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