13 - 1 labor, wages, and earnings purely competitive labor market monopsony model minimum wage...
TRANSCRIPT
13 - 1
Labor, Wages, and Earnings
Purely Competitive Labor Market
Monopsony Model
Minimum Wage Controversy
Unions WageDetermination
13 - 2
Labor, Wages, and Earnings
Purely Competitive Labor Market
Monopsony Model
Minimum Wage Controversy
Unions
Wages•Price paid for labor•Wage Rate = MRC
WAGES, SALARY AND EARNINGS
13 - 3
Labor, Wages, and Earnings
Purely Competitive Labor Market
Monopsony Model
Minimum Wage Controversy
Unions
PURELY COMPETITIVELABOR MARKET
Market Demand•Many firms
Market Supply•Numerous willing and able workers
“Wage Taker” Behavior
13 - 4
Labor, Wages, and Earnings
Purely Competitive Labor Market
Monopsony Model
Minimum Wage Controversy
Unions
LaborCosts
PURELY COMPETITIVE LABORMARKET EQUILIBRIUM
Labor Market
S
D (∑ mrp’s)
Wc
(1000)
Individual Firm
S = MRC
D = MRP
Wc
Q
W
Q
($10)
(5)
$10 $10 $10 $10 $10 $10
W
13 - 5
Labor, Wages, and Earnings
Purely Competitive Labor Market
Monopsony Model
Minimum Wage Controversy
Unions
DETERMINANTS OF RESOURCE DEMAND
Changes in Product
Demand
Changes in Productivity•More Resources•Better Resources•Technology
13 - 6
Labor, Wages, and Earnings
Purely Competitive Labor Market
Monopsony Model
Minimum Wage Controversy
Unions
• Changes in the price of substitute resources
Substitution effect
+ Output effect
= Net effect
• Changes in the price of complementary resources
DETERMINANTS OF RESOURCE DEMAND
13 - 7
Labor, Wages, and Earnings
Purely Competitive Labor Market
Monopsony Model
Minimum Wage Controversy
Unions
MONOPSONY MODEL•Single buyer for a type of labor
• “Wage Maker” Behavior
13 - 8
Labor, Wages, and Earnings
Purely Competitive Labor Market
Monopsony Model
Minimum Wage Controversy
Unions
WS
Q
MONOPSONISTICLABOR MARKET
13 - 9
Labor, Wages, and Earnings
Purely Competitive Labor Market
Monopsony Model
Minimum Wage Controversy
Unions
D = MRP
S
Wm
MRC
Qm
MONOPSONISTICLABOR MARKET
MRP = MRC
Qm units oflabor hired
W
Q
13 - 10
Labor, Wages, and Earnings
Purely Competitive Labor Market
Monopsony Model
Minimum Wage Controversy
Unions
D = MRP
S
Wm
MRC
Wc
Qm Qc
The competitivesolution would
result in a higherwage and greater
employment.
MONOPSONISTICLABOR MARKET
W
Q
13 - 11
Labor, Wages, and Earnings
Purely Competitive Labor Market
Monopsony Model
Minimum Wage Controversy
Unions
WAGE DIFFERENTIALS•Marginal Revenue Productivity
•Ability•Education and Training
• Investment in Human Capital
13 - 12
Labor, Wages, and Earnings
Purely Competitive Labor Market
Monopsony Model
Minimum Wage Controversy
Unions
13 - 13
Labor, Wages, and Earnings
Purely Competitive Labor Market
Monopsony Model
Minimum Wage Controversy
Unions
MINIMUM WAGECONTROVERSY
•Case Against Minimum Wage
13 - 14
Labor, Wages, and Earnings
Purely Competitive Labor Market
Monopsony Model
Minimum Wage Controversy
Unions
How the Minimum Wage Affects the Labor Market
Q
W
0
LaborsupplyLabor surplus
(unemployment)
Labordemand
Minimumwage
Quantitydemanded
Quantitysupplied
13 - 15
Labor, Wages, and Earnings
Purely Competitive Labor Market
Monopsony Model
Minimum Wage Controversy
Unions
MINIMUM WAGECONTROVERSY
Case Against Minimum Wage• Unemployment• Some small businesses shutdown• Benefits those who don’t need it
13 - 16
Labor, Wages, and Earnings
Purely Competitive Labor Market
Monopsony Model
