Facebook Pixel Code
x
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

The Roles of Unit Labor Costs, Real Unit Labor Costs, and Relative Wages in Affecting Employment and Unemployment Essay Example

Show related essays

The Roles of Unit Labor Costs, Real Unit Labor Costs, and Relative Wages in Affecting Employment and Unemployment

This is a preview of the 4-page document
Read full text

The Roles of Unit Labor Costs, Real Unit Labor Costs, and Relative Wages in Affecting Employment and Unemployment. This is a prime example of how unit labour cost and inappropriate wage levels would lead to inflationary impact and unemployment.
Influence of Real Unit Labor Costs. Real unit labour cost is defined as the ratio of unit labour cost to the factor of ‘P’, which can be defined as a. Index of consumer prices in case of real wage as income to workers; b. Index of domestic producer prices in case of real wage as a cost to production. This can also be termed as ‘Wage Share of Aggregate Income’ i.e. the share of the total income that attributes towards the wages. It can be concluded from this definition that an increasing wage share leads to reduced profitability of a firm. From the laws of economics, it is known that when the profitability of a firm reduces, the investor loses their confidence and withdraws their investments, and such a scenario would also reduce the productivity, and once the productivity declines, there would be firing of workers, thus, unemployment (Todaro, 2008).

This case also presents a classical scenario of how inappropriate wage levels influence unemployment through the context of real unit labour costs. Relative wages imply the ratio of relativity and can be amongst variables based on differentiation of gender (male/female), age brackets (youth/adult) or can be labour vs. capital. Relative employment growth (such as growing number of female employees to male employees) illustrates the industry composition in terms of gender representation. Age bracket relativity depicts substitution impact, while labour vs. capital substitution shows advances in prices for either. Essentially, these tend to illustrate an incrementing trend towards inappropriate wages because the replacement is fundamentally expensive than the variable existing to be replaced. Subsequently, cost of production would rise; increasing the final cost of output, and the price increase would be the bottom-line, enhancing inflations (Sloman, 2006). This relates to another case of inappropriate wage levels leading to inflation in the light of relative wages.  . The Roles of Unit Labor Costs, Real Unit Labor Costs, and Relative Wages in Affecting Employment and Unemployment.

This is a preview of the 4-page document
Open full text

Works Cited

John Sloman, Kevin Hinde. Economics for Business 4th Edition. Pearson Education, 2006

Joseph Nellis, David Parker. Principles of Business Economics 2nd Edition. Pearson Education, 2006

Michael P. Todaro, Stephen Smith. Economic Development 10th Edition. Pearson Education, 2008

Olivier Blanchard. Macroeconomics International Version 5th Edition. Pearson Education, 2008

Close ✕
Tracy Smith Editor&Proofreader
Expert in: Macro & Microeconomics, Human Resources, Management
Hire an Editor
Matt Hamilton Writer
Expert in: Macro & Microeconomics, E-Commerce, Finance & Accounting
Hire a Writer
preview essay on The Roles of Unit Labor Costs, Real Unit Labor Costs, and Relative Wages in Affecting Employment and Unemployment
WE CAN HELP TO FIND AN ESSAYDidn't find an essay?

Please type your essay title, choose your document type, enter your email and we send you essay samples

Contact Us