If regional unemployment is low, what will happen to wages in that area? [simple,...

[Mark W]

...year 12/13 economics please] This is for a project.

In simple terms, if unemployment is low in an area of the UK, say East Midlands for example, does this mean the average wage paid will be higher or lower?

It's a bit confusing - I *think* wages will be higher because of a decreased supply of labour, and increased demand (that caused the low unemployment?). How would you display this on a simple supply and demand diagram? A leftward shift of supply, a rightward shift of demand, or both, or neither?

Any pointers would be really great.

[Tmess2]

In theory, all other things being equal and ignoring the ability to migrate, low unemployment tends to put a pressure on wages especially if new jobs are being created.

On a diagram shart, one axis would be hourly wage (or weekly wage) and another would be jobs per worker or some similar measure reflecting the decline of available workers.

If you use jobs per worker, the line will rise as you go left to right (i.e. more jobs per worker = workers able to insist on a higher hourly wage). If you use unemployment rate, the line will fall as you go left to right (higher unemployment = lower wage).

I am not sure how to show it on a supply and demand graph. (Its been a while since I have took economics) because you really are dealing with three variables (two of which are not constant). On a supply and demand graph, you can show the current wages but not the relationship between wages and unemployment.

In other words, a supply and demand graph shows the current willingness of employers to pay certain wages and the willingness of workers to accept those jobs. Both the line for the workers (supply) and the line for jobs (demand) -- or vice versa -- will be altered by conditions. If jobs are plentiful and workers scarce, the line for workers will shift upwards (with all workers insisting on a higher wage). Likewise, the line for jobs will reflect the demand for the products produced by those workers. If that demand is high, the manufacturer can charge more for product and still sell more product requiring additional workers. In that case, the manufacturer will be willing to pay more per worker because they can still make a profitable return on investment given the high demand for the product.

If you are wanting to show the change in the chart between periods of high employment and low employment (i.e. solid lines for one period and dashed lines for the other), there would definitely be a shift in the demand of employers for workers pushing the demand line for workers upwards. There might also be a reaction shifting the supply line of workers upwards as well, but that is less certain.

[I , a Bolshevik]

Yes, you are rigth ,wages will be higher.When unemployment is low , workers are not afraid of going on strike,if they are defeated and fired they can find another job easily.That´s why Capitalists need an "Army of unemployed".

http://en.wikipedia.org/wiki/Reserve_army_of_labor

[ideogenetic]

Assuming the labor supply hasn't changed (e.g. emigration shrank the labor force), it will show as a demand curve shift to the right. The supply curve will not move, the cost of labor will rise as demand rides up the supply curve.