pension plans into which males and females make equal contributions pay smaller monthly benefits to women than to men on the
10. In what way does discrimination redistribute national income? How does it reduce national income?
9. Table 14.2 reveals significant earnings differences by gender and race at each level of education. What nondiscriminatory factors might explain part of the earnings differences between females and
8. Is the following statement true or false? If it’s false, explain why. “The unemployment rates for white females and African–American men are considerably higher than the rate for white
7. Assume that the occupational distribution of males and females is as follows:Calculate the index of segregation and explain its meaning. Compare the meaning of an index of 0.40 with indexes of
6. Explain the following statement: “In the taste for discrimination model, discrimination is practiced even though it is costly to do so. But in the statistical discrimination model, it is clear
5. Use simple supply and demand analysis to explain the impact of occupational segregation or “crowding” on the relative wage rates of men and women. Who gains and who loses as a consequence of
4. What is statistical discrimination and why does it occur? The theory of statistical discrimination implies that discrimination can persist indefinitely, whereas the taste for discrimination model
3. In Becker’s taste for discrimination model, what is the meaning of the discrimination coefficient d ? If the monetary value of d is, say, $6 for a given white employer, will that employer hire
2. Women have increased the amount of education they have achieved relative to men, and average years of schooling completed are now approximately the same for males and females. Human capital theory
1. What has been the general secular trend of the weekly earnings of full-time female workers compared to male workers? What factors help explain this trend?
On average, women have less mathematical and quantitative training than do men.Jobs demanding high levels of such training often pay exceptionally high salaries.Relate these factors to each of the
Suppose the hourly market wage for specific white workers is $16, while the wage for equally productive African–American workers is $12. What can be inferred about the dollar value of the
How might statistical discrimination reinforce occupational segregation?
Compare the average earnings of African–American males to those of white males in Table 14.2. Explain how this difference might be responsible for the difference in the percentage of
Go to the National Labor Relations Board’s home page ( http://www.nlrb.gov ).Where is the NLRB located? What does it do? How many members are on the board? What is common to all board members’
7. How might each of the following be interpreted as an example of rent provision by government?a. State laws require that out-of-state big-game hunters be accompanied by one of a limited number of
6. Answer these questions on the basis of the information in the accompanying table. The data are for a competitive firm.a. What is the profit-maximizing level of job safety as viewed by the firm?
5. Evaluate this statement: “Profit-maximizing firms lack an incentive to provide job safety, and consequently, the federal government must intervene legislatively to protect workers against the
4. Why are most labor unions—whose constituents receive wages substantially above the minimum wage—strong supporters of the minimum wage? Why might unions composed of skilled workers who are pure
3. Explain how an increase in the minimum wage coulda. Reduce teenage employment but leave the teenage unemployment rate unaffected.b. Reduce investment in human capital.c. Leave the poverty rate
2. Show graphically how an increase in the minimum wage might affect employment in (a) a competitive labor market and (b) a labor market characterized by monopsony.
1. Explain each of the following statements:a. “The Wagner Act of 1935 reduced the costs of providing union services and thereby increased the number of union members.”b. “The Wagner Act of
Suppose a firm’s marginal cost of an extra unit of job safety is $250,000; the marginal private benefit, $200,000; and the marginal social benefit, $300,000. Will the firm provide this extra unit
Suppose the federal government increases the minimum wage by 25 percent. Based on theory and traditional evidence, predict the impact of this increase on (a) the average wage of teenagers, (b)
Go to the Bureau of Labor Statistics Web site ( http://www.bls.gov ) and in sequence select “Databases and Tables” and “Series Report.” Then enter the following ID series numbers:
Go to the Bureau of Labor Statistics Web site ( http://www.bls.gov ) and in sequence select “Databases and Tables” and “Series Report.” Then enter the following ID series numbers:
8. Use the following labor market data to determine the answers to (a) through (d) :a. Is this tax progressive? Explain.b. What is the before-tax equilibrium wage rate?c. What effect does the tax
7. Explain how the existence of national, state, and city parks might affecta. Labor demand in the recreational vehicle industry.b. The demand for workers who build and maintain equipment for private
6. Assuming that income includes both private and public goods and that leisure is a normal good, explain how a major reduction in governmentally provided goods might increase a person’s optimal
5. Explain why a draft system might cause the U.S. military to overemploy labor and underemploy capital (from society’s perspective). Speculate about why the army increasingly contracts out
4. Explain why a voluntary army may be less expensive to society than an army composed of draftees. Which will likely be less expensive to taxpayers?
3. Speculate about the reason(s) for each of the following facts about public sector pay:a. The pay premium received by federal employees declined in the middle and late 1980s.b. Local governments
2. Comment on this statement: “In general, federal government employees are underpaid compared to similar private sector workers. This is due to the monopsony power of government.”
1. List and discuss factors that help explain why public sector employment rose faster than private sector employment between 1950 and 2008. At what levels of government has public sector employment
Starting in 2011, the maximum marginal tax rate on income will rise from 35.0 to 39.6 percent. Explain why Stone may work more as a result, whereas Smythe may work less
How might Figure 12.4 relate to the lack of work effort observed under the old Communist regimes of Eastern Europe and Russia?
Go to the Bureau of Labor Statistics Web site ( http://www.bls.gov ) and select“Publications” and then “Economic News Releases.” Find and select “Union Members.” What are the median
13. What has been the impact of deregulation on the relative wages and employment of unionized workers in the airline and trucking industries? What factors help explain the difference in outcomes
12. Would our economy function better if it were union-free? Explain your answer.Provide a counterargument to your position.
11. Describe the various avenues through which unions might alter the distribution of earnings. On balance, do unions enhance or mitigate wage dispersion?
10. In what specific ways might the presence of a union raise productivity within a firm? Use the exit mechanism and voice mechanism concepts in your response.
9. Evidence suggests that firms that sell their products in less competitive product markets are more likely to be unionized than firms selling in highly competitive markets. Recalling from Chapter 5
8. “There is an inherent cost to society that accompanies any union wage gain.That cost is the diminished efficiency with which labor resources are allocated.”Explain this contention. Do you
7. Indicate the amount of work time lost each year because of strikes. Cite circumstances under which the amount of work time lost during a specific strike might be a poor indicator of the amount of

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