Introduction to the Labor Market LIR 809 MAJOR QUESTIONS OF LABOR - - PDF document

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Oct 20, 2023 344 likes •400 views

Introduction to the Labor Market LIR 809 MAJOR QUESTIONS OF LABOR ECONOMICS Concern with PRICING & ALLOCATION of Labor 4 Practical Questions Who works? What determines how much people are paid and in what form? Who can

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LIR 809

Introduction to the Labor Market

LIR 809

MAJOR QUESTIONS OF LABOR ECONOMICS

Concern with PRICING & ALLOCATION of Labor 4 Practical Questions Who works? What determines how much people are paid and in what form? Who can move where & why? Why is there unemployment & scarcity

f workers?

LIR 809

Components of an Economic Model

3 Parts

Underlying assumptions, including ceteris paribus assumption Theory of behavior Predictions

Positive Model: value free

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LIR 809

CONTRADICTIONS IN THE MARKET

Employer need for flexibility vs. Employee need for income security Demand for skilled workers vs. Failed Public Schools & Aging Work Force Worker demand for non-wage benefits vs. Increasing cost of those benefits Globalization of production & markets

LIR 809

NEOCLASSICAL APPROACH TO LABOR MARKETS

An Introduction

LIR 809

LABOR MARKET THEORIES

Neoclassical Market Theory

Governed by Supply & Demand Use of Efficiency Decision Rule

Internal Labor Market Theory

Governed by Administrative Rules

Neoclassical Market Theory Institutional approach: Internal Labor Market Theory

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LIR 809

What is Produced How it is Produced How Output & Income is Distributed

CLASSICAL DEFINITION OF THE MARKET

Three Basic Problems Solved by Economy:

Production Distribution

LIR 809

MARKET PROCESS

Motivation: Self-Interest
Constraint: Competition
Mechanism: Prices

FEATURES OF THE SYSTEM

LIR 809

OUTCOMES OF MARKET PROCESS

What: Consumer Sovereignty (“Willingness to Pay”)

How: Least Cost Production Who: Supply & Demand for factors of Production

Perfect market: one with infinite number

f small consumers and producers

SOLUTIONS

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LIR 809

UNDERLYING ASSUMPTIONS Individuals are rational (prefer A to B and B to C, etc.) Information is perfect & costless More is better Instant adjustments Zero transaction costs People know their trade-offs

LIR 809

UNIQUENESS OF LABOR

Labor Services Rented not Purchased Use of Labor Services - Time-Specific Workers Heterogeneous (Asset specificity) Chronic Excess Supply & Shortages Continuity of Employment Relationship Rare that individual can increase demand by dropping wage Labor Concern with non-pecuniary factors