Transcript
28 - 1Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
Wage Determination
HELP
WANTED
28C H A P T E R
28 - 2Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
Wages Defined...Wages - - Salary - - Earnings
Nominal Wages
Real Wages
International differences...
LABOR, WAGES, AND EARNINGS
28 - 3Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
0 4 8 12 16 20 24 28 32Germany
SwitzerlandDenmarkSweden
JapanUnited States
FranceItaly
United KingdomAustralia
CanadaKorea
TaiwanPortugal
GLOBAL PERSPECTIVEHourly Wages of Production Workers,Selected Nations
Source: U.S. Bureau of Labor Statistics
Hourly Pay in U.S. Dollars, 1999
28 - 4Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
GENERAL LEVEL OF WAGES
Role of Productivity• Plentiful Capital• Abundant Natural Resources
• Advanced Technology• Labor Quality• Intangible Factors
28 - 5Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
REAL WAGES ANDPRODUCTIVITY
Growth in real income (earnings)
Growth in output per worker-hour
Can only grow at
about the same rate!
Secular Growth of Real Wages
28 - 6Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
PURELY COMPETITIVELABOR MARKET
Purely competitive labor market:
Many Firms
Numerous Qualified Workers
“Wage Taker” Behavior
Market Demand for Labor
Market Supply of Labor
28 - 7Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
Non-LaborCosts
LaborCosts
LABOR SUPPLY AND DEMANDPURELY COMPETITIVE MARKET
Labor Market
S
D = MRP( mrp’s)
Wc
(1000)
Individual Firm
S = MRC
d = mrp
Wc
Quantity of Labor
Wa
ge
Ra
te (
do
llars
)
Quantity of Labor
($10)
(5)
$10 $10 $10 $10 $10 $10
IncludesNormalProfit
28 - 8Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
Non-LaborCosts
LaborCosts
IncludesNormalProfit
LABOR SUPPLY AND DEMANDPURELY COMPETITIVE MARKET
Labor Market
S
D = MRP( mrp’s)
Wc
(1000)
Individual Firm
S = MRC
d = mrp
Wc
Quantity of Labor
Wa
ge
Ra
te (
do
llars
)
Quantity of Labor
($10)
(5)
$10 $10 $10 $10 $10 $10
Marginal ResourceCost (MRC) will be
constant and equal toresource price(the wage rate)
28 - 9Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
MONOPSONY MODEL
•Single Buyer of a type of labor
•The type of labor is relatively immobile “Wage Maker” Behavior
Upward-Sloping SupplyCurve to Firm
28 - 10Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
Wa
ge
Ra
te (
do
llars
)S
Quantity of Labor
MONOPSONISTICLABOR MARKET
In monopsonyMRC lies abovethe supply curve
28 - 11Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
Wa
ge
Ra
te (
do
llars
)
MRP
S
Wm
Quantity of Labor
MRC
Qm
MONOPSONISTICLABOR MARKET
MRP = MRC
Qm units oflabor hired
28 - 12Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
Wa
ge
Ra
te (
do
llars
)
MRP
S
Wm
Quantity of Labor
MRC
Wc
Qm Qc
The competitivesolution would
result in a higherwage and greater
employment
MONOPSONISTICLABOR MARKET
28 - 13Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
Wa
ge
Ra
te (
do
llars
)
MRP
S
Wm
Quantity of Labor
MRC
Wc
Qm Qc
The competitivesolution would
result in a higherwage and greater
employment
MONOPSONISTICLABOR MARKET
Monopsonists maximizeprofits by hiring a smaller
number of workers andthereby paying a less-than-
competitive wage rate.
