Ch19mic pendapatan dan diskriminasi

Chapter 19Chapter 19Chapter 19Chapter 19

Earnings and Earnings and DiscriminationDiscriminationEarnings and Earnings and

DiscriminationDiscrimination

©© 2002 by Nelson, a division of Thomson Canada Limited 2002 by Nelson, a division of Thomson Canada Limited©© 2002 by Nelson, a division of Thomson Canada Limited 2002 by Nelson, a division of Thomson Canada Limited

Mankiw et al. Principles of Microeconomics, 2nd Canadian Edition Chapter 19:

• Examine how wages compensate for differences in job characteristics.

• Learn and compare the human-capital and signalling theories of education.

• Learn why wages rise above the level that balances supply and demand.

• Consider why it is difficult to measure the impact of discrimination on wages.

• See when market forces can and cannot provide a natural remedy for discrimination.

• Consider the debate over comparable worth as a system for setting wages.

• Examine how wages compensate for differences in job characteristics.

• Learn and compare the human-capital and signalling theories of education.

• Learn why wages rise above the level that balances supply and demand.

• Consider why it is difficult to measure the impact of discrimination on wages.

• See when market forces can and cannot provide a natural remedy for discrimination.

• Consider the debate over comparable worth as a system for setting wages.

In this chapter you will…In this chapter you will…


Earnings and DiscriminationEarnings and Discrimination

• Differences in Earnings in Canada today:– The typical physician earns about

$200,000 a year.– The typical police officer earns about

$50,000 a year.– The typical farm worker earns about

$20,000 a year.

• Differences in Earnings in Canada today:– The typical physician earns about

$200,000 a year.– The typical police officer earns about

$50,000 a year.– The typical farm worker earns about

$20,000 a year.


Earnings and DiscriminationEarnings and Discrimination

• What causes earnings to vary so much?–Wages are governed by labour supply

and labour demand.– Labour demand reflects the marginal

productivity of labour.– In equilibrium, each worker is paid the

value of his or her marginal contribution to the economy’s production of goods and services.

• What causes earnings to vary so much?–Wages are governed by labour supply

and labour demand.– Labour demand reflects the marginal

productivity of labour.– In equilibrium, each worker is paid the

value of his or her marginal contribution to the economy’s production of goods and services.


SOME DETERMINANTS OF SOME DETERMINANTS OF EQUILIBRIUM WAGESEQUILIBRIUM WAGES

• Compensating differentials• Human capital• Ability, effort, and chance• signalling• The superstar phenomenon

• Compensating differentials• Human capital• Ability, effort, and chance• signalling• The superstar phenomenon


Compensating DifferentialsCompensating Differentials

• Compensating differential refers to a difference in wages that arises from nonmonetary characteristics of different jobs.– Coal miners are paid more than others

with similar levels of education.– Night shift workers are paid more than

day shift workers.– Professors are paid less than lawyers

and doctors, who have similar amounts of education.

• Compensating differential refers to a difference in wages that arises from nonmonetary characteristics of different jobs.– Coal miners are paid more than others

with similar levels of education.– Night shift workers are paid more than

day shift workers.– Professors are paid less than lawyers

and doctors, who have similar amounts of education.


Human CapitalHuman Capital

• Human capital is the accumulation of investments in people, such as education and on-the-job training.

• The most important type of human capital is education.

• Education represents an expenditure of resources at one point in time to raise productivity in the future.

• Human capital is the accumulation of investments in people, such as education and on-the-job training.

• The most important type of human capital is education.

• Education represents an expenditure of resources at one point in time to raise productivity in the future.


• In general, workers with more human capital earn more, on average, than workers with less human capital.

• University graduates in Canada earn earn about 58 percent more than workers with a high school diploma.

• Education raises wages because – firms (demanders of labour) are willing to pay

more for the highly educated because they have higher marginal products.

– Workers (suppliers of labour) are willing to pay the costs of education only if there is a reward for doinf so.

• In general, workers with more human capital earn more, on average, than workers with less human capital.

