Chapter Overview
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Fundamental Questions 1. What accounts for earnings disparities between males and females and between whites and nonwhites? 2. Are discrimination and freely functioning markets compatible? 3. What government policies have been implemented to reduce wage differentials? 4. Have unions been able to increase the wages of union members relative to the wages of nonunionized workers? 5. What effects do government policies and programs such as minimum wages have on the labor market? Teaching Objectives The primary purpose of this chapter is to present the theories and forms of discrimination-personal prejudices, statistical discrimination, occupational segregation, age, and educational differences-along with a discussion of how to ameliorate discriminating practices. Also given is an overview of labor unions from functional and legal perspectives. Noteworthy features of this chapter include a discussion of why labor discrimination exists and how it affects the labor market, the theory of comparable worth, a complete analysis of the collective bargaining process that stresses the benefits unions can offer to employees, and a description of the economic effects of labor unions. Two unique aspects of this chapter are the economic evaluation of minimum wage legislation and the economic insight article on unionization in Japan. Areas that warrant special attention include bilateral monopoly. Care must be taken to construct Figure 9 and to emphasize that bilateral monopoly poses an indeterminant solution in economics. An objective analysis of the economic consequence of minimum wage laws is needed to balance what will probably be a subjective response among students to this issue. The chapter links with the previous chapter on the labor market and ties into prior discussion of monopoly power, but this time in the hands of workers and not producers. Key Term Review discrimination
Lecture Outline and Teaching Strategies 1. Discrimination 1.a. The definition of discrimination: When factors unrelated to a worker's marginal physical product acquire a negative or positive value on the labor market, discrimination exists. Teaching Strategy: Use Figure 1 to demonstrate the wage differential between men and women performing the same work. 1.b. Theories of discrimination 1.b.1. Personal prejudice: Certain groups are precluded from higher-paying jobs because of the personal prejudice of employers, workers, or customers. Teaching Strategy: Cite an example of each form of personal prejudice and query the students for more examples. Some may have experienced personal discrimination, so the discussion should be lively. 1.b.2. Statistical discrimination: This can occur when an individual is not hired because of his or her education, experience, age, or test score. Teaching Strategy: Cite an example, say, of a firm not hiring people older than 55. 1.c. Occupational segregation: This occurs when jobs are separated according to sex. Teaching Strategy: Cite examples such as schoolteachers and nurses versus professors and doctors. Note that these exemplify crowding. 1.d. Immigration: Because of immigration, the earnings gap between Hispanics and whites has widened, as has the earnings gap between skilled and unskilled labor. Teaching Strategy: Explain why recent immigration, especially of Hispanics, has caused these two results; use demand and supply analysis of relevant labor markets. 2. Wage Differentials and Government Policies 2.a. Antidiscrimination laws: The Civil Rights Act of 1964 made it unlawful for an employer to discriminate on the basis of race, color, religion, sex, or national origin. Teaching Strategy: Have the students write a paragraph describing how the Civil Rights Act could be violated by an employer. 2.b. Comparable worth: According to this doctrine, pay should be determined by job characteristics rather than by labor supply and demand; comparable jobs should receive comparable pay. Teaching Strategy: Discuss why computer science professors earn more than English professors and what comparable worth would mean to each professor's salary. Base analysis on Figure 4. 3. Unionization and Wage Differentials 3.a. Monopsony: In monopsony there is just one buyer of a resource. Teaching Strategy: Discuss the NCAA as an example of a monopsony buyer of student athletes. 3.b. Bilateral monopoly: In this case a single monopsony buyer faces a labor union. Teaching Strategy: Exemplify by using the example of major league baseball teams buying ball players from a baseball union. Utilize Figure 5. In theory, bilateral monopoly cannot give a particular equilibrium wage, only a range of possible wages (Figure 5). 3.b.1. Efficiency bases for unions: Unions exist in many industries other than monopsonies; unions and firms use collective bargaining to agree on wages or working conditions. 3.c. Economic effects of unions: Unions can affect wages by changing the demand and/or supply of labor. Teaching Strategy: Demonstrate each effect graphically-that is, unions make the demand for labor less elastic and also shift the supply curve to the left by increasing the marginal factor cost. Use Figure 7. 3.c.1. How do unions increase wages? Unions try to restrict the supply of labor by trying to impose closed shops, union shops, as well as by lobbying to restrict immigration. 3.c.2. What happens to nonunion labor? Workers unable to find employment in union jobs will look for work in the nonunion sector. This results in the supply of labor increasing and the real wage decreasing in the nonunion sector. 4. Labor Market Laws: Minimum Wages, Occupational Safety, and the Family and Medical Leave Act 4.a. Minimum wages: The issue of a minimum wage is controversial. Teaching Strategy: Compare Figure 9(a) with 9(b). 4.b. Occupational safety: The Occupational Health and Safety Act requires safety standards in the workplace. Teaching Strategy: Show how OSHA regulations could actually decrease potential jobs. 4.c. Labor policies in other industrial nations: U.S. policies are less restrictive than those of other nations. |
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