Labour Economics assignment 1
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Chapter01.pptxChapter One Introduction to Labour Market Economics
Prepared by Dr. Amy Peng
Ryerson University
© 2012 McGraw-Hill Ryerson Ltd.
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Learning Objectives
See that, as in other market, supply and demand curves can be used to find the equilibrium values of wages and employment levels.
Understand that earnings, hours, and hourly wages are quite unevenly distribution in the Canadian labour market.
Understand that, in additional to market forces, legislative and institutional factors play an important to in labour market outcomes.
Learn about the different types of data sets, such as timeseries data, crosssection microdata, and panel data, that are used in labour market research.
Learn how regression analysis contributes to our understanding of labour economics.
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Main Players and their Roles
Individuals’ Decisions
When to enter the labour force
How much education/training
Type/extent of job search
Occupation/industry
Labour hours/household work
Accept/quit/relocate
Wage rate
Union/association
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Main Players and their Roles
Firms’ Decisions
Numbers of workers
Wages/benefits
Hours
Layoff/bankruptcy
Subcontract
Pension/retirement policy
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Main Players and their Roles
Factors Influencing the Firm’s Decision
Global Competition:
Free trade, Industrial restructuring, Deregulation, Privatization
Legislative Environment:
Human Rights, Minimum wage, Overtime, Maternity leave, Worker’s compensation, Occupational health/safety, Pensions/mandatory retirement, Labour laws/collective bargaining
Changing Workforce:
Age, Gender, Ethnic diversity
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Main Players and their Roles
Government’s Decisions
Individual rights vs. employer competitiveness
Public support
Training
Insurance
Compensation
Pensions
Vocational rehabilitation
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Labour Market Economics
Involves analyzing the determinants of the various dimensions of labour supply and demand and their interaction in alternative market structures to determine wages, employment, and unemployment.
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Labour Supply and Demand
Dimensions of Labour Supply
Dimensions of Labour Demand
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Labour Supply and Demand Dimensions of Labour Supply
Quantity Dimensions:
Population Growth, Labour Force Participation…
Quality Dimensions:
Education, Health, Labour Productivity…
The Impact of Income Maintenance Programs:
Welfare, Disability, Employment Insurance…
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Labour Supply and Demand
Dimensions of Labour Demand
Labour Costs and the Firm’s Hiring Decisions:
The impact of quasi-fixed costs and legislatively imposed costs…
Demand for the Firm’s Output and the Firm’s Competitiveness:
Globalization, Industrial restructuring, Free trade, Technological advancements…
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Labour Supply and Demand
Labour Market Outcomes:
Wages, Employment, Unemployment, Labour Shortages, and Wage Differentials…
Factors Influencing the Outcomes:
Legislative Interventions, Unions and Collective Bargaining, the Market Structures (in both the product and the labour markets)…
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Preliminary Explorations of Labour Market Outcomes
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Preliminary Explorations of Labour Market Outcomes
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Preliminary Explorations of Labour Market Outcomes
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Preliminary Explorations of Labour Market Outcomes
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The Neoclassical Model of Labour Supply and Demand
Key Ingredients:
Behavioural Assumptions:
Consumer/Buyer (Consumer Choice Theory)
Producer/Seller (Theory of the Firm)
Interaction between Buyers and Sellers:
Wage and Employment in a Competitive Labour Market: Market Clearing Outcome
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Wages and Employment in a Competitive Labour Market A Neoclassical Model
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NS
Employment
Wages
ND
W*
N*
W’
ND’
NS’
Supply > Demand
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The Neoclassical Model of Labour Supply and Demand Two Sector Case
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W
W
Employment
Employment
Sector A
Sector B
Sa1
Da
Db
Sb1
Wa
Wb
We
Sb2
Sa2
We
We would expect individuals to move to sector B, shifting out the supply curve in sector B, until the wage is equal in the two sectors and there are no longer incentives for individuals to switch sectors.
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Policy Issues
Labour market economics should be able to shed light on policy issues affecting:
Labour Supply
Labour Demand
Wage Determination and Wage Structures
Unemployment
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Policy Issues
Labour Supply:
Work incentive effects of income maintenance and tax transfer programs such as employment insurance, welfare, subsidized day care…
Labour Demand:
The labour demand effects of globalization and outsourcing, trade policies, collective bargaining, legislative policies with respect to minimum wages, human rights, workplace health and safety…
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Policy Issues
Wage Determination and Wage Structures:
Wage polarization, non-wage benefits, male-female wage differentials, pay equity legislation, retirement, and pensions…
Unemployment:
Changes in unemployment rate, job stability, impact of employment insurance on unemployment, youth unemployment…
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Similarities and Differences between the Labour Market and Other Markets
Various Actors with a Variety of Goals
Sociological, Institutional, and Legislative Constraints
Market Imperfections
Complex Price, Serving a Variety of Functions
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Alternative Perspectives
Neoclassical
Emphasis on the theoretical foundation of the labour market and market clearing forces
Institutionalism
Emphasis on the descriptive realism and the roles of institutions, customs, and sociopolitical factors
Dualism
Based on segmented labour market tradition: primary and secondary
Radicalism
Emphasis on the class conflicts as the main determinant of the labour market outcomes
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Chapter Summary
Definition: Labour Market Economics
Main Players and their Roles
Individuals, Firms, and Governments
Dimensions of Labour Supply and Demand
Quantity and Quality Dimensions, Income Maintenance Effects, Labour Costs, Product Demands, and Firms’ Competitiveness
Labour Market Outcomes
Wages, Employment, and Wage Differentials
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Chapter Summary
Factors Influencing the Outcomes
Legislative Interventions, Unions, and the Market Structures
Alternative Models of the Labour Market
Policy Issues
Labour Supply, Labour Demand, Wage Determination, and Unemployment
Characteristics of the Labour Market
Stakeholders, Sociological, Institutional, Legislative Constraint, Market Imperfections, and Complex Price (Wage Rate) Implications
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Appendix (optional)
The Importance of the Regression Analysis
and An Overview of Regression Analysis
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Types of Data
Aggregate or Time-series Data
Cross-section Microdata
Panel or Longitudinal data
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Supply and Demand and the Relative Earnings of “Star” versus “Grinder” Hockey Players
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Demand is lower for grinders than stars
Supply is higher for grinders than stars
A lower wage for grinders than stars
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NHL Player Salaries by Goals Scored in the Previous Year, 2010–11
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Logarithm of NHL Player Salaries by Goals Scored in the Previous Year, and Fitted Regression Line, 2010–11
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Estimating Effects of Performance on Player Salary in 2010–11
We can summarize the relationship between player’s salary and goals as follows:
Salary = a + b x Goals
Salary = a + b x Goals + e
Ordinary Least Square (OLS) estimator
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Estimated Effects of Performance on Player Salary in 2010–11 (OLS)
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