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Chapter 21: Q. 37 (page 525)

Do you think it is rational for workers to prefer sticky wages to wage cuts when the consequence of sticky wages is unemployment for some workers? Why or why not? How do the reasons for sticky wages explained in this section apply to your argument?

Short Answer

Expert verified

Workers who are able to save their job are well off with sticky wages but those who lose their job will prefer wage cuts.

Step by step solution

01

Step 1. Unemployment Rate.

The unemployment rate is the percentage of adults who are able to work and are willing to work, and actively looking for work but are not able to find a job.

02

Step 2. Sticky wages or wage cuts.

Sticky wages mean wage does not fall due to a fall in the demand for labor which creates unemployment. Workers who are able to save their job are well off with sticky wages but those who lose their job will prefer wage cuts.

They generally prefer long-term contracts with fixed wages as they do not have to bear the unemployment consequences.

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Most popular questions from this chapter

Over the long term, has the U.S. unemployment rate generally trended up, trended down, or remained at basically the same level?

Under what condition would a decrease in

unemployment be bad for the economy?

What type of unemployment (cyclical, frictional, or structural) applies to each of the following:

(a) landscapers laid off in response to a drop in new housing construction during a recession.

(b) coal miners laid off due to EPA regulations that shut down coal-fired power

(c) a financial analyst who quits his/her job in Chicago and is pursuing similar work in Arizona

(d) printers were laid off due to a drop in demand for printed catalogs and flyers as firms go the internet to promote and advertise their products.

(e) factory workers in the U.S. were laid off as the plants shut down and move to Mexico and Ireland.

If many workers become discouraged from looking for jobs, explain how the number of jobs could decline but the unemployment rate could fall at the same time.

Assess whether the following would be counted as “unemployed” in the Current Employment Statistics survey.

a. A husband willingly stays home with children while his wife works.

b. A manufacturing worker whose factory just closed down.

c. A college student doing an unpaid summer internship.

d. A retiree.

e. Someone who has been out of work for two years but keeps looking for a job.

f. Someone who has been out of work for two months but isn’t looking for a job.

g. Someone who hates her present job and is

actively looking for another one.

h. Someone who decides to take a part-time job because she could not find a full-time position.
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