• University graduates in Canada earn earn about 58 percent more than workers with a high school diploma.

• Education raises wages because – firms (demanders of labour) are willing to pay

more for the highly educated because they have higher marginal products.

– Workers (suppliers of labour) are willing to pay the costs of education only if there is a reward for doinf so.

Human CapitalHuman Capital


• Figure 19-1 shows that in the United States the ratio of the average earnings of university graduates to the average earnings of high-school graduates has grown steadily over time.

• In 1982, the U.S. university graduates earned 52 percent more than high-school graduates; in 1994, they earned about 75 percent more.

• The wage premium in Canada has not grown over this period. In 1982, university graduates earned about 60 percent more than high school graduates; in 1994 they earned about 57 percent more.

• Figure 19-1 shows that in the United States the ratio of the average earnings of university graduates to the average earnings of high-school graduates has grown steadily over time.

• In 1982, the U.S. university graduates earned 52 percent more than high-school graduates; in 1994, they earned about 75 percent more.

• The wage premium in Canada has not grown over this period. In 1982, university graduates earned about 60 percent more than high school graduates; in 1994 they earned about 57 percent more.

CASE STUDY:CASE STUDY: The Value of SkillThe Value of Skill

Table 19-1. The Ratio of University of University Table 19-1. The Ratio of University of University Graduates to Earnings of High-School Graduates Graduates to Earnings of High-School Graduates

Copyright©2004 South-Western


• Why the growing wage premium in the U.S.?– International trade has increased the

demand for skilled labour.– Increased computerization has caused

the demand for skilled workers to rise and the demand for unskilled workers to fall.

• Why the growing wage premium in the U.S.?– International trade has increased the

demand for skilled labour.– Increased computerization has caused

the demand for skilled workers to rise and the demand for unskilled workers to fall.

CASE STUDY (cont’d):CASE STUDY (cont’d): The Value of SkillThe Value of Skill


• Why is there no increase in the relative earnings of Canadian skilled workers?– The relative supply of skilled workers

has increased faster in Canada. – The relative supply of skilled labour has

kept pace with the increase in the demand for skilled labour. The earnings gap between skilled and unskilled labour has remained constant.

• Why is there no increase in the relative earnings of Canadian skilled workers?– The relative supply of skilled workers

has increased faster in Canada. – The relative supply of skilled labour has

kept pace with the increase in the demand for skilled labour. The earnings gap between skilled and unskilled labour has remained constant.

CASE STUDY (cont’d):CASE STUDY (cont’d): The Value of SkillThe Value of Skill


• Natural ability is important for workers in all occupations.

• Many personal characteristics determine how productive workers are and, therefore, play a role in determining the wages they earn.

• Some people work hard; others are lazy. We should not be surprised to find that those who work hard are more productive and earn higher wages.

• Chance also plays a role in determining wages.

• Natural ability is important for workers in all occupations.

• Many personal characteristics determine how productive workers are and, therefore, play a role in determining the wages they earn.

• Some people work hard; others are lazy. We should not be surprised to find that those who work hard are more productive and earn higher wages.

• Chance also plays a role in determining wages.

Ability, Effort, and Chance Ability, Effort, and Chance


An Alternative View of Education: An Alternative View of Education: signallingsignalling

• Firms use educational attainment as a way of sorting between high-ability and low-ability workers.– It is rational for firms to interpret a

college degree as a signal of ability because it is easier for a high ability person to earn a university degree.

• It is similar to the signalling theory in advertisement.

• Firms use educational attainment as a way of sorting between high-ability and low-ability workers.– It is rational for firms to interpret a

college degree as a signal of ability because it is easier for a high ability person to earn a university degree.

• It is similar to the signalling theory in advertisement.



• There is now two views on education:– Human-capital theory– Signalling theory

• Human-capital view: education makes workers more productive

• Signalling view: education is correlated with natural ability

• There is now two views on education:– Human-capital theory– Signalling theory

• Human-capital view: education makes workers more productive

• Signalling view: education is correlated with natural ability



• Predictions on policies:– Human-capital view: increasing

education levels for all workers will increase productivity and thereby wages.

