Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. Contemporary Economics: An Applications Approach By Robert J. Carbaugh 3rd Edition Chapter 8: Labor Markets

Carbaugh, Chap. 8 2 Market for apple pickers Labor Market Equilibrium Wage ($ per week) A D0D0 S0S Quantity of apple pickers per week

Carbaugh, Chap. 8 3 A firm's demand schedule for labor Labor Market Equilibrium Demand = value of the marginal product Wage ($ per week) LaborTotalMarginalProductValue of inputproductProductPriceMarginal (workers(boxes per(boxes per Product per week)week)week) $10$ Labor demand schedule Labor demand curve A Quantity of apple pickers per week

Carbaugh, Chap. 8 4 Changes in the market supply & demand for labor Labor Market Equilibrium A D0D0 B S0S0 Increased supply of labor S1S1 A D0D0 B S0S0 Increased demand for labor D1D1 Wage ($ per week) Quantity of apple pickers per week Quantity of apple pickers per week

Carbaugh, Chap. 8 5 A D0D0 B S0S0 Shock effect moderates job losses Wage rate ($ per hour) D Wage floor Job losers Effects of a minimum wage Labor Market Equilibrium A D0D0 B S0S0 Higher wages cause job losses Wage rate ($ per hour) C Wage floor Market surplus Job losers New entrants who cannot find jobs Kept jobs D1D Quantity of labor (mill. hours/week) Quantity of labor (mill. hours/week)

Carbaugh, Chap. 8 6 A D0D0 B S0S0 Decrease the supply of labor Wage rate ($ per hour) Union methods to increase wages Labor Unions A D0D0 B S0S0 Increase the demand for labor D1D1 Wage rate ($ per hour) S1S Quantity of labor (thous. hours per week) Quantity of labor (thous. hours per week)

Carbaugh, Chap. 8 7 A D0D0 B S0S0 Non-unionized market (Honda) Wage rate ($ per hour) Effects of an industrial union Labor Unions A D0D0 B S0S0 Unionized market (Ford, GM, DaimlerChrysler) Wage rate ($ per hour) Wage floor C Market surplus S1S Quantity of labor (thous. hours per week) Quantity of labor (thous. hours per week)

Carbaugh, Chap. 8 8 Import competition and domestic workers Impact of Trade and Immigration A Wage floor D0D0 B S0S0 Wage rate ($ per hour) D1D1 C D

Carbaugh, Chap. 8 9 A S Mexico D0D0 B Wage rate ($ per day) 7 Effects of labor migration from Mexico to the US Impact of Trade and Immigration A United States Mexico D0D0 B S US Wage rate ($ per day) S US' 7 S Mexico' Quantity of labor (millions) Quantity of labor (millions)