Micro Chapter 17 Wage Determination

Unions can also boost wage rates by ________ the supply of labor, and over the years organized labor has favored policies to do just that. For example, labor unions have supported legislation that has (1) restricted permanent immigration, (2) reduced child labor, (3) encouraged compulsory retirement, and (4) enforced a shorter workweek.

reducing

_________is the quantity of goods and services a worker can obtain with nominal wages; _____ wages reveal the "purchasing power" of nominal wages.

real wage

The wage-raising actions achieved by both exclusive and inclusive unionism __________ employment in unionized firms.

reduce

__________ contend that an above-equilibrium minimum wage (say, Wu) will simply cause employers to hire fewer workers. - is that it is "poorly targeted" to reduce household poverty.

Critics

Because the ________ productivity of these players is so high, they are in very high demand by sports teams. This high demand leads to their extremely high salaries. In contrast, most workers generate much more modest revenue for their employers. This results in much lower demand for their labor and, consequently, much lower wages

MR

To determine a firm's total revenue from employing a particular number of labor units, we sum the ______s of those units.

MRP

Unions can increase the demand for their labor by increasing the demand for the goods or services they help produce. _________ is the main tool for increasing the demand for union-produced goods or services.

Political lobbying

_______ can also increase the demand for union labor by altering the price of other inputs.

Unions

__________ are the price that employers pay for labor. They take the form of not only direct money payments such as hourly pay, annual salaries, bonuses, commissions, and royalties, but also fringe benefits such as paid vacations, health insurance, and pensions. Unless stated otherwise, we will use the term _________ to mean all such payments and benefits converted to an hourly basis.

Wages

___________ because in its pure form there is a single seller and a single buyer. The union is a monopolistic "seller" of labor that controls labor supply and can influence wage rates, but it faces a monopsonistic "buyer" of labor that can also affect wages by altering the amount of labor that it employs

bilateral monopoly

unions have sometimes sought to increase the demand for their labor by supporting policies that will reduce or hold down the price of a ________ resource.

complementary

This is especially true of _________, whose members possess a particular skill, such as carpenters, brick masons, or plumbers. _______have frequently forced employers to agree to hire only union members, thereby gaining virtually complete control of the labor supply. Then, by following restrictive membership policies—for example, long apprenticeships, very high initiation fees, and limits on the number of new members admitted—they have artificially restricted labor supply.

craft unions

the greater the productivity of labor, the greater is the ________ for it.

demand

In the _____________ , a union increases the wage rate by increasing labor demand through actions that increase product demand or alter the prices of related inputs.

demand-enhancement union model

the supply of labor faced by an individual firm is perfectly _____

elastic

The intersection of the market labor demand curve and the market labor supply curve determines the _________ and level of employment in a purely competitive labor market

equilibrium wage rate

Such practices result in higher wage rates and constitute what is called __________-. By excluding workers from unions and therefore from the labor supply, craft unions succeed in elevating wage rates.

exclusive unionism

The nation's labor force has _______ significantly over the decades. But as a result of the productivity-increasing factors we have mentioned, increases in labor demand have outstripped increases in labor supply.

grown

To find the total, or market, labor demand curve for a particular labor service, we sum _______ the labor demand curves (the marginal revenue product curves) of the individual firms,

horizontally

Another source of wage differentials is differing amounts of _________ which is the personal stock of knowledge, know-how, and skills that enables a person to be productive and thus to earn income. Such stocks result from investments in human capital.

human capital

Another way of resolving a principal-agent problem is through some sort of __________ that ties worker compensation more closely to worker output or performance. Such incentive pay schemes include piece rates; commissions and royalties; bonuses, stock options, and profit sharing; and efficiency wages.

incentive pay plan

Suppose a strong industrial union is formed in a monopsonist labor market rather that a competitive labor market, thereby creating a combination of the monopsony model and the ?

inclusive unionism model

Economists use the term ________ broadly to apply to (1) blue- and white-collar workers of all varieties; (2) professional people such as lawyers, physicians, dentists, and teachers; and (3) owners of small businesses, including barbers, plumbers, and a host of retailers who provide labor as they operate their own businesses.

