ECON 102 Lecture Notes - Lecture 23: Marginal Revenue Productivity Theory Of Wages, Pullman Strike, Per Capita Income

• School: University of Illinois
• Department: Economics
• Course: ECON 102
• Professor: Isaac Dilianni--- Universityof Illinois

Document Summary

The pullman strike (1894): federal troops guarded a train. Shifts labor supply curve to the left, creating a higher wage for unionized workers but a smaller number of higher paying jobs. Change in quantity looks for other jobs, creating a fall in wage for non-unionized industries. Per capita income have steadily raised without unions. What determines wages? (not iron law of wages (cost of subsistence/reproduction or. Marxism (amount of bargaining power that workers have relative to employers) Marginal (revenue) productivity theory of wages: the theory that in a competitive market a worker"s wage is determined by that worker"s marginal revenue product. Marginal revenue product: the marginal product of labor multiplied by marginal revenue. Firms operate in the area of diminishing marginal returns. Relationship between wage (y) and quantity (x) is demand curve of labor. Only way to change demand curve itself is to change fixed input.