Exam 18: Labor Markets

A compensating differential is the difference in working conditions faced by workers in different professions.

Preference based discrimination involves the use of personal biases to judge individuals.

A firm is willing to hire a worker when the marginal product of labor is:

With the aid of a labor market graph, explain why wages for similar jobs are much higher in developed economies than in developing countries.

For a career in engineering, getting a Ph.D. in art history adds more human capital than getting a B.S. in mathematics.

Since the 1980s:

Unions are the fundamental reason why wages are higher in wealthy countries.

Suppose that being an accountant and a musician require similar amounts of skills, education, training, and so forth. If accountants are paid higher wages than musicians:

Suppose that jobs A and B are equally attractive, requiring the same amount of skills, education, and training. It is suddenly learned that working at job B will lower your life expectancy by 4.5 years. What will happen in the labor markets for jobs A and B?

In the Wealth of Nations, Adam Smith wrote: Pecuniary wages and profit, indeed, are everywhere in Europe extremely different according to the different employments of labour and stock. But this difference arises partly from certain circumstances in the employments themselves, which, either really, or at least in the imaginations of men, make up for a small pecuniary gain in some, and counterbalance a great one in others; and partly from the policy of Europe, which nowhere leaves things at perfect liberty. (Book 1, Chapter 10) Which idea was Smith describing?

Can economics overcome discrimination? Suppose an economy has two groups of individuals-Xs and Ys-who have similar skills. Most employers, however, have a bias against Ys, so they hire only Xs. Thus Xs earn higher wages than Ys. Explain how economists predict that this discrimination will be overcome in the long run?

A person may decide to work fewer hours as his or her wage increases (i.e., the labor supply need not always slope upwards).

What negative impacts can unions have on industries and the economy? I. They can initiate worker strikes and sit-ins which stall production. II. By limiting the supply of labor in one industry they can cause an increased supply of labor in other industries, which causes lower wages in those industries. III. They can limit firms to hiring only unionized workers, which could stop firms from hiring the labor with the most appropriate skills.

Janitors in the United States get paid more than janitors in India because, compared with India:

One of the earliest unions-if it could be called that-were stonemasons. During Medieval Europe, the skill of masonry was a closely guarded secret and one had to endure a seven-year apprenticeship before being allowed to independently practice the trade. On the completion of the apprenticeship, the new mason would receive his own set of tools (a critical form of compensation since the tools were expensive and securing a loan was very difficult) and join the union of masons (allowing the new mason to charge a high price for his labor). As a result, hiring masons was very expensive. What made this union particularly successful?

If a white NBA basketball player generates more fan interest than an equally capable black basketball player we might expect the white player to be paid more, a form of ________ discrimination.

What increases on-the-job safety most is:

Which of the following statements is TRUE?

Assume Xs earn $5 less per hour than Ys and a firm employs 200 workers. There are 8 working hours in the day, 5 working days a week, and 50 working weeks a year. If the firm discriminates and hires only Ys, how much profit will it lose in a year? (Assume Xs have the same work skills as Ys.)

Before the shipping container, cargo had to be removed from a ship piece by piece, a very time-consuming process requiring a lot of dockworkers to accomplish. The shipping container allows a single dockworker to accomplish what it took several workers to do by moving many pieces of cargo all at once. The West Coast Dockworkers' Union was concerned about the change and demanded compensation from an association of shipping companies resulting in the Mechanization and Modernization Agreement of 1961. But, if automation increased wages, which of the following best explains why the workers resisted change?