13. Please, give your detailed explanation why a worker’s wage might be above the level that balances supply and demand. Minimum wage, Market power of labor unions and Efficiency wages.

Why worker’s wages are assumed to adjust to balance labor S and labor D. But this assumption does not always apply. For someone wages are set above level, brings S versus D into equilibrium. Workers are not affected because their equilibrium wages are well above legal minimum workers least skilled minimum wage laws raise wages above the level they would earn in an unregulated labor market.

Wages rise above equilibrium market power of labor unions. Union is worker association that bargains with employers over wages and working conditions. Unions often raise wages above level that would prevail without a union, perhaps because they can threaten to withhold labor from the firm by calling a strike.

Efficiency wages. Firm can find it profitable to pay high wages because doing so increases the productivity of its workers. High wages may reduce worker turnover, increase worker effort, and raise quality of workers who apply for jobs at the firm. Firms may choose to pay their workers more .Result is a surplus of labor, or unemployment.

14. Explain the role Customers and Government play in perpetuating discrimination in Labor markets. Moreover, when and why sometimes Employers discriminate in the Labor market. Examples are a must.

Competitive markets contain a natural remedy for employer discrimination. The entry into the market of firms that care only about profit tends to eliminate discriminatory wage differentials.

These wage differentials persist in competitive markets only when customers are willing to pay to maintain the discriminatory practice or when the government mandates it.

Example (Customer preferences)

Suppose that restaurant owners discriminate against blondes when hiring waiters. As a result, blonde waiters earn lower wages than brunette waiters. In this case, a restaurant can open up with blonde waiters and charge lower prices. If customers care only about the quality and price of their meals, the discriminatory firms will be driven

out of business, and the wage differential will disappear. If customer preferences for discrimination is strong an economy with such discrimination would contain two types of restaurants. Blonde restaurants hire blondes, have lower costs, and charge lower prices. Brunette restaurants hire brunettes, have higher costs, and charge higher prices. Customers who did not care about the hair color of their waiters would be attracted to the lower prices at

the blonde restaurants. Bigoted customers would go to the brunette restaurants and would pay for their discriminatory preference in the form of higher prices.

Example (government policies)

Another way for discrimination to persist in competitive markets is for the government to mandate discriminatory practices. If, for instance, the government passed a law stating that blondes could wash dishes in restaurants but could not work as waiters, then a wage differential could persist in a competitive market.

I think that employers may discriminate due to customer preferences or personal prejudices Employers who care only about making money are at an advantage when competing against those who also care about discriminating. As a result, firms that do not discriminate tend to replace those that do. In this way, competitive markets have a natural remedy for employer discrimination.

15. List and then explain the productivity factors which may explain the difference in pay between men and women in similar occupations. Do any of these factors arise as a result of cultural or social traditions? If so, describe how changes in social relationships will affect the pay gap over time. Productivity factor: 1) Women’s educational attainment is worse 2) They have less job experience 3) Women are less inclined to competition Yes, to some extent, arise as a result of cultural or social traditions. All of these productivity factors has arisen since women’s obligions always were to grow up children and carry out household, so are proner to leave jobs for children, be on maternity leave and often they don’t attain PhD. With time this social pay gap will decrease as social instituations and realations in our society change.

Chapter 20

16. There are Problems in Measuring Inequality; In-kinds Transfers, The Economic Life Cycle, Transitory versus Permanent Income. Carefully explain them in detail and outline the pros and cons associated with.

Problems in measuring inequality

Although data on the income distribution and poverty rate help to give us some idea about the degree of inequality in our society, but also there are problems in measuring inequality.