The initial position of the graph corresponds to the initial labor market condition in the southern state before the labor union negotiated the new, higher wage for workers in the northern state. Suppose that after the wage goes up in the northern state, some workers in the northern state lose their jobs and decide to move to the southern state. Adjust the graph to show what happens to employment and wages in the southern state.
The initial position of the graph corresponds to the initial labor market condition in the southern state before the labor union negotiated the new, higher wage for workers in the northern state. Suppose that after the wage goes up in the northern state, some workers in the northern state lose their jobs and decide to move to the southern state. Adjust the graph to show what happens to employment and wages in the southern state.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The initial position of the graph corresponds to the initial labor market condition in the southern state before the labor union negotiated the new, higher wage for workers in the northern state.
Suppose that after the wage goes up in the northern state, some workers in the northern state lose their jobs and decide to move to the southern state.
### Graph Explanation
The graph depicts the relationship between wage and labor in the southern state. It shows:
- **Y-axis (Vertical):** Represents Wage.
- **X-axis (Horizontal):** Represents Labor.
The graph includes:
- **Demand Curve (Blue):** This downward sloping line shows the demand for labor. As wages decrease, employers are willing to hire more workers.
- **Initial Supply Curve (S₁, Light Gray):** Represents the initial supply of labor in the southern state.
- **Adjusted Supply Curve (S₂, Orange):** Represents the new supply of labor after northern state workers move south, indicating an increase in labor supply.
### Analysis
The shift from supply curve S₁ to S₂ indicates an increase in the labor supply in the southern state, potentially due to job loss in the northern state and migration of workers.
### Question
"Which of the following groups are better off as a result of the union action in the northern state? Check all that apply."
- Employers in the northern state
- The original workers in the southern state
- Workers in the northern state employed at the union wage
- All workers in the northern state
### Answer Choices
- Workers in the northern state employed at the union wage: **Checked**
- All workers in the northern state: **Checked**
Transcribed Image Text:**Labor Market and Unionization: An Analysis**
Consider two states that adopt different laws concerning labor unions.
**Northern State Labor Market:**
The graph illustrates the labor market in a northern state. Initially, the market-clearing wage is $10.00 per hour. The legislature in this state passes laws facilitating union formation, allowing collective bargaining, resulting in a negotiated wage of $12.50 per hour.
**Graph Analysis:**
- **Axes:** The x-axis represents labor in thousands of workers (ranging from 0 to 1000), while the y-axis represents the wage in dollars per hour (ranging from $0 to $20).
- **Lines:**
- **Supply (orange line):** Upward sloping, indicating that as wages increase, more labor is supplied.
- **Demand (blue line):** Downward sloping, indicating that as wages increase, less labor is demanded.
- **Equilibrium:** Initially at $10.00 per hour.
- **New Union Wage:** $12.50 per hour, shifting from equilibrium.
The graph input tool allows users to explore different scenarios. Currently, it shows:
- Wage: $2.50 (to be adjusted)
- Labor Demanded: 875 thousand workers
- Labor Supplied: 125 thousand workers
**Instructions:**
Enter $12.50 into the Wage box on the graph.
**Hint:** Pay attention to units on the graph. At the union wage, 375,000 union workers will be employed.
**Southern State Labor Market:**
In contrast, the southern state has "right-to-work" laws, keeping the wage at the market-clearing value of $10.00 per hour. The graph is assumed to be similar to the northern state, except for these legislative differences.
**Conclusion:**
This comparative analysis of labor markets highlights how union-supportive legislation impacts wages and employment levels in different states.
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