In this chapter we examine this tradeoff more closely. The relationship between inflation and unemployment is a topic that has attracted the attention of some of the most important economists of the last half century. The best way to understand this relationship is to see how thinking about it has evolved over time. | Wages and Unemployment Chapter 17 McGraw-Hill/Irwin Copyright © 2015 by McGraw-Hill Education (Asia). All rights reserved. Learning Objectives Discuss the four important trends that have characterized labor markets in industrialized countries Apply a supply and demand model to understand the labor market Explain how changes in the supply of and the demand for labor explain trends in real wages and employment since 1960 Define and calculate the unemployment rate and the participation rate Differentiate among the three types of unemployment defined by economists and the costs associated with each Trend 1: Increasing Real Wages Common in industrialized countries in the 20th century Trend 2: Slower Wage Growth Since 1973 The annual rate of real wage growth is uneven Data on real wage growth in the United States: 1960 – 1973 per year 1973 – 1996 per year 1996 – 2010 2% per year 1973 – 2010 0% per year Year . Japan Canada S. Korea 1990 1995 2000 2005 2010 2011 Rate of Increase (1990-2011) Hourly Wage Index in Manufacturing, 1990–2011 (2005 = ) Trend 3: Increased Wage Inequality in US and many industrialized countries Between 1960 and 2010 Average real weekly earnings of production workers decreased Real wages of the least-skilled, least-educated workers decreased 25 to 30% Best-educated, highest-skilled workers' real wages increased Income with an advanced university degree is Three times the income of a high school graduate Four times the income of a worker who did not graduate from high school Trend 4: Increasing Employment in US and Asian Economies In 2007, 146 million people in the US had jobs 46 million new jobs since 1980 In 1970, 57% of the over-16 population had jobs In 2007, 63% worked Between 1980 and 2007 employment increased 46% At the same time over-16 population increased 38% The Labor . | Wages and Unemployment Chapter 17 McGraw-Hill/Irwin Copyright © 2015 by McGraw-Hill Education (Asia). All rights reserved. Learning Objectives Discuss the four important trends that have characterized labor markets in industrialized countries Apply a supply and demand model to understand the labor market Explain how changes in the supply of and the demand for labor explain trends in real wages and employment since 1960 Define and calculate the unemployment rate and the participation rate Differentiate among the three types of unemployment defined by economists and the costs associated with each Trend 1: Increasing Real Wages Common in industrialized countries in the 20th century Trend 2: Slower Wage Growth Since 1973 The annual rate of real wage growth is uneven Data on real wage growth in the United States: 1960 – 1973 per year 1973 – 1996 per year 1996 – 2010 2% per year 1973 – 2010 0% per year Year . Japan Canada S. Korea 1990 1995