Minimum Wage Controversy
Unions
MINIMUM WAGECONTROVERSY
Case For Minimum Wage•Fights monopsony• Increase productivity•Reduce turnover
13 - 17
Labor, Wages, and Earnings
Purely Competitive Labor Market
Monopsony Model
Minimum Wage Controversy
Unions
MINIMUM WAGECONTROVERSY
Evidence and Conclusions
• Creates unemployment• Labor welfare increases• Does stop monopsonists
13 - 18
Labor, Wages, and Earnings
Purely Competitive Labor Market
Monopsony Model
Minimum Wage Controversy
Unions
D1
S
Wc
Qc
THREE UNION MODELSDemand-Enhancement Model
W
Q
13 - 19
Labor, Wages, and Earnings
Purely Competitive Labor Market
Monopsony Model
Minimum Wage Controversy
Unions
Wu
Qu
D1
S
Wc
Qc
D2
...by increasingproduct demand
THREE UNION MODELSDemand-Enhancement Model
W
Q
13 - 20
Labor, Wages, and Earnings
Purely Competitive Labor Market
Monopsony Model
Minimum Wage Controversy
Unions
Wu
Qu
D1
S
Wc
Qc
D2
...by increasingproduct demand...by increasingproductivity
THREE UNION MODELSDemand-Enhancement Model
W
Q
13 - 21
Labor, Wages, and Earnings
Purely Competitive Labor Market
Monopsony Model
Minimum Wage Controversy
Unions
Wu
Qu
D1
S
Wc
Qc
D2
...by increasingproduct demand...by increasingproductivity...by increasingthe price ofsubstitutes
THREE UNION MODELSDemand-Enhancement Model
W
Q
13 - 22
Labor, Wages, and Earnings
Purely Competitive Labor Market
Monopsony Model
Minimum Wage Controversy
Unions
13 - 23
Labor, Wages, and Earnings
Purely Competitive Labor Market
Monopsony Model
Minimum Wage Controversy
Unions
D
Wc
Qc
THREE UNION MODELSExclusive or Craft Model
S1W
Q
13 - 24
Labor, Wages, and Earnings
Purely Competitive Labor Market
Monopsony Model
Minimum Wage Controversy
Unions
Wu
D
Wc
Qc
THREE UNION MODELSExclusive or Craft Model
Qu
S1
...restrictive membership policies
S2
W
Q
13 - 25
Labor, Wages, and Earnings
Purely Competitive Labor Market
Monopsony Model
Minimum Wage Controversy
Unions
Wu
D
Wc
Qc
THREE UNION MODELSExclusive or Craft Model
Qu
S1
...restrictive membership policies...restricting labor supply of the economy as a whole
S2
W
Q
13 - 26
Labor, Wages, and Earnings
Purely Competitive Labor Market
Monopsony Model
Minimum Wage Controversy
Unions
Wu
D
Wc
Qc
THREE UNION MODELSExclusive or Craft Model
Qu
S1
...restrictive membership policies...restricting labor supply of the economy as a whole…occupational licensing
S2
W
Q
13 - 27
Labor, Wages, and Earnings
Purely Competitive Labor Market
Monopsony Model
Minimum Wage Controversy
Unions
13 - 28
Labor, Wages, and Earnings
Purely Competitive Labor Market
Monopsony Model
Minimum Wage Controversy
Unions
Wc
Qc
THREE UNION MODELSInclusive or Industrial Model
D
S
...by organizing virtually all workers and thereby control of the supply curve for labor causing…
W
Q
13 - 29
Labor, Wages, and Earnings
Purely Competitive Labor Market
Monopsony Model
Minimum Wage Controversy
Unions
Wu
D
Wc
Qc
THREE UNION MODELSInclusive or Industrial Model
Qu
D
...by organizing virtually all workers and thereby control of the supply curve for labor
S
Qe
W
Q
13 - 30
Labor, Wages, and Earnings
Purely Competitive Labor Market
Monopsony Model
Minimum Wage Controversy
Unions
13 - 31
Labor, Wages, and Earnings
Purely Competitive Labor Market
Monopsony Model
Minimum Wage Controversy
Unions
WAGE INCREASESAND UNEMPLOYMENT
• Union members receive about 15% higher wages
• Unions create unemployment