6-Labor Markets and Wages

  1. About
    1. Households are suppliers and firms are demanders
    2. “The pattern of working people who carry out production”


  2. Demand
    1. What changes: technology, loss of market share
    2. Wages don’t effect demand, but when wages go up the substitution effect causes companies to use robots or a business to move online to offset costs
    3. Elasticity among professions seems to be more inelastic in the short term and elastic in the long run but among part-time and second incomes, shifts in wages increase volatility
  3. Supply
    1. What changes?- Population, demographics(women in 70’s entering workforce)
    2. Unions: 1.Help build better communications 2.Militancy
    3. Wages don’t change supply
  4. Minimum wage
    1. Essentially a price floor
    2. When minimum wage laws passed in 1938 it put many low skilled black workers in the south out of work due to the increase in wage and education levels. Some would argue it was meant to do so.
    3. Discrimination scenarios
      1. In the workplace: A certain group of people don’t get jobs because of poor schooling.-The firm is just passing on the news that discrimination has occurred before and is not, their self, discriminating.
      2. Two people have the same skill set, but one gets paid less than market value. In this care another employer could swoop in, give the person a raise and have a great workforce that doesn’t cost any more than another.(and may be more loyal)
      3. Customers and/or employees refuse to deal with certain groups, making the employer discriminate when it doesn’t want to
      4. Two people have same skills but different groups of people get funneled into different jobs
  5. Wages are only part of total compensation, benefits do not come out of the heart of the employer it’s a part of the pay.

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