Graphical Illustration of Involuntary Unemployment in the Firm's Wage-Setting Model (Figure 6.17)

A manufacturing firm sets its wage at $25 per hour to ensure high productivity from its current employees. To manage its applicant pool, the firm has a policy of only considering applicants whose minimum acceptable (reservation) wage is $18 per hour or less. Based on this information, which of the following job applicants would be considered involuntarily unemployed?

Hiring Decisions and Unemployment Status

Explaining Involuntary Unemployment in a Firm's Hiring Model

According to the single-firm wage-setting model, a job applicant is classified as involuntarily unemployed only if their reservation wage is higher than the wage being offered by the firm.

A technology firm sets its wage at $50 per hour to ensure high productivity and deter shirking. To manage its large applicant pool, the firm has a policy of only considering applicants whose minimum acceptable (reservation) wage is $35 per hour or less. Based on this information, match each job applicant profile with their correct employment status relative to this firm.

Firm's Rationale for Creating Involuntary Unemployment

A company establishes a high wage to ensure its employees work hard and decides it will only hire new people whose minimum acceptable wage is below a specific threshold. A job seeker whose minimum acceptable wage falls between the company's hiring threshold and the high wage being offered is classified as ______.

A company sets a wage of $30 per hour to ensure its employees are productive. To streamline hiring, it only considers applicants whose minimum acceptable (reservation) wage is $20 per hour or less. The company is now considering changing its hiring policy to accept applicants with a reservation wage up to $25 per hour, while keeping the paid wage at $30. What is the most likely effect of this policy change on the group of job applicants?

Analyzing a Firm's Wage and Hiring Strategy

Evaluating a Change in Hiring Policy