28 - 14Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
Wag
e R
ate
(do
llar
s)
D1
S
Quantity of Labor
Wc
Qc
THREE UNION MODELSDemand-Enhancement Model
28 - 15Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
Wu
Qu
Wag
e R
ate
(do
llar
s)
D1
S
Quantity of Labor
Wc
Qc
D2
...by increasingproduct demand
THREE UNION MODELSDemand-Enhancement Model
28 - 16Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
Wu
Qu
Wag
e R
ate
(do
llar
s)
D1
S
Quantity of Labor
Wc
Qc
D2
...by increasingproduct demand...by increasingproductivity
THREE UNION MODELSDemand-Enhancement Model
28 - 17Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
Wu
Qu
Wag
e R
ate
(do
llar
s)
D1
S
Quantity of Labor
Wc
Qc
D2
...by increasingproduct demand...by increasingproductivity...by increasingthe price ofsubstitutes
THREE UNION MODELSDemand-Enhancement Model
28 - 18Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
Wag
e R
ate
(do
llar
s)
D
Quantity of Labor
Wc
Qc
THREE UNION MODELSExclusive or Craft Model
S1
28 - 19Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
Wu
Wag
e R
ate
(do
llar
s)
D
Quantity of Labor
Wc
Qc
THREE UNION MODELSExclusive or Craft Model
Qu
S1
...restrictive membership policies
S2
28 - 20Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
Wu
Wag
e R
ate
(do
llar
s)
D
Quantity of Labor
Wc
Qc
THREE UNION MODELSExclusive or Craft Model
Qu
S1
...restrictive membership policies...restricting labor supply of the economy as a whole
S2
28 - 21Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
Wu
Wag
e R
ate
(do
llar
s)
D
Quantity of Labor
Wc
Qc
THREE UNION MODELSExclusive or Craft Model
Qu
S1
...restrictive membership policies...restricting labor supply of the economy as a whole…occupational licensing
S2
28 - 22Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
Wag
e R
ate
(do
llar
s)
Quantity of Labor
Wc
Qc
THREE UNION MODELSInclusive or Industrial Model
D
S
...by organizing virtually all workers and thereby control of the supply curve for labor causing…
28 - 23Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
Wu
Wag
e R
ate
(do
llar
s)
D
Quantity of Labor
Wc
Qc
THREE UNION MODELSInclusive or Industrial Model
Qu
D
...by organizing virtually all workers and thereby control of the supply curve for labor causing…
S
28 - 24Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
WAGE INCREASESAND UNEMPLOYMENT
• Union members receive about 15% higher wages
• Negative impact on level of employment
Negative unemployment effect reduced by:
GrowthElasticity
28 - 25Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
BILATERAL MONOPOLY MODELMonopsonist & Union SeekDifferent Wage Rates...
…economic theorycannot
determine the actual outcome.
Wu
Wag
e R
ate
(do
llar
s)
D
Quantity of Labor
Wc
Qc
D
S
Qu=Qm
Wm
28 - 26Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
Wu
Wag
e R
ate
(do
llar
s)
D
Quantity of Labor
Wc
Qc
BILATERAL MONOPOLY MODELMonopsonist & Union SeekDifferent Wage Rates...
D
S
…economic theorycannot
determine the actual outcome.
Qu=Qm
Wm
Desirability of Bilateral Monopoly
28 - 27Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
MINIMUM WAGECONTROVERSY
•Case Against Minimum Wage
•Case For Minimum Wage
•Evidence and Conclusions
28 - 28Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
WAGE DIFFERENTIALSMarginal Revenue Productivity
Noncompeting Groups•Ability•Education and Training
•Investment in Human Capital
28 - 29Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
WAGE DIFFERENTIALSCompensating Differences
•Nonmonetary DifferencesMarket Imperfections
•Lack of Job Information•Geographical Immobility•Unions & Government Restraints
•Discrimination
28 - 30Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
PAY FOR PERFORMANCE
The Principal-Agent Problem
Incentive Pay Plan• Piece Rates• Commissions or Royalties• Bonuses, Stock Options, &
Profit Sharing• Efficiency Wages
28 - 31Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
PAY FOR PERFORMANCENegative Side-Effects of Pay
for Performance•Poor Product Quality•Questionable or Fraudulent Sales Practices
•Disruption of Teamwork•Free Ride by Low Producers•Low Turnover Decreases Hiring Opportunities
28 - 32Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
PAY FOR PERFORMANCENegative Side-Effects of Pay
for Performance•Poor Product Quality•Questionable or Fraudulent Sales Practices
•Disruption of Teamwork•Free Ride by Low Producers•Low Turnover Decreases Hiring Opportunities
ChapterConclusions
nominal wagereal wagepurely competitive labor marketmonopsonyexclusive unionismoccupational licensinginclusive unionism
bilateral monopolyminimum wagewage differentialsmarginal revenue
productivitynoncompeting groupsinvestment in human capitalcompensating differences incentive pay plan
ENDBACKCopyright McGraw-Hill/Irwin 2002
28 - 34Copyright McGraw-Hill/Irwin, 2002
Labor, Wages, and Earnings
General Level of Wages
Real Wages and Productivity
Purely Competitive Labor Market
Monopsony Model
Three Union Models
Bilateral Monopoly Model
Minimum Wage Controversy
Wage Differentials
Pay For Performance
Key Terms
PreviousSlide
NextSlide
EndShow
Next:
Rent, Interest, and Profits
Chapter 29
top related