Even in the absence of collective bargaining, workers do have some bargaining power that allows them to receive wages higher than their reservation wage. Each worker's bargaining power depends both on the nature of the job and on the economywide labor market conditions. Let's consider each factor in turn. a. Compare the job of a delivery person and a computer net- work administrator. In which of these jobs does a worker have more bargaining power? Why? b. For any given job, how do labor market conditions affect a worker's bargaining power? Which labor market variable would you look at to assess labor-market conditions? c. Suppose that for given labor market conditions (the vari- able you identifled in part b), worker bargaining power throughout the economy increases. What effect would this have on the real wage in the medium run? in the short run? What determines the real wage in the model described in this chapter?

Even in the absence of collective bargaining, workers do have some bargaining power that allows them to receive wages higher than their reservation wage. Each worker's bargaining power depends both on the nature of the job and on the economywide labor market conditions. Let's consider each factor in turn. a. Compare the job of a delivery person and a computer net- work administrator. In which of these jobs does a worker have more bargaining power? Why? b. For any given job, how do labor market conditions affect a worker's bargaining power? Which labor market variable would you look at to assess labor-market conditions? c. Suppose that for given labor market conditions (the vari- able you identifled in part b), worker bargaining power throughout the economy increases. What effect would this have on the real wage in the medium run? in the short run? What determines the real wage in the model described in this chapter?

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter19: Earnings And Discrimination

Section: Chapter Questions

Problem 8PA

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Policymakers sometimes propose laws requiringfirms to give workers certain fringe benefits, such ashealth insurance or paid parental leave. Let’s considerthe effects of such a policy on the labor market.a. Suppose that a law required firms to give eachworker $3 of fringe benefits for every hour that theworker is employed by the firm. How does this lawaffect the marginal profit that a firm earns from eachworker at a given cash wage? How does the lawaffect the demand curve for labor? Draw your answeron a graph with the cash wage on the vertical axis.b. If there is no change in labor supply, how wouldthis law affect employment and wages?c. Why might the labor-supply curve shift inresponse to this law? Would this shift in laborsupply raise or lower the impact of the law onwages and employment?d. As discussed in Chapter 6, minimum-wage lawskeep the wages of some workers, particularlythe unskilled and inexperienced, above theequilibrium level. What effect would a fringebenefit mandate have…
Consider an economy with two labor markets—onefor manufacturing workers and one for serviceworkers. Suppose initially that neither is unionized.a. If manufacturing workers formed a union, whatwould you expect to happen to the wages andemployment in manufacturing?b. How would these changes in the manufacturinglabor market affect the supply of labor in themarket for service workers? What would happento the equilibrium wage and employment in thislabor market?
9. Each of two firms has one job opening. Suppose that (for reasons not discussed here but relating to the value of filling each opening) the firms offer different wages: firm i = 1,2 offers the wage wi. Imagine two workers, each of whom can apply to only one firm. The workers simultaneously decide whether to apply to firm 1 or to firm 2. If only one worker applies to a given firm, that worker gets the job; if both workers apply to one firm, the firm hires one worker at random (probability 0.5 for hiring worker 1 and probability 0.5 of hiring worker 2) and the other worker is unemployed (which has a payoff of zero). Suppose workers are risk neutral i.e., u(w) = w. а. Construct the normal form game. (Hint: payoffs in the normal form game are expected utility payoffs) b. Solve for the pure strategy set of Nash equilibria of the workers normal-form game when 0.5w1 w2. At equilibrium would a worker secure a job? Explain
To maximize profits, a firm uses a fixed amount of capital and varying amounts of labour inits production processes to produce commodity Y. The output fetches Kshs 3 in the market andthe firm’s production is as summarized.Number of workers Output per hour0 01 92 173 244 305 356 397 428 44 Required;i.Calculate the marginal product of labour for this firm and the value of the marginal productof labour and the Marginal Revenueii.Suppose that the competitive wage for workers who can make Product Y is Ksh16 perhour. How many workers should this firm hire and why?
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6. Contrasting labor union laws in two states Consider two states that adopt different laws conceming labor unions. The following graph shows the labor market in a state in the North. Initlally, the market-dearing wage there is $8.00 per hour. Suppose that the legislature in this northem state passes laws that make it easy for workers to join a union. Through collective bargalning, the union negotiates a wage of $10.00 per hour. Use the graph Input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Graph Input Tool Market for Labor 16 Wage (Dollars per hour) 14 Supply 2.00 Labor Demanded (Thousands of workers) 12 Labor Supplied (Thousands of workers) 1,400 200 10 Demand 2 200 400 600 800 1000 1200 1400 1600 LABOR (Thousands of workers) Enter $10.00 Into the box labeled WVage on the previous graph. Hint: Be sure to pay attention to the units used on the graph. At the union wage, union workers will be employed. The following…