Global Chapter 7: Labor Market

Working Age Population

The total number of people above around 15/16 until 65 who are able to work.

Labor Force

The total number of workers, including both the employed and the unemployed (searching for jobs).

Labor Force Participation Rate

The percentage of the working-age population in the labor force.

Labor Force Participation Rate Formula

Labor force divided by working age population times 100.

Unemployment Rate

The percentage of the labor force that is unemployed and actively seeking a job.

Unemployment Rate Equation

Unemployed divided by labor force times 100.

Employment Rate

The proportion of the adult population that is employed.

Employment Rate Equation

Employed divided by population of working age.

Wage Setting Relation

W = P^eF(u,z), defining wage setting in relation to expected price level, unemployment rate, and other variables.

Expected Price Level (P^e)

The anticipated level of prices in the economy.

Unemployment Rate (u)

The percentage of workers who are without a job but actively seeking work.

Other Variables (z)

Factors that affect wage setting beyond the basic model.

Relationship Between Wage and Unemployment

A negative relationship; as unemployment rises, wages typically decrease.

Relationship Between Wage and z

A positive relationship; as other variables increase, wages also increase.

Price Setting Relation

W/P = 1/(1+m), indicating the relationship between wage and price.

Wage Setting and Price Setting Equilibrium

1/(1+m) = F(un, z), representing equilibrium conditions for wage and price.

Wage Setting Curve

A negative sloping curve that indicates the relationship between wages and unemployment.

Price Setting Curve

A horizontal line, indicating that price is constant and unaffected by unemployment.