Chapter 8 - The labour market: wage determination

usman ahmed
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usman ahmed
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Chapter 8 - The labour market: wage determination
1 demand and supply
1.1 wage will differ with different elasticities of supply and demand, D & S determines T.E and E.C
1.1.1 economic rent - the amount above their transfer earnings.
1.1.2 Transfer earnings(normal pi) - the minimum price a unit of labour will work for
2 Trade union
2.1 can set a minimum price (trade union mark up)
2.1.1 creates unemployment
2.2 In a competitive labour market
2.3 in a monopsonistic labour market
2.3.1 bi lateral monopoly - can increase wages and employment from that offered by monopsony
3 wage differentials
3.1 demand and supply - different elasticities
3.2 bargaining strength of trade union, e.g. BMA strong vs cleaner weak
3.3 perceived MRP, higher barristers, important service
3.4 Between groups
3.4.1 Skilled vs unskilled higher demand(MRP) + inelastic/lwoer of skilled t.u. more effective with skilled skilled harder to replace with capital, unskilled easier
3.4.2 male vs female female second earners, can work for less part time because of no childcare, too expensive women dont aim for top paid jobs, OR no women in a top paid market deskilled over time due to pregnancy, lose pay increments when on childcare/maternity leave implemented laws not effective, s.d act 1975 perceived MRP lower for women, thus lower demand
3.4.3 minority vs majority workers from minority groups are less qualified on average minority workers concentrated in low paid jobs MRP perceived to be lower different aspirations
3.4.4 Part time vs Full time part time seen as less committed so given lower pay, also training less likely to be given to part time workers so lower productivity (MPP) high proportion of part time workers are women take less responsibility f.t. workers have more opportunities to gain pay increases.
4 discrimination
4.1 positive - perceive the MRP to be higher than it really is
4.2 perceive the MRP to be lower than it really is
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