labor

Unions recognize that their ability to influence the demand for labor is?

limited

Because the monopsonist is the only employer in the labor market, its _________ (labor) cost exceeds the wage rate.

marginal resource

The firm in a purely competitive labor market ________- its profit by hiring workers up to the point at which its wage rate equals MRP.

maximizes

As is true of monopoly power, there are various degrees of monopsony power. In pure monopsony such power is at its _________ because only a single employer hires labor in the labor market.

maximum

Since the passage of the Fair Labor Standards Act in 1938, the United States has had a federal ?

minimum wage

The purpose of the _________ is to provide a "wage floor" that will help less-skilled workers earn enough income to escape poverty.

minimum wage

Other things equal, the ____________ maximizes its profit by hiring a smaller number of workers and thereby paying a less-than-competitive wage rate

monopsonist

a market structure in which there is only a single buyer. A labor market _____ has the following characteristics: There is only a single buyer of a particular type of labor. The workers providing this type of labor have few employment options other than working for the monopsony because they are either geographically immobile or because finding alternative employment would mean having to acquire new skills. The firm is a "wage maker" because the wage rate it must pay varies directly with the number of workers it employs.

monopsony

Where union labor and another resource are complementary, a price decrease for the other resource will increase the demand for union labor through ?

output effect

An industrial union that includes virtually all available workers in its membership can put firms under great ________ to agree to its wage demands. Because of its legal right to strike, such a union can threaten to deprive firms of their entire labor supply.

pressure

As it applies to labor, the _____________ is one of workers pursuing their own interests to the detriment of the employer's profit objective.

principal-agent problem

But the interests of firms and workers are not identical. As a result, a _______________ arises. Workers may seek to increase their utility by shirking on the job, that is, by providing less than the agreed-upon effort or by taking unauthorized breaks. They may improve their well-being by increasing their leisure during paid work hours, without forfeiting income. The night security guard in a warehouse may leave work early or spend time reading a novel rather than making the assigned rounds. A salaried manager may spend time away from the office visiting with friends rather than attending to company business.

principal-agent problem

The _____________ is usually associated with the possible differences in the interests of corporate stockholders (principals) and the executives (agents) they hire. But this problem extends to all paid employees. Firms hire workers because they are needed to help produce the goods and services the firms sell in their attempts to turn a profit. Workers are the firms' agents; they are hired to advance the interest (profit) of the firms. The principals are the firms; they hire agents to advance their goals. Firms and workers have one interest in common: They both want the firm to survive and thrive. That will ensure profit for the firm and continued employment and wages for the workers.

principal-agent problem

______ In this type of market: Numerous firms compete with one another in hiring a specific type of labor. Each of many qualified workers with identical skills supplies that type of labor. Individual firms and individual workers are "wage takers" since neither can exert any control over the market wage rate.

purely competitive labor market

Your_____ wage depends on your nominal wage and the prices of the goods and services you purchase.

real

Those requirements might include level of education, amount of work experience, the passing of an examination, and personal characteristics ("the practitioner must be of good moral character"). Members of the licensed occupation typically dominate the licensing board that administers such laws. The result is_________ which often leads to policies that serve only to restrict entry to the occupation and reduce labor supply.

self-regulation

Voting patterns and surveys make it clear, however, that the minimum wage has ______ political support.

strong

The competitive employer is a wage _____ and employs workers at the point where the wage rate (= MRC) equals MRP.

taker

The monopsonist's supply curve is ________ because the firm must pay higher wage rates if it wants to attract and hire additional workers. This same curve is also the monopsonist's average-cost-of-labor curve.

upsloping

The supply curve for each type of labor slopes _______, indicating that employers as a group must pay higher wage rates to obtain more workers.

upward

Hourly wage rates and annual salaries differ greatly among occupations. Listed average annual salaries for a number of occupations to illustrate such occupational ?

wage differentials

________ is the price paid per unit of labor services, in this case an hour of work.

wage rate

________- is the amount of money received per hour, day, or year.

nominal wage

__________ if abused, results in above-competitive wages and earnings for those in the licensed occupation

licensing