15 - 1 Copyright McGraw-Hill/Irwin, 2005 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 Previo us Slide Next Slid e End End Show Show Wage Determination HELP WANTED 15 C H A P T E R
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15 - 1 Copyright McGraw-Hill/Irwin, 2005 Labor, Wages, and Earnings General Level of Wages Real Wages and Productivity Purely Competitive Labor Market.
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15 - 1Copyright McGraw-Hill/Irwin, 2005
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
EndEndShowShow
Wage Determination
HELP
WANTED
15C H A P T E R
15 - 2Copyright McGraw-Hill/Irwin, 2005
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
EndEndShowShow
Wages Defined...Wages - - Salary - - Earnings
Wage RateNominal WagesReal Wages
International differences...
LABOR, WAGES, AND EARNINGS
15 - 3Copyright McGraw-Hill/Irwin, 2005
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
EndEndShowShow
0 5 10 15 20 25GermanyDenmark
SwitzerlandUnited States
JapanSweden
United KingdomFrance
CanadaItaly
AustraliaKorea
TaiwanMexico
GLOBAL PERSPECTIVEHourly Wages of Production Workers,Selected Nations
Source: U.S. Bureau of Labor Statistics, 2003
Hourly Pay in U.S. Dollars, 2001
15 - 4Copyright McGraw-Hill/Irwin, 2005
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
EndEndShowShow
GENERAL LEVEL OF WAGES
Role of Productivity• Plentiful Capital• Access to Abundant Natural Resources
• Advanced Technology• Labor Quality• Other Factors
15 - 5Copyright McGraw-Hill/Irwin, 2005
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
EndEndShowShow
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
15 - 6Copyright McGraw-Hill/Irwin, 2005
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
EndEndShowShow
PURELY COMPETITIVELABOR MARKET
Purely competitive labor market:
Many Firms
Numerous Qualified Workers
“Wage Taker” Behavior
Market Demand for Labor
Market Supply of Labor
15 - 7Copyright McGraw-Hill/Irwin, 2005
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
EndEndShowShow
Non-LaborCosts
LaborCosts
PURELY COMPETITIVE LABORMARKET EQUILIBRIUM
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
15 - 8Copyright McGraw-Hill/Irwin, 2005
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
EndEndShowShow
Non-LaborCosts
LaborCosts
IncludesNormalProfit
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).
PURELY COMPETITIVE LABORMARKET EQUILIBRIUM
15 - 9Copyright McGraw-Hill/Irwin, 2005
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
EndEndShowShow
MONOPSONY MODEL
•Single Buyer of a type of labor
•The type of labor is relatively immobile “Wage Maker” Behavior
bilateral monopolyminimum wagewage differentialsmarginal revenue productivitynoncompeting groupsinvestment in human capitalcompensating differences incentive pay plan