labor markets Flashcards
what is the margianl product of labor?
MPL is the additional revenue generated by hiring an additional worker
When is a firm willing to hire?
When marginal product of labor is greater than than the wages.
MPL > wages
why is the demand curve for labor downward sloping?
When firms hire more workers the marginal product of labor declines so firms pay lower wages as they hire more workers.
why is the supply curve for labor upward sloping?
An increase in wages increases the supply of laborers in the market so most workers are likely to work more as wages increase.
Can you look at wages as equal to MPL?
Yes. For most firms MPL = wages
why do janitors in the US earn more than janitors in India
India is a less productive economy. There is more capital invested the US so the office buildings are more productive.
supply side: there is a high supply for low-skilled janitors in India compared to the US. US has more alternative better opportunities.
What is human capital?
Tools of the mind. Knowledge, education, skills, training.
What is a compensating differential?
A compensating differential is a difference in wages that offsets the differences in working conditions.
EX - commercial fishing and truck driving are dangerous jobs and although they require no education or human capital they are paid high due to the risks
what is the correlation between wages and safety?
Making jobs more safe saves money on wages. Avoiding government fines and another charges that would occur if an employee was hurt or sued the company acts as a motivator to provide greater safety
What is the impact of wages on unions?
Union jobs pay more than non union jobs so they reduce industry employment and shift the supply curve to the left. By reducing supply, the wages go up.
What are the different types of discriminiation?
1) statistical discrimination
2) preference-based discrimination
- by employees
- by employers
- by customers