– Signalling view: education does not enhance productivity sor raising the education level of all workers does not affect wages.

• The truth lies somewhere between these two extremes.

• Predictions on policies:– Human-capital view: increasing

education levels for all workers will increase productivity and thereby wages.

– Signalling view: education does not enhance productivity sor raising the education level of all workers does not affect wages.

• The truth lies somewhere between these two extremes.


The Superstar PhenomenonThe Superstar Phenomenon

• Superstars arise in markets that exhibit the following characteristics:– Every customer in the market wants to enjoy

the good supplied by the best producer.– The good is produced with a technology that

makes it possible for the best producer to supply every customer at a low cost.

• There are no superstar carpenters because he or she can only provide their services to a limited market, all other things being equal.

• Superstars arise in markets that exhibit the following characteristics:– Every customer in the market wants to enjoy

the good supplied by the best producer.– The good is produced with a technology that

makes it possible for the best producer to supply every customer at a low cost.

• There are no superstar carpenters because he or she can only provide their services to a limited market, all other things being equal.


Above-Equilibrium Wages: Minimum-Wage Above-Equilibrium Wages: Minimum-Wage Laws, Unions, and Efficiency WagesLaws, Unions, and Efficiency Wages

• Why are some workers’ wages set above the level that brings supply and demand into equilibrium?–Minimum-wage laws–Market power of labour unions– Efficiency wages

• Why are some workers’ wages set above the level that brings supply and demand into equilibrium?–Minimum-wage laws–Market power of labour unions– Efficiency wages



• Unions– A union is a worker association that

bargains with employers over wages and working conditions.

• Strike– A strike refers to the organized

withdrawal of labour from a firm by a union.

• Unions– A union is a worker association that

bargains with employers over wages and working conditions.

• Strike– A strike refers to the organized

withdrawal of labour from a firm by a union.



• Efficiency Wages– The theory of efficiency wages holds

that a 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.• raise the quality of workers that apply for

jobs at the firm.

• Efficiency Wages– The theory of efficiency wages holds

that a 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.• raise the quality of workers that apply for

jobs at the firm.


THE ECONOMICS OF THE ECONOMICS OF DISCRIMINATIONDISCRIMINATION

• Discrimination occurs when the marketplace offers different opportunities to similar individuals who differ only by race, ethnic group, sex, age, or other personal characteristics.

• Discrimination occurs when the marketplace offers different opportunities to similar individuals who differ only by race, ethnic group, sex, age, or other personal characteristics.


THE ECONOMICS OF THE ECONOMICS OF DISCRIMINATIONDISCRIMINATION

• Although discrimination is an emotionally charged topic, economists try to study the topic objectively in order to separate myth from reality.

• Although discrimination is an emotionally charged topic, economists try to study the topic objectively in order to separate myth from reality.


Measuring labour-Market DiscriminationMeasuring labour-Market Discrimination

• Discrimination is often measured by looking at the average wages of different groups.

• Even in a labour market free of discrimination, different people have different wages.

• People differ in the amount of human capital they have and in the kinds of work they are willing and able to do.

• Simply observing differences in wages among broad groups—white and black, men and women—says little about the prevalence of discrimination.

• Discrimination is often measured by looking at the average wages of different groups.

• Even in a labour market free of discrimination, different people have different wages.

• People differ in the amount of human capital they have and in the kinds of work they are willing and able to do.

• Simply observing differences in wages among broad groups—white and black, men and women—says little about the prevalence of discrimination.


• Because the differences in average wages among groups in part reflect differences in human capital and job characteristics, they do not by themselves say anything about how much discrimination there is in the labour market.

• Because the differences in average wages among groups in part reflect differences in human capital and job characteristics, they do not by themselves say anything about how much discrimination there is in the labour market.

Measuring labour-Market DiscriminationMeasuring labour-Market Discrimination


Discrimination by EmployersDiscrimination by Employers

• Firms that do not discriminate will have lower labour costs when they hire the employees discriminated against.

