Chapter 15: Wage Determination

UNION WAGE MODELS -exclusive or craft union model -demand-enhancement model -inclusive or industrial model

Abundant capital is the reason for the HIGH PRODUCTIVITY OF LABOR in industrially advanced economies.

OCCUPATIONAL LICENSING refers to pressuring federal, state and local governments to pass laws that say that some group can practice their trade only if they meet certain requirments

*REAL HOURLY COMPENSATION* is equal to wages and salaries plus employers' contributions to social insurance and private benefit plans

*A UNION THAT RAISES WAGE* rates by attempting to gain control over the firm's total labor supply and threatens to withhold via a strike is using the inclusive Union model

A LABOR MARKET MONOPSONY IS A MARKET in which a single employer of labor has substantial buying (hiring) power

In a purely competitive labor market,individual firms and workers are WAGE TAKERS, because neither can exert any control over the market wage rate

A MONOPSONY is a market in whicha single firm has substantial buying (hiring) power.

A BILATERAL MONOPOLY is a monopolistic seller of labor that controls labor supply and can influence wage rates, but it faces a monopolistic buyer of labor that can affect wages by altering the amount of labor that it employs.

In what cases can the minimum wage increase wage rates without causing significant unemployment?

What are the CRITICISMS OF MINIMUM WAGE? -an above-equilibrium minimum wage will simply cause employers to hire fewer workers -it is poorly targeted to reduce household poverty

Reasons for the HIGH PRODUCTIVITY OF LABOR - the efficiency and flexibility of management -the vast size of the domestic market - vast market -a business, social, and political environment that emphasizes production and productivity -the increased specialization of production enabled by free-trade agreements with other nations -plentiful capital equipment

Reasons for the HIGH PRODUCTIVITY OF LABOR -labor quality -plentiful capital and equipment -advanced technology -access to abundant natural resources

The BILATERAL MONOPOLY UNION MODEL is a combination of the monoposony model and the inclusive unionism model

CRAFT UNIONS are unions whose members possess a particular skill such as carpentry, masonry or plumbing

The MOST IMPORTANT goal of a labor union is to raise wages.

Even in a COMPETITIVE LABOR MARKET, the higher wage rate might prompt firms to find more productive tasks for low-paid workers, thereby raising productivity.

The PRIMARY TOOL USED BY UNIONS to increase the use of union-produced goods and services is POLITICAL LOBBYING.

The point at which the MARKET LABOR DEMAND CURVE and the MARKET LABOR SUPPLY CURVE intersect determines the equilibrium wage rate and level of labor employed in a purely competitive labor market

The REAL WAGE is the quantity of goods and services a worker can obtain from nominal wages

Abundant capital goods and natural resources is one reason for the HIGH PRODUCTIVITY OF LABOR in industrially advanced economies

The WAGE RATE OR PRICE PAID PER UNIT LABOR OF SERVICES is multiplied by the number of hours worked, which determines labor earnings

AVERAGE LEVEL OF WAGES, like the general level of prices, includes a wide range of different wage rates

The passage of FAIR LABORS STANDARDS ACT established a federal minimum wage.

A NOMINAL WAGE is the amount of money received per hour, day, or year in return for labor services performed without any adjustment for inflation

UNIONS INCREASE THE DEMAND FOR UNION LABOR by altering the price of other direct or indirect production of inputs..

The greater the LEVEL OF PRODUCTIVITY OF LABOR, the greater the demand for that labor

UNIONS artificially restrict labor supply through: -limiting quantity of new members -long apprenticeships -high initiation fees

The MONOPSONIST'S SUPPLY CURVE is also its average cost of labor curve

What explains the EFFECTS ON EQUILIBRIUM WAGE AND LABOR if an industrial union is formed? -a higher above-equilibrium wage rate -a perfectly elastic labor supply

UNION MODELS attempts to increase the demand for union labor by raising demand for the products union members produce and or altering the prices of related inputs?the demand-enhancement model

When unions artificially restrict the supply of labor this is referred to as EXCLUSIVE OR CRAFT UNIONISM