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| QUICK REVIEW 28-1 |
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- Real wages have increased historically in the
United States because labor demand has increased relative to labor supply.
- Over the long term
real wages per worker have
increased at approximately the same rate as worker productivity.
- The competitive employer is a "wage
taker" and employs workers at the point where the wage rate (5 MRC) equals MRP.
- The labor supply curve to a monopsonist is
upsloping
causing MRC to exceed the wage rate for each worker. Other things equal
the
monopsonist
hiring where MRC 5 MRP
will employ fewer workers and pay a lower wage rate
than would a purely competitive employer.
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| QUICK REVIEW 28-2 |
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- In the demand-enhancement union model
a union
increases the wage rate by increasing labor demand through actions which increase product
demand
raise labor productivity
or alter the prices of related inputs. In the exclusive
(craft) union model
a union increases wage rates by artificially restricting labor
supply
say
through long apprenticeships or occupational licensing.
- In the inclusive (industrial) union model
a
union raises the wage rate by gaining control over a firm's labor supply and threatening
to withhold labor via a strike unless a negotiated wage is obtained.
- Bilateral monopoly occurs in a labor market where
a monopsonist bargains with an inclusive
or industrial
union. Wage and employment
outcomes are determined by collective bargaining in this situation.
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| QUICK REVIEW 28-3 |
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- Proponents of the minimum wage argue it is needed
to assist the working poor and counter monopsony where it might exist; critics say it is
poorly targeted and reduces employment.
- Wage differentials are attributable in general to
the forces of supply and demand
influenced by differences in workers' skills and
nonmonetary differences in jobs. But several labor market imperfections also play a role.
- As it applies to labor
the principal-agent
problem is one of workers pursuing their own interests to the detriment of the employer's
profit objective.
- Pay-for-performance plans (piece rates
commissions
royalties
bonuses
profit sharing
and efficiency wages) are designed to
improve worker productivity by overcoming the principal-agent problem
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