Ch4-LaborMarketEquilibrium鲍哈斯劳动经济学.pdf

Last Week Labor Demand 2 Firms production function =(,)Firms objective:profit maximization =Central question:how many workers are hired and what are they paid?1.Short-run:K fixed,firm adjusts L 2.Long-run:firm can adjust both L,K Labor Demand 3 Short-run employment decision Value of marginal product of labor:=Profit-maximizing condition =Short-run labor demand curve,firm and industry Short-run elasticity of labor demand Review Question(#3-10)4 Suppose wage is$10,price of each unit of capital is$25,price of output is$50.The production function is ,=1/21/2 If the current capital stock is fixed at 1,6000 units,how much labor should the firm employ in the short-run?How much profit will the firm earn?Labor Demand 5 Long-run employment decision Isoquant curve =Isocost line =+Profit-maximizing condition =Labor Demand 6 Impact of wage change Scale effect Substitution effect Long-run labor demand curve Long-run elasticity of labor demand Elasticity of substitution Perfect substitutes Perfect complements Labor Demand 7 Policy application Affirmative action(typo!)Minimum wage Review Question(#3-9)8 In a particular industry,labor supply is=10+and labor demand is=40 4.What are the equilibrium wage and employment if the labor market is competitive?Suppose the government sets a minimum wage of$8.How many workers would lose their jobs?CH.4 LABOR MARKET EQUILIBRIUM Jisoo Hwang 2014 Fall Introduction 10 Labor market equilibrium coordinates the desires of firms and workers,determining the wage and employment observed in the labor market.Market types:Competitive Noncompetitive These market structures generate unique labor market equilibria.Competitive Labor Market Each firm in the industry faces the same competitive price p regardless of how much output it sells.Each firm in the industry pays a constant wage w to all workers,regardless of how many workers it hires.Competitive vs.Noncompetitive 11 Noncompetitive Labor Market Monopsony Monopoly Competitive Labor Markets 12 Eqm in a Single Competitive Labor Market 13 Competitive equilibrium occurs when supply equals demand,generating a competitive wage and employment level(no unemployment!).It is unlikely that the labor market is ever in an equilibrium,since supply and demand are dynamic.The model suggests that the market is always moving toward equilibrium.14 P:producer surplus Q:worker surplus P+Q:gains from trade Competitive Equilibrium:Efficient 15 D:reflects VMPL S:reflects the workers value of time outside the labor market The competitive market maximizes the total gains from trade(P+Q)accruing to the economy.If more workers are hired than E*,the extra workers are better off not working.If fewer workers are hired than E*,the missing workers would be more efficiently used in the labor market than elsewhere.Competitive Eqm across Labor Markets 16 Many labor markets:differentiated by region or industry If workers were mobile and entry and exit of workers to the labor market was free,then there would be a single wage paid to all workers.17 wNwSCan this wage differential persist?Efficiency Revisited 18 The“single wage”property of a competitive equilibrium has important implications for economic efficiency.In a competitive equilibrium,wage=VMPL As firms and workers move to the region that provides the best opportunities,they eliminate regional wage differentials.Allocative efficiency:the allocation of workers to firms equating the wage to the value of marginal product is also the allocation that maximizes national income The“invisible hand”process:self-interested workers and firms accomplish a social goal that no one had in mind,i.e.,allocative efficiency.19 Did regional wage differential in the US narrow over time?Review Question(#4-7)20 A firm faces perfectly elastic demand for its output at a price of$6 per unit of output.The firm,however,faces an upward-sloped labor supply curve of =20 120 Where L is the number of workers hired each hours and w is the hourly wage rate.Thus,the firm faces an upward-sloping marginal cost of labor of =6+0.1 Each hour of labor produces 5 units of output.How many workers should the firm hire to maximize profits?What wage will the firm pay?Payroll Taxes Payroll Subsidies Mandated Benefits Immigration Policy Applications 21 Policy Application(1):Payroll Taxes 22 Payroll tax:taxes imposed on employers or employees What happens to wage and employment when the government assesses a payroll tax on Employers?Employees?23 Suppose the firm pays a tax of$1 for every employee-hour it hires.$w1:wage actually received by workers$w1+1:cost of hiring a worker Policy Application(1):Payroll Taxes 24 Payroll taxes assessed on employers lead to a downward,parallel shift in the labor demand curve.amount the firm must pay to hire a worker amount that workers actually receive Firms and workers share the cost of payroll taxes,since the cost of hiring a worker rises and the wage received by workers declines.25 Suppose worker pays a tax of$1 on every hour of work.$w1:wage received from the employer$w1-1:actual after-tax wage of worker Policy Application(1):Payroll Taxes 26 Payroll taxes assessed on workers lead to a an upward,parallel shift in the labor supply curve.amount the firm must pay to hire a worker amount that workers actually receive Payroll taxes increase total costs of employment,so these taxes reduce employment in the economy.Firms and workers share the cost of payroll taxes,since the cost of hiring a worker rises and the wage received by workers declines.Same labor market impact as a payroll tax assessed on firms.Policy Application(1):Payroll Taxes 27 When will the payroll tax be shifted completely to workers?If the firms labor supply curve is perfectly inelastic,the same amount of labor would be employed regardless of the wage.The more inelastic the supply curve,the more burden shifted onto the worker.28 Policy Application(1):Payroll Taxes 29 The after-tax equilibrium is inefficient because the number of workers employed does not maximize the total gains from trade.Before-tax:gains from trade=P+Q After-tax:gains from trade=P*+Q*+T workers value of time outside the labor market More workers should be hired.30 Policy Application(2):Payroll Subsidies 31 Payroll subsidy:government grants the firm a tax credit for every person-hour it hires.An employment subsidy lowers the cost of hiring for firms.This means payroll subsidies shift the demand curve for labor to the right(up).Total employment will increase as the cost of hiring has fallen.32 Suppose govt grants the firm$1 for every person-hour it hires.