1. Labor, Wages, and Earnings
Chapter 13

2. Nominal vs Real Wages
Nominal Wage – amount of money received Real Wage – Nominal Wage – Inflation COLA – Cost of Living Adjustments that automatically increase wages and keep real wages from decreasing

3. Purely Competitive Labor Market
Graph: Market and Firm

4. Monopsony – a resource market where an employer has monopolistic hiring power
Upsloping Labor Supply Curve
MRC higher than the wage rate – MRC of the new worker is the new worker’s wage plus the amount necessary to bring the wage rate of all current employees up to the new wage level
The monopsonist maximizes its profits by hiring a smaller number of workers and paying less than the competitive wage
Chart

5. Monopsony (cont)
Graph

6. Union Models – Demand Enhancement Model
Unions want to increase the demand for labor – higher wages, more jobs Increased product demand leads to increased labor demand – buy union, protectionism policies, lobbying for union projects Unions seek to raise the price of substitute labor – support of minimum wage laws Graph

7. Union Model – Exclusive Craft Union
Unions can raise wages by reducing the supply of labor Unions support restricting immigration, child labor laws, and overtime laws Exclusive Craft Unions restrict membership to maintain wages – Carpenters Union, IBEW Graph

8. Union Model – Inclusive or Industrial Model
These union seek all workers as members Below a certain wage rate the union will supply no labor. Employers become wage takers Graph

9. Minimum Wage
Minimum Wage acts as a price floor in a labor market. Graph Issue – Is the demand for minimum wage labor highly inelastic?