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Contemporary Economics: An Applications Approach By Robert J. Carbaugh 3rd Edition

This chapter explores labor market equilibrium, labor demand, and labor unions, analyzing the effects of minimum wage, trade, and immigration on the labor market.

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Contemporary Economics: An Applications Approach By Robert J. Carbaugh 3rd Edition

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  1. Contemporary Economics:An Applications ApproachBy Robert J. Carbaugh3rd Edition Chapter 8: Labor Markets

  2. 1000 500 0 0 1000 2000 Quantity of apple pickers per week Labor Market Equilibrium Market for apple pickers S0 Wage ($ per week) A D0 Carbaugh, Chap. 8

  3. 1000 900 800 700 600 500 400 300 200 100 0 0 1 2 3 4 5 6 7 8 9 10 Quantity of apple pickers per week Labor Market Equilibrium A firm's demand schedule for labor Labor demand curve Labor demand schedule Labor Total Marginal Product Value of input product Product Price Marginal (workers (boxes per (boxes per Product per week) week) week) 0 0 1 90 90 $10 $900 2 170 80 10 800 3 240 70 10 700 4 300 60 10 600 5 350 50 10 500 6 390 40 10 400 Wage ($ per week) A Demand = value of the marginal product Carbaugh, Chap. 8

  4. 900 900 800 800 700 700 600 600 500 500 400 400 300 300 200 200 100 100 0 0 400 600 800 1000 1200 1400 1600 400 600 800 1000 1200 1400 1600 Quantity of apple pickers per week Quantity of apple pickers per week Labor Market Equilibrium Changes in the market supply & demand for labor Increased supplyof labor Increased demandfor labor S0 Wage ($ per week) S0 Wage ($ per week) B S1 A A B D1 D0 D0 Carbaugh, Chap. 8

  5. 10 10 8 8 6 6 4 4 2 2 0 0 0 4 8 12 16 0 2 4 6 8 10 12 14 16 18 Quantity of labor (mill. hours/week) Quantity of labor (mill. hours/week) Labor Market Equilibrium Effects of a minimum wage Higher wages causejob losses Shock effectmoderates job losses Wage rate ($ per hour) Market surplus S0 S0 Wage rate ($ per hour) B C B D Wage floor Wage floor A A Job losers New entrants who cannot find jobs Kept jobs D1 Job losers D0 D0 Carbaugh, Chap. 8

  6. 42 42 36 36 30 30 24 24 18 18 12 12 6 6 0 0 0 2 4 6 8 10 12 14 16 18 0 2 4 6 8 10 12 14 16 18 Quantity of labor (thous. hours per week) Quantity of labor (thous. hours per week) Labor Unions Union methods to increase wages Increase thedemand for labor Decrease thesupply of labor S1 S0 S0 Wage rate ($ per hour) Wage rate ($ per hour) B B A A D1 D0 D0 Carbaugh, Chap. 8

  7. 90 85 85 80 75 75 70 65 65 60 55 55 50 45 45 40 35 35 30 25 25 20 15 15 10 5 5 1 3 5 7 9 11 13 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Quantity of labor (thous. hours per week) Quantity of labor (thous. hours per week) Labor Unions Effects of an industrial union Unionized market(Ford, GM, DaimlerChrysler) Non-unionized market(Honda) Wage rate ($ per hour) Wage rate ($ per hour) S0 S0 S1 Market surplus B C Wage floor A A B D0 D0 Carbaugh, Chap. 8

  8. 70 60 50 40 30 20 10 0 0 2 4 6 8 10 12 14 16 18 20 Quantity of labor (thou. hours per week) Impact of Trade and Immigration Import competition and domestic workers S0 Wage rate ($ per hour) B C Wage floor A D D0 D1 Carbaugh, Chap. 8

  9. 90 90 75 75 60 60 45 45 30 30 15 15 0 0 0 2 4 6 8 10 12 14 16 18 20 0 2 4 6 8 10 12 14 16 18 20 Quantity of labor (millions) Quantity of labor (millions) Impact of Trade and Immigration Effects of labor migration from Mexico to the US United States Mexico SMexico' SMexico SUS SUS' Wage rate ($ per day) Wage rate ($ per day) A B B A D0 D0 7 7 Carbaugh, Chap. 8

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