• Nondiscriminatory firms will tend to replace firms that discriminate.

• Competitive markets tend to limit the impact of discrimination on wages.

• Firms that do not discriminate will be more profitable than those firms that do discriminate.

• Firms that do not discriminate will have lower labour costs when they hire the employees discriminated against.

• Nondiscriminatory firms will tend to replace firms that discriminate.


• Firms that do not discriminate will be more profitable than those firms that do discriminate.


CASE STUDY:CASE STUDY: Explaining the Gender Wage Explaining the Gender Wage GapGap

Table 19-1. Ratio of female to male earnings by education

Education Female to Male Earnings ratio

Less than high school 69.1%

High school 78.4

Incomplete postsecondare 80.5

Postsecondare diploma/certificate

79.4

Postsecondary degree 84.5

Overall 80.3


CASE STUDY (cont’d):CASE STUDY (cont’d): Explaining the Explaining the Gender Wage GapGender Wage Gap


Discrimination by Customers and Discrimination by Customers and GovernmentsGovernments

• Although the profit motive is a strong force acting to eliminate discriminatory wage differentials, there are limits to its corrective abilities.– Customer preferences– Government policies

• Although the profit motive is a strong force acting to eliminate discriminatory wage differentials, there are limits to its corrective abilities.– Customer preferences– Government policies


• Customer preferences: – If customers have discriminatory

preferences, a competitive market is consistent with a discriminatory wage differential.

– This will happen when customers are willing to pay to maintain the discriminatory practice.

• Customer preferences: – If customers have discriminatory

preferences, a competitive market is consistent with a discriminatory wage differential.

– This will happen when customers are willing to pay to maintain the discriminatory practice.



• Government policies: –When the government mandates

discriminatory practices or requires firms to discriminate, this may also lead to discriminatory wage differentials.

• Government policies: –When the government mandates

discriminatory practices or requires firms to discriminate, this may also lead to discriminatory wage differentials.



SummarySummary

• Workers earn different wages for many reasons.

• To some extent, wage differentials compensate workers for job attributes.

• Workers with more human capital get paid more than workers with less human capital.

• Workers earn different wages for many reasons.

• To some extent, wage differentials compensate workers for job attributes.

• Workers with more human capital get paid more than workers with less human capital.


SummarySummary

• The return to accumulating human capital is high and has increased over the past decade.

• There is much variation in earnings that cannot be explained by things economists can measure.

• The return to accumulating human capital is high and has increased over the past decade.

• There is much variation in earnings that cannot be explained by things economists can measure.


SummarySummary

• The unexplained variation in earnings is largely attributable to natural ability, effort, and chance.

• Some economists have suggested that more-educated workers earn higher wages because workers with high natural ability use education as a way to signal their high ability to employers.

• The unexplained variation in earnings is largely attributable to natural ability, effort, and chance.

• Some economists have suggested that more-educated workers earn higher wages because workers with high natural ability use education as a way to signal their high ability to employers.


SummarySummary

• Wages are sometimes pushed above the equilibrium level because of minimum-wage laws, unions, and efficiency wages.

• Some differences in earnings are attributable to discrimination on the basis of race, sex, or other factors.

• When measuring the amount of discrimination, one must correct for differences in human capital and job characteristics.

• Wages are sometimes pushed above the equilibrium level because of minimum-wage laws, unions, and efficiency wages.

• Some differences in earnings are attributable to discrimination on the basis of race, sex, or other factors.

• When measuring the amount of discrimination, one must correct for differences in human capital and job characteristics.


SummarySummary


• Discrimination can persist in competitive markets if customers are– willing to pay more to discriminatory

firms,– or if the government passes laws

requiring firms to discriminate.


• Discrimination can persist in competitive markets if customers are– willing to pay more to discriminatory

firms,– or if the government passes laws

requiring firms to discriminate.


The EndThe End

Ch19mic pendapatan dan diskriminasi

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