Factors Causing an Upward Shift in the No-Shirking Wage Curve
The no-shirking wage curve illustrates the minimum wage required to ensure employee effort at different employment levels. This curve will shift upward in response to economic changes that benefit workers. A primary cause for this shift is any factor that increases the workers' reservation wage. When workers' next best alternatives improve, a firm must offer a higher wage to maintain the necessary employment rent that incentivizes effort.
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Introduction to Macroeconomics Course
Ch.1 The supply side of the macroeconomy: Unemployment and real wages - The Economy 2.0 Macroeconomics @ CORE Econ
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Factors Causing an Upward Shift in the No-Shirking Wage Curve
A government enacts a new policy that substantially increases the weekly payment and extends the eligibility period for unemployment insurance benefits. What is the most likely direct impact of this policy on the reservation wage of an unemployed individual, and what is the underlying reason for this change?
Evaluating a Job Offer
Analyzing Changes in a Worker's Minimum Acceptable Pay
The introduction of a new government program offering free, high-quality vocational training to unemployed individuals would likely cause their average reservation wage to decrease, as the program makes them more eager to find a job quickly.
For each scenario described, determine its most likely direct effect on an unemployed worker's reservation wage.
Learn After
A new government policy is enacted that provides comprehensive, free retraining programs and job-placement assistance for unemployed workers, significantly improving their prospects of finding a comparable or better job. What is the most likely effect of this policy on the curve that represents the minimum wage firms must pay to ensure workers do not shirk their responsibilities?
Impact of Unemployment Benefits on Wage Setting
An increase in the psychological or physical costs associated with performing a job, such as a more stressful work environment, would cause the curve representing the minimum wage required to ensure employee effort to shift downward.