Question

This month the unemployment rate is 15%, but among people still employed (the remaining 85%) the national real (inflation adjusted) median wage is 10% higher than the national figure for January 2020, when the unemployment rate was 4%. Use information about employer-employee relationships to explain how both the national unemployment rate and the national real median wage could have increased.

Please be thorough in your answer.

Answer 1

Ans.

As per the economic theories there is inverse relationship between the unemployment and wages. Which means when the unemployment increase, there is enough supply of labor in the economy, demand is less for the labor and this causes the wages to go down.  
However, there are alternative theories also. For e.g. in the current environment since January when the unemployment has increased to 15% , many economists argue that the wages are sticky i.e. because of the government regulations , contractual terms , unions and to protect the top talent many employers don’t cut the salaries of the existing staff rather there will be layoffs to downsize the in efficient labor. This causes the unemployment to increase , but for the people who are employed the wages may be sticky and that will cause the wage to appear higher then the median figure of the past because many employees at the low spectrum may have been laid off.