Principles of Economics. Chapter 28. Unemployment. Problems and Aplications.6-10. Gregory Mankiw. 8th edition.
6. Are the following workers more likely to experienceshort-term or long-term unemployment? Explain.
a. a construction worker who is laid off because of bad weather
b. a manufacturing worker who loses his job at a plant in an isolated area
c. a stagecoach-industry worker who is laid off because of competition from railroads
d. a short-order cook who loses his job when a new restaurant opens across the street
e. an expert welder with little formal education who loses his job when the company installs automatic welding machinery
7. Using a diagram of the labor market, show the effect of an increase in the minimum wage on the wage paid to workers, the number of workers supplied, thenumber of workers demanded, and the amount ofunemployment.
8. Consider an economy with two labor markets—onefor manufacturing workers and one for service workers.Suppose initially that neither is unionized.
a. If manufacturing workers formed a union, what impact would you predict on the wages and employment in manufacturing?
b. How would these changes in the manufacturing labor market affect the supply of labor in the market for service workers? What would happen to the equilibrium wage and employment in this labor market?
9. Structural unemployment is sometimes said to resultfrom a mismatch between the job skills that employerswant and the job skills that workers have. To explore this idea, consider an economy with two industries:auto manufacturing and aircraft manufacturing.
9. Structural unemployment is sometimes said to resultfrom a mismatch between the job skills that employerswant and the job skills that workers have. To explore this idea, consider an economy with two industries:auto manufacturing and aircraft manufacturing.
a. If workers in these two industries require similar amounts of training, and if workers at the beginning of their careers can choose which industry to train for, what would you expect to happen to the wages in these two industries? How long would this process take? Explain.
b. Suppose that one day the economy opens itself to international trade and, as a result, starts importing autos and exporting aircraft. What would happen to the demand for labor in these two industries?
c. Suppose that workers in one industry cannot be quickly retrained for the other. How would these shifts in demand affect equilibrium wages both in the short run and in the long run?
d. If for some reason wages fail to adjust to the new equilibrium levels, what would occur?
10. Suppose that Congress passes a law requiringemployers to provide employees some benefit (such ashealthcare) that raises the cost of an employee by$4 per hour.
a. What effect does this employer mandate have on the demand for labor? (In answering this and the following questions, be quantitative when you can.)
b. If employees place a value on this benefit exactly equal to its cost, what effect does this employer mandate have on the supply of labor?
10. Suppose that Congress passes a law requiringemployers to provide employees some benefit (such ashealthcare) that raises the cost of an employee by$4 per hour.
c. If the wage can freely adjust to balance supply and demand, how does this law affect the wage and the level of employment? Are employers better or worse off? Are employees better or worse off?
d. Suppose that, before the mandate, the wage in this market was $3 above the minimum wage. In this case, how does the employer mandate affect the wage, the level of employment, and the level of unemployment?
e. Now suppose that workers do not value the mandated benefit at all. How does this alternative assumption change your answers to parts (b) and (c)?