Chapter 18
employer-based discrimination
- I prefer to hire group x over group y - least likely to withstand market forces - not maximizing profits
demand for labor & marginal product of labor
- a firm is willing to hire a worker when the worker increases the firm's revenues more than the firm's costs - MPL - the increase in costs from hiring an additional worker affect the worker's wage
types of preference-based discrimination
- employer based - employee based - customer based - governmental
individual supply of labor supply curve
"backbend"
labor market equillibrium
- occurs at the intersection of the market supply & demand curves from labor - a firm will hire workers whenever the marginal product of labor exceeds the market wage (MPL > W) - Thus, at equilibrium in the labor market, the marginal product of labor equals the market wage (MPL = W)
human capital theory
- treats acquisition of education & training as "investment" decisions by individuals - assumes individuals treat these decisions as rational investment decisions & compare benefits against coss
customer-based discrimination
I prefer services from group x over group y
employee-based discrimination
I prefer to work with group x over group y
law of diminishing returns
each individual worker that is hired will add less value than the one hired previously
non-discriminating employers
earn higher profits, succeed more
statistical discrimination
decisions about individuals based on a group of characteristics. repeated interaction reduced statistical discrimination
compensating differential
difference in wages that offset differences in working conditions
bigot customers...
encourage discrimination
governmental discrimination
government power used to favor one group over another
dangerous jobs
have a low supply & high demand, and therefore have higher wages
MPL falls when...
more labor is used
high supply + low demand =
much lower wage demand
if wage rate is high...
not many will be hired and vice versa
unions may...
restrict supply or negotiate higher wages
wages determined by
supply and demand
wages in unionized jobs...
tend to be higher
market supply of labor supply curve
upward sloping as usual
