From the course: Economics for Everyone: Job Markets and the Economy

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Wages and job creation

Wages and job creation

From the course: Economics for Everyone: Job Markets and the Economy

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Wages and job creation

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- Wages and job creation are like the Frank Sinatra song about love and marriage. They go together like a horse and carriage, and you can't have one without the other. The relationship between wages and job creation is really a supply and demand issue. When there are more jobs created than there are people to work them, wages go up. Essentially the demand for labor exceeds the supply of workers, and wages go up. They don't always go up a lot, but they usually go up. On the flip side, if there are a lot of unemployed people and there are fewer jobs being created, wages won't usually go up much, if at all. And they might even go down. That's because the supply of labor exceeds the number of jobs available. This is one of the worst problems with a labor market. People are very quick to fire, the unemployment rate is quick to rise, and it takes a long time for businesses to be comfortable hiring new people. So the…

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