Answer to Question #278382 in Macroeconomics for bunnybear

Question

How will an increase in the unemployment rate affect bargaining power and nominal wages in the country-South Africa?

Answer 1

The bargaining power of workers depends on the level of unemployment in economy. If unemployment rate is high, there will be a fall in the bargaining power of workers. Workers tend to ready to work even at the lower wage rate. The competitions among the workers also cause the fall in the nominal wage rate. Workers are ready to work at lower wage rate.