Next page Chapter 1: Labor Economics: Introduction and Overview

Jump to first page 1. Labor Economics as a Discipline

Jump to first page n Socioeconomic Issues u Gender and race discrimination u Legal and illegal immigration u Fall in unionization u Free trade n Quantitative Importance u 75% of national income goes to labor. n Unique Characteristics u Labor is rented and not bought/sold u Non-monetary aspects Importance of Labor Economics

Jump to first page u Institutional factors F Unions, licensing, minimum wage, discrimination u Labor demand is a derived demand Importance of Labor Economics

Jump to first page 2. The “Old” and the “New”

Jump to first page n Old Approach Change in Labor Economics u Highly descriptive and historical. u Little economic analysis n New Approach u Uses applied micro and macro theory

Jump to first page 3. Economic Perspective

Jump to first page n Labor economics uses theories of choice to explain behavior of labor market participants and resulting outcomes. n Theories rest on three assumptions u Relative scarcity u Purposeful behavior F Choices involve giving something up - an opportunity cost F Individuals make choices purposefully with an expected net gain Choice

Jump to first page u Adaptability F Workers and firms adapt to changes in expected costs and benefits Choice

Jump to first page 4. Overview

Jump to first page n Microeconomics u Individual economic units or markets n Macroeconomics u Economy as a whole Overview

Jump to first page 1. Why must the concepts of supply and demand as they pertain to products be modified when applied to labor markets? Questions for Thought: 2. Indicate whether each of the following statements pertains to microeconomics or macroeconomics: (a) The unemployment rate in the United States was 4.2 percent in (b) Bartenders at Andrew’s Capital Bar and Grill earn $9.25 per hour. (c) The productivity of American workers as a whole has increased by more than 2 percent per year in the last 4 years.

Jump to first page End Chapter 1