Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.
PART 6 The Economics of Labor Markets
Chapter 19 of 36 Earnings and Discrimination
Section 2 of 16
…
· physician earns about $200,000
· police officer about $50,000
· farmworker about $20,000
Why do earnings vary so much?
The neoclassical theory of the labor market provides an answer.
This theory tells us
· wages are determined by labor supply and demand
· labor demand, in turn, reflects the marginal productivity of labor
· resulting in a labor supply and demand equilibrium
In equilibrium each worker is paid the value of their marginal contribution:
· how much sales and profit the worker adds to the firm
· how much benefit the worker adds society’s needs
…
This theory of the labor market is only a part of the explanation for wage differences.
We must consider what determines supply and demand for different types of labor.
Jobs have differing nonmonetary characteristics which affect wages paid.
Some jobs are hard, dirty, dull, and dangerous, others are easy, clean, enjoyable, and safe.
The better the job’s nonmonetary characteristics the more people are willing to do the job at any given wage.
Jobs with good nonmonetary characteristics tend to have lower equilibrium wages than those with bad ones.
…
Imagine you are looking for a summer job in a local beach community.
Two kinds of jobs are available: beach pass checker and garbage collector.
Beach pass checkers walk along the beach mid-day and check to be sure beach-goers have bought the required pass.
Garbage collectors work starting at dawn and drive dirty, noisy trucks and pick up garbage.
Most people would prefer the beach job if the wages were the same.
To induce people to become garbage collectors the town has to pay higher wages.
…
Economists use the term compensating differential to refer to a difference in wages that arises from nonmonetary characteristics of different jobs.
Some examples of jobs’ wage differences for workers with similar levels of education:
· coal miners paid more due to the dirty, dangerous, unhealthy nature of coal mining
· factory night shift workers paid more because they are forced into a day-night reversal lifestyle
· college professors mostly paid less than similarly highly educated lawyers and doctors because of the lower-pressure workplace environment and intellectual and personal satisfaction of teaching
…
lower-pressure workplace environment
puresshā no sukunai shokuba kankyō
プレッシャーの少ない職場環境
Comments
Post a Comment