ECON 2101 XI

Age, Disabilities, and Sexual Orientation

-Age Discrimination in Employment Act of 1967 -Americans with Disabilities Act of 1990 -Employment Non-Discrimination Act

demographic changes

-changes in population -immigration patterns -labor force participation rates (percentage of individuals in a group who enter the labor force)

Factors that change labor demand

-changes in product demand -changes in productivity -changes in the prices of other inputs

Why would a market labor supply curve SHIFT? (not a point on the curve shift, but the entire solution curve)

-demographic changes -non-wage aspects of jobs -wages paid in other occupations -non-wage income

Factors that affect the elasticity of demand for labor

-elasticity of demand for the product -ease of input sustainability -labor's share of total production costs

Taft-Hartley Act

-prohibited closed shops -restrictions on union shops -restrictions on agency shops -included right-to-work laws

because each firm is too small to affect the larger market, how much labor can it hire at the market-determined wage?

ALL THE LABOR IT WANTS

VMP_L = ? in the competitive case

VMP_L = MRP_L

industrial union

all workers employed in a specific industry (ex. auto workers (UAW) and public employees (AFSCME)).

Equal Pay Act of 1963

amended Fair Labor Standards Act of 1938 (requires that men and women receive equal pay for equal work)

changes in product demand

anything that changes the price of the product in competitive markets will shift the firm's demand for labor

an individual labor supply curve is ________-________

backward bending

job-crowding hypothesis

breaks occupations into predominately male and female jobs

Civil Rights Act of 1964

cannot refuse to hire someone based on individual discriminations

non-wage income

changes in income from sources other than working (like a trust) -> hours worked declines

changes in the prices of other inputs

changes in input prices can affect the demand for labor through their effect on capital prices

Competitive firms hire labor from where?

competitive labor markets

demand for labor

derived from the demand for the firm's product and the productivity of labor

in the long run, when all production factors can be adjusted, elasticity of demand for labor tends to be more __________.

elastic

agency shop

employees are not required to join the union, but must pay dues to compensate the union for its services

yellow dog contracts

employees are required to sign enforceable contracts in which they agreed not to join a union as a condition of employment

an elastic demand for labor means what?

employment is more responsive to wage rates (inelastic -> employment is not responsive to wage rates)

Executive Order 11246 - Affirmative Action

extended selection criteria to college admissions, etc. and gives minorities an upper hand (Law School at Michigan accepted people based on race to improve diversity and it was ruled acceptable by Supreme Court in Grutter v Bollinger)

substitution effect

higher wages mean that the value of work has increased, and the opportunity costs of leisure are higher; hence, work is substituted in place of leisure

income effect

higher wages mean that you can maintain the same standard of living by working fewer hours. The impact on labor supply is generally negative

The constant slope of market labor supply curves comes from: _______ prices means ______ quantities supplied.

higher; higher

market supply for labor (S_L) is the __?

horizontal sum of the individual labor supply curves in the market

the elasticity of demand for labor measures what?

how responsive the quantity of labor demanded is to changes in wages

non-wage aspects of jobs

if a manager can increase pleasantness, safety, or status of a job -> labor supply will increase (ex. airline companies increase number of people working in mundane jobs by allowing them to fly anywhere for free)

labor's share of total production costs

if labor's share of total costs is small, the demand for labor will tend to be rather inelastic

changes in productivity

increasing worker productivity means a shift to the right as firms are willing to pay higher wages

In the short run, when labor is the only truly variable factor of production, elasticity of demand for labor is more _________.

inelastic

market demand for labor (is/is not) a summation of the demand for labor by all firms in the market

is not

segmented labor market

labor markets split into separate parts: this leads to different wages paid to different sectors even though both markets are highly competitive

right-to-work laws

laws that permitted states to outlaw union shops

Labor unions

legal associations of employees that bargain with employers over terms and conditions of work, including wages, benefits, and working conditions

When the labor supply curve is positively sloped, income is more important than _______ at the given wage levels

leisure: higher wages means more hours worked

When the labor supply curve is negatively sloped, income is (less/more) important than leisure at the given wage levels

less: higher wages means less hours worked

the value of the marginal is the same/similar to what in a perfectly competitive market?

marginal revenue product of labor

the substitution effect encourages individuals to work ____ as wages _______.

more; rise

ease of input sustainability

the more difficult it is to substitute capital for labor, the more INELASTIC the demand for labor will be (ex. pilots & commercial airplanes: pilots able to secure higher wages); the easier it is to substitute capital for labor, the less bargaining power workers have, and labor demand tends to be more elastic

elasticity of demand for the product

the more price elastic the demand for a product, the greater the elasticity of demand for labor (higher wages = higher product prices = more easily consumers substitute away from product = more workers are unemployed)

marginal revenue product

the value of another worked to the firm (equal to marginal physical product of labor times marginal revenue)

value of the marginal product

the value of the marginal product of labor (VMP_L) is equal to the marginal physical product of labor times price: MPP_L * P

When the labor supply curve is negatively sloped, the substitution effect is _______ than the income effect

weaker

at which point would a firm decide to no longer hire workers?

when the going wage for labor is equal to MRP_L (if more than one point satisfies this, then whichever has the most quantity output)

economic discrimination

when workers of equal ability are paid different wages or in any other way discriminated against because of race, color, religion, gender, age, national origin, sexual orientation, or disability

Activities are divided into two categories: ____ and _______

work; leisure

insider-outsider theory

workers are segregated into those who belong to unions and those who are unemployed or are nonunion workers

closed shop

workers must belong to the union before they can be hired

Why has jobs in the US changed since our parents' generation?

1. shift from manufacturing to services 2. significant growth in international trade and foreign direct investment 3. internet transformed the manufacturing process

Equation for elasticity of labor

E_L = (%ΔQ_L)/(%ΔW)

t/f: market demand is a horizontal summation of individual firm demands

FALSE; that's supply!!

MRP_L equation

MRP_L= MPP_L * MR (marginal revenue product = marginal physical product of labor * marginal revenue)

leisure

all activities that do not involve paid work

union shops

nonunion hires must join the union within a specified period of time (usually 30 days)

an elastic demand for labor is one which the absolute value of the elasticity is more than: __?

one (1)

an inelastic demand for labor is one which the absolute value of the elasticity is less than: __?

one (1)

elasticity of demand for labor

percentage change in the quantity of labor demanded divided by the percentage change in the wage rate

the substitution effect for labor supply is always ________; it leads to more _____ __ ____ when the ____ ____ _________

positive; hours of work; wage rate increases

Individual labor supply curves are backward-bending. Market labor supply curves are generally __?

positively sloped (linearly; a function, constant slope)

craft union

represents members of a specific craft or occupation (such as air traffic controllers: PATCO, truck drivers (Teamsters), and teachers (AFT))

wages in alternative jobs

rising wages in growth industries will shrink the supply of labor available to firms in other industries (if the individual's skills are marketable in both/all the given industries)

dual market hypothesis

splits market into primary and secondary sectors. primary: jobs that offer high wages, good working conditions, job stability, advancement opportunities secondary: low wages and benefits, poor working conditions, high labor turnover, little chance of advancement

When the labor supply curve is positively sloped, the substitution effect is _______ than the income effect

stronger

the income effects counteracts the ___________ ______

substitution effect

Generalized market equilibrium in competitive labor markets require that we take into account the industry ______ and ______ for labor

supply; demand

marginal physical product of labor (MPP_L)

the additional output a firm receives from employing an added unit of labor (MPP_L = ΔQ/ΔL)

supply of labor

the amount of time an individual is willing to work at various wage rates