Ch.11 Labor Market

responsiveness to changes in wages

elasticity of demand for labor measures:

% change quantity(L)/% change in wage

elasticity of demand for labor=

the intersection of supply and demand

equilbirum occurs at :

VMP(L)=wage rate

in competitive firms profits are maximized when labor is hired to the point where

workers

in the market supply curve when wages rise _____ also rise

MPP(L)

is the additional output from adding 1 more worker

dual labor market hypothesis

labor market is split into primary and secondary sectors

industrial union

represents all workers employed in a specific industry

craft unio

represents members of a specific craft or occupation

10%-20% higher

the average union wage is __________________ than the average nonunion wage within the same industry

economic distrimination

workers of equal ability and productivity are paid different wages or are otherwise discriminated against

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

what causes shifts in labor demand

at higher wages

when does income effect dominate substitution effect?

at lower wages

when does substitution effect dominate income effect?

insider-outsider theory

workers ar segregated into union and nonunion sectors

income effect

workers choose fewer hours when wages rise and more hours when they fall

Substitution effect

workers choose more hours as wages rise and less hours as wages fall

limitations to beckers theory

-adjustment costs of firing unproductive workers can be high -women may be less willing to move -women may choose more flexible career paths that do not penalize for extended absences

benefits of union membership

-higher wages and job benefits -greater job security against arbitrary or vindictive management

costs of union memberhsip

-membership dues -costs of strikes -loss of some individual flexibility

MPP(L)xMR

MRP(L)=

MRP(L)

amount of additional revenue 1 worker earns for the firm

gary becker

argued that discrimination is economically detrimental to all parties

unions

associations of employees that bargain with employers over the terms and conditions of work

non-discriminating firms

can hire from a larger supply of workers at lower wages, resulting in lower costs and greater profits

discriminating firms

must pay higher wages for "preferred" workers, resulting in highers costs and lower profits

union shop

nonunion workers can be hired but must join within a specified time

agency shop

nonunion workers may be hired but must pay union dues for its services

job crowding hypothesis

occupations are broken into predominantly male and female jobs

segmented labor markets

occur when labor markets split into seperate parts, leading to wage differentials

closed shop

only union members are hired

positively

the market supply curve is ______ sloped.

the supply of labor

the time an individual is willings to work at various wage rates