Written agreement between

Explicit contracts
employer and employee

Unwritten agreement between employer

Implicit contracts Contracts
and employee; oral agreement
Sticky wages Labor Demand = Firms Employers
Located above the equilibrium level Labor Market Supply and Demand
Labor Supplies = Workers
Wages will stick to that level
no matter the economy Why is there always
Labor Market Equilibrium
Why do unemployment still unemployment
exist despite equilibrium
Pay this minimum amount
of wage to workers Actual amount received in
Nominal
Minimum wage law payment for work
An example of Real and Nominal Wages
price floor Wages adjusted
Real Wage
to inflation
Workers who can perform
Efficient wage theory
the task efficiently People without work (4 weeks)

The market does not know

Imperfect information Wages and Employment Available and seeking for work but can't find one
where the equilibrium is

Population of working age 15-64 years old

People entering the market
for the first time Number of people in the population working age who
Unemployment Labor Force
are working outside the household/or who wishes to work
Temporary unemployment caused by the Frictional
People reentering after an absence
normal workings of the labor market Unemployment
Neither employed or actively
Out of labor force
People who have quit jobs in seeking for paid work
search for a new one
Ratio of number of people in labor
Participation rate Labour force/population of workers (Employed + unemployed)/ pop of working age
Types of Unemployment force to the working age population
Technological progress

Changes occur due to

Shifts in demand for Underemployed =
goods and services Rate Underemployment /
Caused by structural changes in the Structural employed
economy that eliminate certain jobs Unemployment
Mismatch between skills and
the skills needed
Problem and Solution

Training or additional education