Chapter 10 Wages Are Different Now

The fact that wages and employment are linked should not be shocking news. Wages are the market price for employees. There are many factors that prevent the supply demand relationship between labor and wages to function like a typical free market. Employers want to avoid employee turnover costs and there are usually regulations about wages and terminations. Employees may consider benefits of employment other than just wages, that may not be captured in pay data and also often want a level of predictability in their incomes. Many of these factors tend to make the price of labor less volatile than some other economic figures.

Much of the wage data that is used in economic analysis comes from the same surveys used ...

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