Bài giảng MicroEconomics - Chapter 13 Wage Determination

Wage DeterminationMcGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.Labor, Wages, and EarningsWagesPrice paid for laborDirect pay plus fringe benefits Wage rateNominal wageReal wageGeneral level of wagesLO113-2Role of ProductivityLabor demand depends on productivityU.S. labor is highly productivePlentiful capitalAccess to abundant natural resourcesAdvanced technologyLabor qualityOther factorsLO113-3Real Wages and ProductivityLong-run trend of average real wages in the U.S.Real Wage Rate (Dollars)Quantity of LaborD1900S1900D1950D2000D2020S1950S2000S2020LO113-4Real Wages and ProductivityLO113-5Competitive Labor MarketMarket demand for laborSum of firm demandExample: carpentersMarket supply for laborUpward slopingCompetition among industriesLabor market equilibriumMRP = MRC ruleLO213-6($10)WC($10)WCWage Rate (Dollars)Labor MarketQuantity of LaborWage Rate (Dollars)Individual FirmQuantity of LaborQC(1000)00d=mrpqC(5)s=MRCCompetitive Labor MarketLO2D=MRP(∑ mrp’s)Sebac13-7Monopsony ModelEmployer has buying powerCharacteristicsSingle buyerLabor immobileFirm “wage maker”Firm labor supply is upward slopingMRC higher than wage rateEquilibrium LO313-8 Examples of monopsony powerMonopsony ModelWage Rate (Dollars)Quantity of Labor0SMRPMRCcbaWcWmQmQcLO313-9Monopsony PowerMaximize profit by hiring smaller number of workersExamples of monopsony powerNursesProfessional AthletesTeachersThree union modelsLO313-10Demand Enhancement ModelUnion modelIncrease product demandAlter price of other inputsWage Rate (Dollars)Quantity of LaborWuQcQuWcD1D2SIncreaseIn DemandLO413-11Wage Rate (Dollars)Quantity of LaborDS1QcWcS2WuQuDecreaseIn SupplyCraft Union ModelLO413-12Industrial Union ModelInclusive unionismAuto and steel workersWage Rate (Dollars)Quantity of LaborDSQcWcWuQuQeabeLO413-13Bilateral Monopoly ModelMonopsony and inclusive unionismSingle buyer and sellerNot uncommonIndeterminate outcomeDesirability LO413-14Bilateral Monopoly ModelLO4Wage Rate (Dollars)Quantity of LaborD=MRPSQcWcWuQu=QmMRCWma13-15The Minimum Wage ControversyCase against minimum wageCase for minimum wageState and locally set ratesEvidence and conclusionsLO513-16Differences across occupationsWhat explains wage differentials?Marginal revenue productivityNoncompeting groupsAbilityEducation and trainingCompensating differencesLO5Wage Differentials13-17Wage DifferentialsLO513-18Wage DifferentialsWorkers prevented from moving to higher paying jobsMarket imperfectionsLack of job informationGeographic immobilityUnions and government restraintsDiscriminationLO513-19Pay for PerformanceThe principal-agent problem Incentive pay planPiece ratesCommissions or royaltiesBonuses, stock options, and profit sharingEfficiency wagesNegative side-effectsLO613-20