Modern Labor. Economics. Theory and Public Policy. Eleventh Edition. Ronald G. Ehrenberg. School of Industrial and Labor Relations. Cornell University. Full file at Policyth-Edition-Ehrenberg-Test-Bank Modern Labor Economics, 12e. Modern Labor Economics This page intentionally left blank Modern Labor Economics Theory and Public Policy Eleventh Edition Ronald G. Ehrenberg School of.

Modern Labor Economics Theory And Public Policy Pdf

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1 Introduction. The Labor Market Labor Economics: Some Basic Concepts Positive Economics The Models and Predictions of Positive Economics Modern Labor Economics: Theory and Public Policy, Twelfth Edition. Ronald G. Ehrenberg • Robert S. Smith. Chapter Outline. The Labor Market: Definitions. Modern Labor Economics: Theory and Public Policy (12th Edition) [Ronald G. Ehrenberg, Robert S. Smith] on *FREE* shipping on qualifying offers.

What is the unemployment rate? How many people are not in the labor force?

The labor force consists of the employed plus the unemployed, totaling million people. Furthermore, suppose that the consumer price index is Based on the information given, the downloading power of American worker earnings increased during the s.

True or false?

Answer: False. Give examples of each.

Ehrenberg rg and rs smith modern labor economics

Answer: One type of employee benefit is a payment in-kind. Payments in-kind include medical insurance, dental insurance, unemployment insurance taxes, and paid vacations or personal time. The other major type of employee benefit is deferred payment.

Deferred payments include various forms of retirement income pension income, contributions into pension plans, and Social Security taxes. Question Status: New 41 Draw a hypothetical labor demand curve for machinists in the aircraft industry. What is being held constant in drawing your labor demand curve? Why does the curve look as you have drawn it? Why does the shape of this curve depend on the period of time short run versus long run under consideration?

Answer: The labor demand curve for machinists in the aircraft industry should be negatively sloped with the wage on the vertical axis and quantity or employment of machinists on the horizontal axis.

The labor demand curve reflects an inverse relationship between the wage paid to machinists and the quantity of machinists demanded. The curve assumes the prices of other factors of production, such as capital or other types of labor, the state of technology, and the product demand curve are held constant.

The labor demand curve for machinists is negatively sloped because a change in the machinist wage rate generates both a scale and a substitution effect.

To illustrate, suppose the wage rate increases. The increase in the wage raises aircraft manufacturer production costs which aircraft manufacturers will attempt to pass on to consumers through an increase in the product price. An increase in product price, given the product demand curve, leads to a reduction in demand for aircraft which in turn implies fewer machinists demanded. This effect is the scale effect of the wage increase. In addition, the higher machinist wage implies that machinists are relatively more expensive compared to other factors of production.

Aircraft manufacturers will therefore also wish to switch production methods toward less machinist-intensive production technologies.

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This effect is the substitution effect of the wage increase. Taken together, the scale effect and the substitution effect of a wage change work in the same direction and imply that quantity demanded decreases in response to a wage increase and that quantity demanded increases in response to a wage reduction. The labor demand curve is likely to be steeper in the short run because in the short run a wage increase will yield smaller scale and substitution effects than in the long run. In the short run, aircraft manufacturers will find it difficult to move away from the existing production technology, blunting the substitution effect.

Likewise, the scale effect will be smaller in the short run because aircraft manufacturers will find it easier to pass along product price hikes because product demand is usually less elastic in the short run.

Explain how the decrease in the price of capital affects the demand for labor in the restaurant industry.

Answer: A drop in capital price in the restaurant industry reduces meal production costs. Restaurants will pass along some of these reduced production costs to consumers through lower meal prices, stimulating demand for restaurant meals by consumers. In order to meet the additional consumer demand, restaurants will need to add more workers.