$w1:wage actually received by worker$w1-1:wage the firms actually pay Policy Application(2):Payroll Subsidies 33 Does payroll subsidies lead to efficient outcome?No.Subsidy leads to deadweight loss.At the subsidy-equilibrium,VMP L B:employment goes down,cost of per worker goes up for the firm,workers total compensation(wage+B)goes down.If C=B:employment,labor cost,and worker compensation are the same as without benefit.36$C$C$B$B Policy Application(3):Mandated Benefits 37 As long as mandated benefits provide some value to workers(B0),the mandated benefit is preferable to payroll tax.Smaller cut in employment Smaller DWL If B=C,DWL=0 Policy Application(4):Immigration 38 2020 60706070,-:2014.07.07 14:40()Needing Skilled Workers,a Booming Germany Woos Immigrants By ALISON SMALEJULY 18,2014(New York Times)Policy Application(4):Immigration 39 As immigrants enter the labor market,the labor supply curve shifts to the right.Total employment increases.Equilibrium wage decreases.Immigration reduces the wages and employment of similarly-skilled native-born workers,but native-born workers may be able to increase their productivity by specializing in tasks better suited to their skills.Competing native workers will have lower wages;complementary native workers will have higher wages.40 Wage w0 w1 Total employment N0 E1 Native employment N0 N1 41 Wage w0 w1 Native employment N0 N1 42 43 In the long-run,Lower wage higher profit firms expand K demand curve for labor shifts Policy Application(4):Immigration 44 Economic benefits from immigration Immigration surplus:increase in national income as a result of immigration Although native workers get a lower wage,these losses are more than offset by the increase in income accruing to native-owned firms.Immigration surplus exists only if native wage rates fall when immigrants enter the country.45 Key Concepts 46 Competitive labor market Efficient Policy Applications Payroll taxes:employers or employees?Payroll subsidies Mandated benefits:size of cost and benefit?Immigration:substitutes or complements;short-run or long-run?Monopsony Monopoly Noncompetitive Labor Markets 47 Monopsony 48 Monopsony market exists when a firm is the only buyer of labor.In contrast to a competitive firm that can hire as much labor as it wants at the going price,a monopsonist must increase wages to attract more worker.One-company town(e.g.a coal mine in a remote location)Monopsony firm has an upward-sloping supply curve of labor.Two types of monopsonist firms:1.Perfectly discriminating 2.Nondiscriminating Perfectly Discriminating Monopsonist 49 Discriminating monopsonists are able to hire different workers at different wages.To maximize firm surplus(profits),a perfectly discriminating monopsonist“perfectly discriminates”by paying each worker his or her reservation wage.Profit-maximizing condition:hires up the point where the last workers VMPL=MCL 50 Labor supply curve=MC of hiring Labor demand curve=VMPL E*as in competitive labor market w*not the competitive wage Nondiscriminating Monopsonist 51 Must pay all workers the same wage,regardless of each workers reservation wage.Must raise the wage of all workers when attempting to attract more workers.Profit-maximizing condition:VMPL=MCL Nondiscriminating Monopsonist 52 If the firm wishes to hire 2 workers,it must raise the wage to$6.Total labor costs=$12.MC of hiring the second worker=$7.MC of labor is upward-sloping and rises even faster than the wage.53 Labor supply curve MC of hiring Labor demand curve=VMPL Two properties:EM E*inefficient wM w*and VMPL exploited 54 Suppose the govt imposes a minimum wage of MC of labor=as long as the firm hires up to workers.EM wM Monopoly 55 Firms that have monopoly power can influence the price of the product that they sell.Monopolist faces a downward sloped market demand curve for its output and an even lower downward sloped marginal revenue curve.Because the price of output falls as the monopolist expands production To sell an extra unit of output,monopolist must lower the price not only for that customer but for all other customers.56 MR Demand curve for the good qM p*Monopoly 57 How many workers would a monopolist hire?Marginal Revenue Product(MRP):the workers contribution to a monopolists revenues MRPL=MR*MPL Recall,VMPL=p*MPL MR p for a monopolist MRPLVMPL Profit-maximizing condition:hires up the point where the last workers MRPL=w.Recall,without monopoly power,MR=p,MRPL=VMPL.58 Review Question(#4-8)59 Pollys Pet Store has a local monopoly on the grooming of dogs.The daily inverse demand curve for pet grooming is =20 0.1 where P is the price of each grooming and Q is the number of groomings given each day.Each worker Polly hires can groom 20 dogs each day.What is Pollys labor demand as a function of w,the daily wage?1.Find MR 2.Profit-maximizing condition:MRPL=w Key Concepts 60 Profit-maximizing logic is the same:contribution of last worker hired equals the cost of hiring Monopsony:upward-sloping labor supply curve Discriminating:w=MCL=VMPL Nondiscriminating:w MCL=VMPL Monopoly:can influence price MRPL=w