1. 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

2. Carbaugh, Chap. 8 2 Market for apple pickers Labor Market Equilibrium Wage ($ per week) A D0D0 S0S0 0 500 1000 0 2000 Quantity of apple pickers per week

3. 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)0 19090$10$900 21708010800 32407010700 43006010600 53505010500 63904010400 Labor demand schedule Labor demand curve A 0 100 200 300 400 500 600 700 800 900 1000 012345678910 Quantity of apple pickers per week

4. 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) 0 100 200 300 400 500 600 700 800 900 4006008001000120014001600 Quantity of apple pickers per week 0 100 200 300 400 500 600 700 800 900 4006008001000120014001600 Quantity of apple pickers per week

5. 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 D1D1 0 2 4 6 8 10 0481216 Quantity of labor (mill. hours/week) 0 2 4 6 8 10 02468 12141618 Quantity of labor (mill. hours/week)

6. 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) S1S1 0 6 12 18 24 30 36 42 024681012141618 Quantity of labor (thous. hours per week) 0 6 12 18 24 30 36 42 024681012141618 Quantity of labor (thous. hours per week)

7. 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 S1S1 5 15 25 35 45 55 65 75 85 13579111315 Quantity of labor (thous. hours per week) 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 123456789101112131415 Quantity of labor (thous. hours per week)

8. 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

9. 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' 0 15 30 45 60 75 90 02468101214161820 Quantity of labor (millions) 0 15 30 45 60 75 90 02468101214161820 Quantity of labor (millions)