Thus one effect of reduced capital price on labor demand is a positive scale effect favoring greater employment of restaurant workers. This scale effect will be larger the more elastic is the demand for restaurant meals and smaller the less elastic is the demand for restaurant meals. The drop in capital price, other factor prices constant, will also induce restaurants to move toward more capital-intensive and less labor-intensive production technologies. Hence the lower capital price induces a negative substitution effect away from labor in the restaurant industry.

The substitution effect will be larger the easier it is to replace labor with capital in restaurant meal production. Taken together, the positive scale effect and the negative substitution effect imply that, at a given wage, labor demand might be higher if the scale effect dominates or lower if the substitution effect dominates. Thus the labor demand curve in the restaurant industry will shift in response to a reduction in capital price, but the direction of shift is ambiguous.

Question Status: New 43 The supply of a particular type of labor to a firm is less elastic than the supply of labor to the market. True, false, or uncertain?

The supply of labor to a firm is arguably perfectly elastic whereas the supply of labor to the market is less elastic and positively sloped. The supply of labor to an individual firm is perfectly elastic because, assuming the basic conditions of employment are essentially the same across employers of the labor type in question, if a given firm offered a wage below the going wage, workers simply would flock to other firms paying the going wage.

Likewise, a given firm has no incentive to pay above the going wage for the labor type, as it is able to attract as many workers as it needs at the going wage rate. Labor supply to the market is less elastic because occupations differ in terms of their basic conditions of employment and because workers differ in terms of their tastes and preferences with respect to these conditions of employment.

For example, relatively few people would be willing to do construction work on high-rises or skyscrapers if the wage for such work was low because many other jobs would pay comparably with much less risk to safety. A higher wage for such work, wages in other occupations constant, will attract more into high-rise construction because the additional pay will be enough to compensate some for their fear of heights.

Question Status: New 44 Suppose that a burst of technological advancement and innovation occurs that increases the demand for highly skilled labor. Answer: Student should draw a graph with a single, upward sloping labor supply curve employment of high skill workers on the horizontal axis. The technological change shifts the demand curve for high skill workers to the right.

The model predicts a higher equilibrium wage and higher equilibrium employment level for high skill workers as a result of the technological change. Thus, the interplay of supply and demand determines a unique market-clearing wage. In reality, however, we observe that the pay for an hour of work differs across occupations and jobs. For example, college graduates in the UK earn, on average, 40 per cent more per year than high-school graduates, and elephant handlers at the zoo receive a wage premium because elephants are said to pose an extra risk.

In this chapter we will study how wages vary with job amenities and in the next chapter we study how wages vary with skills.

The idea that wages vary with job amenities is the cornerstone of the compensating wage differential theory we analyse here. The basic argument was made in by Adam Smith: Subscribe to view the full document. Adam Smith, The Wealth of Nations.

This quotation implies that the workers care about the well-being generated by all the characteristics of the job and not only about the wage. Updated to accommodate changes in the Web sites. Domestic America's Career InfoNet This site provides recent data about occupations, their wages medians and midranges for states and for the country as a whole, and trends in employment and job growth.

It also contains a profile for each state giving recent demographic, income and unemployment statistics, rankings of occupations by largest employment, fastest growing, highest paying, and most openings. The sources for the information include the Bureau of Labor Statistics and state departments and agencies.

Bureau of Labor Statistics BLS home page provides numerous links for obtaining data in a variety of ways. In some instances, the link leads to a table.

Ideas versus ideology: The origins of modern labor economics

In other cases, users must complete a form for the system to extract and produce a table of the desired data. It is the primary source of information on the labor force characteristics of the population of the United States. Estimates obtained from the CPS include employment, unemployment, earnings, hours of work, and other indicators and are available by a variety of demographic and other characteristics.

The site provides keyword searching of numerous reports, some of which are available in PDF format.B there will be a surplus of labor in the industry. For example, the minimum wage is a law that prevents employers from paying a wage below the minimum rate. The substitution effect will be larger the easier it is to replace labor with capital in restaurant meal production.

A Alex, who was fired from his job two months ago and is searching for a new job. Modern Labor Economics. B Bob, who would start looking for work if he thought he could get a good job.

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