Employment and Wages


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Employment and Wages


Title: Employment and Wages Author: Infomation Systems Last modified by: Infomation Systems Created Date: 10/15/2010 9:28:03 PM Document presentation format – PowerPoint PPT presentation

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Title: Employment and Wages

Employment and Wages
  • What Determines Wages?
  • Reference 8.1

Key Questions to Answer
  • Why do some people earn higher wages than others?
  • Who or what determines the amount people earn at
    various jobs?
  • Why do wage rates differ?

The Laws of Supply and Demand hold for Labor, too.
  • Demand Curve for Labor How many workers
    employers will demand at each price
  • Supply Curve for Labor How many workers will
    supply their labor at each price.
  • Equilibrium Price Wage Rate

Complete the worksheet Demand, Supply and Wage
  • Employers will demand
  • Workers will supply
  • What will the wage rate be in each instance?

Surplus and Shortage
  • Surplus of Labor Quantity of Labor supplied is
    greater than Quantity Demanded
  • Surplus of Labor -- Wage Rate Falls
  • Shortage of Labor Quantity of labor supplied is
    less than quantity demanded
  • Shortage of Labor Wage Rate Falls

Why do wage rates differ?
  • Make a list of reasons why people may make
    different amounts of money in their employment..

Why do wage rates differ?
  • Special Skill
  • Innate Ability
  • Additional training
  • Demand for Good (derived demand for labor)
  • Gender
  • Location
  • Productivity
  • Few others are willing and able to do the work
  • We can conclude that wage rates may differ
    because the demand for different types of labor
    is not the same OR because the supply of
    different kinds of labor is not the same

p.211 Are TV, Movie, and Sports Stars Worth the
Many Millions they Earn?
  • Michael Jordan made 100x the salary of the lowest
    paid player on the team. Why do you think there
    is such a large difference between what the star
    makes and those who work with the star?

You have just been offered 3 jobs
  • In your hometown, 30,000
  • 2,000 miles away in Lansing, Michigan 50,000
  • In the most beautiful place in the nation,
  • Which job would you take? Why?

  • Job Benefits
  • Monetary Benefits (wages or income) Nonmonetary
  • Discuss with your partner What are examples of
    nonmonetary benefits? Which would be the most
    important to you? How much money would you be
    willing to give up for this benefit?

Nonmonetary Benefits at Google
  • Food
  • Hungry? Check out our free lunch and dinner our
    gourmet chefs create a wide variety of healthy
    and delicious meals every day. Got the munchies?
    Google also offers snacks to help satisfy you in
    between meals.
  • On-site Doctor
  • At Google headquarters in Mountain View,
    California you have the convenience of seeing a
    doctor on-site. Physical therapy and chiropractic
    services are also available.
  • Shuttle Service
  • Google is pleased to provide its Mountain View
    employees with free shuttles to several San
    Francisco, East Bay and South Bay locations.
  • Financial Planning Classes
  • Google provides objective and conflict-free
    financial education classes. The courses are
    comprehensive and cover a variety of financial
  • Other On-Site Services
  • At Google headquarters in Mountain View, you'll
    find on-site oil change and car wash services,
    dry cleaning, massage therapy, gym, hair stylist,
    fitness classes and bike repair.
  • Other Great Benefits
  • Halloween holiday party, health fair, credit
    union, roller hockey, outdoor volleyball court,
    discounts for products and local attractions.

Money Wage vs. Real Wage
  • Measuring wage rate by the amount of money earned
    tells us money wage
  • Measuring wage rate by what the money will buy is
    real wage
  • Real Wage is determined by dividing money wage by
    the Consumer Price Index (CPI)

CPI-Consumer Price Index
  • Issued by the Bureau of Labor Statistics,
    measurements of the changes in prices and wages
    are used to determine inflation or deflation.
  • A sample of goods that cost 100.00 in 1982-1984
    would cost about 218.00 today.

  • The CPI market basket
  • The CPI market basket represents all the consumer
    goods and services purchased by urban households.
    Price data are collected for over 180 categories,
    which BLS has grouped into 8 major groups. These
    major groups, with examples of categories in
    each, are as follows
  • Food and beverages (ham, eggs, carbonated
    drinks, coffee, meals and snacks)
  • Housing (rent of primary residence, fuel oil,
    bedroom furniture)
  • Apparel (mens shirts and sweaters, womens
    dresses, jewelry)
  • Transportation (new vehicles, gasoline, tires,
    airline fares)
  • Medical care (prescription drugs and medical
    supplies, physicians services, eyeglasses and
    eye care, hospital services)
  • Recreation (television sets, cable TV, pets and
    pet products, sports equipment, admissions)
  • Education and communication (college tuition,
    postage, telephone services, computer software
    and accessories)
  • Other goods and services (tobacco and smoking
    products, haircuts and other personal care
    services, funeral expenses).

Minimum Wage Law
  • 1938 Fair Labor Standards Act
  • Originally 25 cents/hr., raised to 40 cents
  • 2001 federal min. wage 5.15
  • Equal to 46 cents in 1938
  • California minimum wage law today-8.00

  • In a competitive labor market, suppose the
    quantity demanded of labor is greater than the
    quantity supplied. What will happen to the wage
  • It will rise. A shortage of labor will increase
    the price of labor.

  • John earns 7/hr. Kim earns 23/hr.
  • In general, why does Kim earn more than John?
  • Supply and demand conditions are different in
    Kims market than Johns market.
  • There may be a greater supply of workers in
    Johns market.
  • There may be greater demand for workers in Kims

  • Over the past three years Ruths money wages have
    increased ten percent., and prices have increased
    13 percent. What has happened to Ruths real

Will increased immigration lead to higher or
lower wages?P. 205
  • Find an article in a newspaper, periodical or
    internet news site that relates to people earning
    different incomes. Write a one paragraph
    explanation in economic terms for the differences
    in salary. Attach a copy of the article to your
  • Read Chapter 8.3 Measuring Unemployment
  • Complete Section Review 1-5