ECON 1100 Chapter Notes - Chapter 14: Minimum Wage Law, Protectionism, Price Floor
23 Apr 2016
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Document Summary
Among the infinite amount of labour markets, there are several reasons for wage differentials: Working conditions (compensating differentials equilibrium wage differential) Inherited skills (small and relatively inelastic supply coupled with large demand equilibrium) Human capital (investment in labour skills is an acquired skill, higher future wages) As long as human capital is costly to acquire, some wage differentials will persist in equilibrium. As demand for university education goes up, their wages go up, but people get more education so the supply goes up and wages go back down a bit, and therefore some of the effect is offset. Discrimination occurs when the marketplace offers different opportunities to similar individuals (same level of education), who differ only by race, ethnic group, sex age or other personal characteristics not by skill/ability. Technological and globalization has weakened the wage fairness. Government policy keeps the discrimination effective until broken (long lingering effects) Firms discriminate against individuals, but other firms will hire them (economic pressure)
