Explain in economic terms the probable effects, ceteris paribus, of the following developments on U.S. wage rates:
a. a declining number of workers in the 20-45 age category
b. the ebbing of union power and influence
c. the increased participation rate of women in the general labor force
d. an increase in American productivity rates
e. a world-wide recession
f. a general improvement in the technology and output-creating capacity of capital investment

Question

Quizplus · Accepted Answer

The Answer is a. A declining number of workers in the 20-45 age category would likely lead to an increase in wage rates, ceteris paribus. This is because a smaller pool of workers in this age group would result in increased competition among employers for their services, leading to higher wages.

b. The ebbing of union power and influence would likely lead to a decrease in wage rates, ceteris paribus. Unions often negotiate higher wages and better working conditions for their members, so a decline in their power would result in less upward pressure on wages.

c. The increased participation rate of women in the general labor force would likely have a mixed effect on wage rates, ceteris paribus. On one hand, an increase in the labor supply could put downward pressure on wages. On the other hand, if the increased participation leads to a more efficient allocation of labor and higher productivity, it could lead to higher wages.

d. An increase in American productivity rates would likely lead to an increase in wage rates, ceteris paribus. Higher productivity means that workers are able to produce more goods and services in the same amount of time, leading to higher wages as employers seek to retain and attract skilled workers.

e. A world-wide recession would likely lead to a decrease in wage rates, ceteris paribus. During a recession, there is typically a decrease in demand for goods and services, leading to higher unemployment and downward pressure on wages.

f. A general improvement in the technology and output-creating capacity of capital investment would likely lead to an increase in wage rates, ceteris paribus. Improved technology and capital investment can lead to higher productivity and increased demand for skilled workers, leading to higher wages.

Explain in Economic Terms the Probable Effects, Ceteris Paribus, of the Following