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EC 201 11-10-08 - o Relative to otherwise comparable jobs...

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EC 201 11-10-08 Early 20 th cent. ↑↑S of rel. high skilled labor →equalizing Since 1970s ↑↑D for high skilled labor →disequalizing Labor earnings is bulk of income for most households o →dist. Of labor earnings drives overall dist. Of income Firm’s D for labor= MRP= (MP)(MR) Higher productivity → higher MRP →higher D for labor →all else equal, higher wages o 1. Capital per worker Machinery Computers Railroad cars Warehouses o 2. Human capital Education Training o Capital + high-skill labor is complementary MR: prices at which output can be sold o P oil ↑↑ 1973-1985 ↓↓1986-1999 ↑↑2000 o Wages of oil workers ↑ 1970s +early 1980s ↓ late 1980s + 1990s o Now an effect through S of labor 1980s No HS diploma required Earnings= $90,000/yr Today’s $150,000 Median US workers ~ $40,000
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Job: oil roughneck offshore Beaufort Sea Dark Cold Dirty Dangerous o If offer low wage no one shows up o All else equal, S of labor farther to left for unpleasant jobs
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Unformatted text preview: o Relative to otherwise comparable jobs with more pleasant characteristics “compensating wage-rate differential” Nec. To compensate for unpleasant characteristics E.g. night jobs Just because compensating differential → high wages Poultry-processing: all jobs rel. unpleasant • Most unpleasant: live hanger • Comp. differential o = 35¢/hr • Minimum wage: price floor in labor mkt. o Avg. US worker ~ $20/hr o Min. wage~ $7/hr o If equil. Wage > min. wage, no direct effect o Even if min> equil., no effect unless law enforced o If min. > equil. And law enforced, surplus → unemployed workers o Amt. actually employed = Ld o Unemployment= (Ls min- Ld min) o Job losses; (l*- Ld min) o Critical: labor-demand elast. = (% ∆Ld/ %∆ wage) o Consensus (?) elast. ~ 0.5 o Min. wage → total $ earned by workers if elast <1...
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EC 201 11-10-08 - o Relative to otherwise comparable jobs...

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