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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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- Fall '08
- Microeconomics, high skilled labor