mankiwe-chap.pptVIP

* * * * * * * * * * * * * * * * * * * * * * * Unemployment from real wage rigidity Then, firms must ration the scarce jobs among workers. Structural unemployment: The unemployment resulting from real wage rigidity and job rationing. If real wage is stuck above its eq’m level, then there aren’t enough jobs to go around. Reasons for wage rigidity 1. Minimum wage laws 2. Labor unions 3. Efficiency wages 1. The minimum wage The min. wage may exceed the eq’m wage of unskilled workers, especially teenagers. Studies: a 10% increase in min. wage reduces teen unemployment by 1-3% But, the min