Chapter 12.1, Problem 4R

To determine

To evaluate: the effect on wages by the type of job, skill level and location

Explanation of Solution

As per the basic labor market theory, the equilibrium wage rate would be one that applies to all workers through sectors and nations. Of course, that isn't the case; doctors usually get more pay for an hour than retail employees, and U.S. workers generally earn higher salaries than Indian workers.

Human capital is a growing cause of inequalities in wage rates. More skilled and educated workers tend to get higher salaries because their marginal labor product tends to be higher. In addition, the differential pay for further schooling helps to compensate employers for the time, energy, and foregone wages of getting the skills needed.

If a specific part of the nation is a particularly attractive place to live in and if economic mobility is good then many and more people move to that town, which in turn will raise the supply of economic and the wage depression. If that area's popularity does not improve compared to other places, the wage rate will be set to such an extent that workers will remain indifferent to living in areas that are more appealing but have lower wages and live in areas that are more favorable with better incomes.

Economics Concept Introduction

Introduction: The labor market, relates to labor supply and demand, in which supply is generated by the workers and demand is given by the employers. It is a major component of every economy, and is closely correlated with money, commodities, and services markets.