Wage Curve - Implications of Wage Curve

Implications of Wage Curve

It is utilised to explain why within a country, some regions suffer worse unemployment than others. Labourers could but, for whatever reasons, are unwilling to migrate from regions with high unemployment low wage area to low unemployment high wage areas.

One of the reasons why unemployed labourers would not want to migrate to other areas with plenty of jobs is because of home-ownership. The worker might be deterred from moving because of the costs involved in selling off his / her home and moving. Blanchflower and Oswald have found that the unemployment rate is positively correlated to home-ownership rate in a cross country study.

However recently some micro econometric evidence suggests that the relationship between homeownership and unemployment is slightly more complicated. People who are employed are more likely to be able to afford a mortgage, and are therefore more likely to have bought their own home. The evidence indicates that the employed home-owners are less likely to become unemployed, and they are also more likely to be employed in jobs with high stability and therefore less likely to change jobs. The unemployed home-owners are more likely to find jobs within the local areas, and less likely to find jobs which would necessitate a move. The overall picture suggests that although home-owners are reluctant to move around, they are more often than not employed, and therefore not contributing the unemployment rate.