Bài giảng MicroEconomics - Chapter 013 Wage Determination

WageDeterminationChapter 13Chapter ObjectivesLabor productivity and real compensation Wage and employment determination Competitive and monopsony marketsUnions and wage ratesCauses of wage differentials“Pay-for-Performance” plans13-2Labor Wages and EarningsWagesPrice paid for laborDirect pay plus fringe benefits Wage rateNominal wageReal wageGeneral level of wages13-3Level of Wages Across NationsHourly Wages of Production WorkersHourly Pay in U.S. Dollars, 2006Source: U.S. Bureau of Labor Statistics, 2006GermanySwedenSwitzerlandUnited KingdomAustraliaCanadaItalyFranceUnited StatesJapanSpainKoreaTaiwanMexico0 5 10 15 20 25 30 3513-4Role of ProductivityLabor demand depends on productivityU.S. labor highly productivePlentiful capitalAccess to abundant natural resourcesAdvanced technologyLabor qualityOther factors13-5Real Wages Long run trend of average real wages in the U.S.Variation across occupationsReal Wage Rate (Dollars)Quantity of LaborD1900S1900D1950D2000D2020S1950S2000S202013-6Competitive Labor MarketMarket demand for laborSum of firm demandExample: carpentersMarket supply for laborUpward slopingCompetition among industriesLabor market equilibriumMRP = MRC rule13-7Wage Rate (Dollars)Wage Rate (Dollars)($10)WC($10)WCLabor MarketIndividual FirmQuantity of LaborQuantity of LaborQC(1000)00D=MRP(∑ mrp’s)d=mrpqC(5)s=MRCSecbaCompetitive Labor Market13-8Monopsony ModelEmployer has buying powerCharacteristicsSingle buyerLabor immobileFirm “wage maker”Firm labor supply upward slopingMRC higher than wage rateEquilibrium 13-9Wage Rate (Dollars)Quantity of Labor0SMRPMRCcbaWcWmQmQc Examples of monopsony powerMonopsony Model13-10Demand Enhancement ModelUnion modelIncrease product demandAlter price of other inputsWage Rate (Dollars)Quantity of LaborWuQcQuWcD1D2SIncreaseIn Demand13-11Craft Union ModelEffectively reduce supply laborRestrict immigrationReduce child laborCompulsory retirementShorter workweekExclusive unionismOccupational licensing13-12Wage Rate (Dollars)Quantity of LaborDS1QcWcS2WuQuDecreaseIn SupplyCraft Union Model13-13Industrial Union ModelInclusive unionismAuto and steel workersWage Rate (Dollars)Quantity of LaborDSQcWcWuQuQeabe13-14Union ModelsAre unions successful?Wages 15% higher on averageConsequences:Higher unemploymentRestricted ability to demand higher wages13-15Bilateral MonopolyMonopsony and inclusive unionismSingle buyer and sellerNot uncommonIndeterminate outcomeDesirability 13-16Bilateral MonopolyWage Rate (Dollars)Quantity of LaborD=MRPSQcWcWuQu=QmMRCWma13-17Minimum WageCase against minimum wageCase for minimum wageState and locally set ratesEvidence and conclusions13-18Wage DifferentialsAverage Annual Wages, 2007 SurgeonsAircraft PilotsPetroleum EngineersFinancial ManagersLaw ProfessorsChemical EngineersDental HygienistsRegistered NursesPolice OfficersElectriciansTravel AgentsBarbersRetail SalespersonsRecreation WorkersTeacher AidesFast Food Cooks$191,410148,810113,890106,20095,51084,24064,91062,48050,67048,10032,19025,86024,53023,79022,82016,860Source: Bureau of Labor Statistics, 2006OccupationAnnual Average Wages13-19Labor Supply and DemandDifferences across occupationsExplains wage differentialsMarginal revenue productivityNoncompeting groupsAbilityEducation and trainingCompensating differences13-20Education and Annual EarningsEducationalAttainmentAnnual Earnings (Thousands of Dollars)AgeProfessional DegreeBachelor’s DegreeAssociate’s DegreeHigh School Diploma13-21Wage DifferentialsWorkers prevented from moving to higher paying jobsMarket imperfectionsLack of job informationGeographic immobilityUnions and government restraintsDiscrimination13-22Pay for PerformanceThe principal-agent problem Incentive pay planPiece ratesCommissions or royaltiesBonuses, stock options, and profit SharingEfficiency wagesNegative side-effects13-23Are CEOs Overpaid?U.S. CEO salaries relatively highGood decisions enhance productivityLimited supply, high MRPIncentive to raise productivity at all levelsHigh salary bias by board members Unsettled issue13-24Key Termswage ratenominal wagereal wagepurely competitive labor marketmonopsonyexclusive unionismoccupational licensinginclusive unionismbilateral monopolyminimum wagewage differentialsmarginal revenue productivitynoncompeting groupshuman capitalcompensating differencesincentive pay plan13-25Next Chapter PreviewRent, Interest,and Profit13-26