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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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This note was uploaded on 04/19/2011 for the course EC 201 taught by Professor Ballard during the Fall '08 term at University of Michigan.
- Fall '08