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Lecture 24

Lecture 24-Labour Markets

4 Pages
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Department
Economics
Course Code
ECO101H1
Professor
Jack Carr

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Thursday, January 14, 2010. Labour Markets
Impact of Union
Union raises wage rate (Wu > W c)
Union reduces employment (Nu < Nc) in this industry
Note: union may try to increase jobs by shifting DD to right (support import restrictions,
encourage members to purchase union made goods)
Implication of Profit-Maximizing Behaviour
W = VMP
Perfect Competition: VMP = P * MP
Imperfect Competition: VMP = MR * MP
:KDWIDFWRUV³FRUUHODWHV´DUHDVVRFLDWHGZLWKKLJK903RIZRUNHUV"
Correlates of VMP
Education
Males, 2001, Full-Time
High School: $41,218
College: $49,224
University: $71,352
Wc
SS
DD (= VMP)
Wu
u = union
c = competitive
market
W
Nu
Nc
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Thursday, January 14, 2010. Labour Markets Impact of Union Union raises wage rate (Wu > W c) Union reduces employment (Nu < Nc) in this industry Note: union may try to increase jobs by shifting DD to right (support import restrictions, encourage members to purchase union made goods) Implication of Profit-Maximizing Behaviour W = VMP Perfect Competition: VMP = P * MP Imperfect Competition: VMP = MR * MP :KDWIDFWRUV³FRUUHODWHV´DUHDVVRFLDWHGZLWKKLJK903RIZRUNHUV" Correlates of VMP Education Males, 2001, Full-Time High School: $41,218 College: $49,224 University: $71,352 Wc SS DD (= VMP) Wu u = union c = competitive market W Nu Nc www.notesolution.com Experience (Age) Males, 2001, Full-Time University, Age 25 to 34: $52,944 University, Age 35 to 44: $74,279 University, Age 45 to 54: $79,496 Full-Time, University Degree, Age 25 to 34 Males: $52,944 Females: $40,616 (76.7%) Canada Full-Time Percent Earnings Females Librarians $54,648 77.2 Civil Engineers $72,938 9.2 Pay Equity RU³&RPSDUDEOH:RUWK´ 1. Earnings Gap: Productivity Difference or Discrimination? Discrimination = Earnings Gap Not Explained by Differences in Productivity 2. Pay Equity ³(TXDOSD\IRUZRUNRIHTXDOYDOXH´ Social concern: certain jobs are held mostly by females, and pay less than ³FRPSDUDEOH´MREVKHOGPRVWO\E\PDOHV 3. Economic Issues 3.1 Assessment of skills, etc, of jobs VS. market-determined wage 3.2 Unintended Side Effects www.notesolution.com Example: Librarians and Engineers 1. Earnings Difference 2. Pay Equity: Legislate WL = WE Result: Excess supply of librarians Employment of librarians declines Librarians Employment declines from Q to QL 3. After Pay Equity : Suppose Demand for Engineers Increases Q WL Librarians SS DD SS WE DD W Engineers N0 N1 WL SS DD WE QL Q www.notesolution.com Engineers (1) If wE XQFKDQJHGH[FHVVGHPDQGIRUHQJLQHHUV³6KRUWDJH´ (2) If wE rises to wE1, then: (i) If wL does not rise, violate pay equity (ii) If wL does rise, employment of librarians falls further WE SS DD WE1 QE DD1 www.notesolution.comThursday, January 14, 2010. Labour Markets Impact of Union W SS W u u = union c = competitive W c market DD (= VMP) Nu N c Union raiseswage rate (W u W )c Union reduces employment (N < N ) in this industry u c Note: union may try to increase jobs by shifting DD to right (support import restrictions, encourage members to purchase union made goods) Implication of Profit-Maximizing Behaviour W = VMP Perfect Competition: VMP = P * MP Imperfect Competition: VMP = MR * MP :K,91,.9478 .4770O,908 ,70,884.L,90ZL9KKLJK!41Z47N078 Correlates of VMP Education Males, 2001, Full-Time High School: $41,218 College: $49,224 University: $71,352 www.notesolution.com
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