Beginning in the 1970 s and continuing for three decades, women entered the U.S. labor force in a big way. If we assume that wages are sticky in a downward direction, but that around 1970 the demand for labor equaled the supply of labor at the current wage rate, what do you imagine happened to the wage rate, employment, and unemployment as a result of increased labor force participation?

In order to understand the impact of increased labor force participation, we need to first visualize the labor market in 1970 when demand and supply were equal. Draw a diagram with wage rate (W) on the vertical axis and quantity of labor (L) on the horizontal axis. Draw an upward-sloping labor supply curve (S) and a downward-sloping labor demand curve (D). The point where these two curves intersect represents the equilibrium wage rate (W0) and employment level (L0) in 1970.

Increased labor force participation will lead to an increase in the supply of labor. This can be represented by a shift of the labor supply curve to the right. This will result in a new equilibrium with a different wage rate and employment level.

After the increase in labor force participation, the new equilibrium will occur at the point where the new supply curve intersects the demand curve for labor. This new point represents the new wage rate (W1) and employment level (L1). Since wages are sticky in a downward direction, it is likely that the wage rate will remain constant or increase slightly, while the employment level will increase.

Unemployment can be defined as the difference between the labor force and the number of people employed. Since the labor force has increased due to the rise in labor force participation but the employment level has also increased, the change in unemployment depends on the magnitudes of these changes. If the increase in the labor force is larger than the increase in employment, then unemployment will rise. If the increase in employment is larger than the increase in the labor force, then unemployment will decrease. In conclusion, as a result of increased labor force participation from women starting in the 1970s: 1. The wage rate is likely to remain constant or increase slightly due to the assumption of downward sticky wages. 2. The employment level will increase as there is a higher demand for labor associated with the increase in labor supply. 3. The unemployment level could either increase or decrease, depending on whether the increase in the labor force is greater than or less than the increase in employment.