Module 13: Labor Markets and Income
Section outline
-
In a market economy like the United States, income comes from ownership of the means of production: resources or assets. More precisely, one’s income is a function of two things: the quantity of each resource one owns, and the value society places on those resources. Each factor of production has an associated factor payment. For the majority of us, the most important resource we own is our labor. Thus, most of our income is wages, salaries, commissions, tips and other types of labor income. Your labor income depends on how many hours you work and the wage rate an employer will pay you for those hours. At the same time, some people own real estate, which they can either use themselves or rent out to other users. Some people have financial assets like bank accounts, stocks and bonds, for which they earn interest, dividends or some other form of income. Each of these factor payments, like wages for labor and interest for financial capital, is determined in their respective factor markets.In this chapter, we will focus on labor markets, but other factor markets operate similarly.
Upon completion of this module, you will be able to:- Describe the demand for labor in perfectly competitive output markets
- Describe the demand for labor in imperfectly competitive output markets
- Identify what determines the going market rate for labor
- Define monopsony power
- Explain how imperfectly competitive labor markets determine wages and employment, where employers have market power
- Explain the concept of labor unions, including membership levels and wages
- Evaluate arguments for and against labor unions
- Analyze reasons for the decline in U.S. union membership
- How firms determine wages and employment when a specific labor market combines a union and a monopsony
- Analyze earnings gaps based on race and gender
- Explain the impact of discrimination in a competitive market
- Identify U.S. public policies designed to reduce discrimination
To achieve these objectives: [Edit these items to match your resources and activities.]
- Read the Module 13 Introduction
- Read Chapter 13 in the course textbook, Microeconomics.
- Complete Module 13 Discussion Forum.
- Complete Module 13 Quiz.
- For course instructors, list any other reading assignments here.
[Include all reading assignments here that are outside of Moodle. Be as
concise as possible. More information can be included in the
third-party section below, if necessary.]
- Complete the [specific activities in the module. Include all in the order you want them completed.]
Module Pressbooks Resources and Activities
You will find the following resources and activities in this module at the Pressbooks website. Click on the links below to access or complete each item.
-
Students mustMark as done
Chapter 13 of Introduction to Microeconomics.
-
-
-
-
Students mustMark as done
Module 13 In Class Group Activity (hide from students)
Course SLO 1: Identify the basic economic principles that serve as the foundation of economic analysis
Course SLO 6: Discuss the basic theories behind consumer and producer behavior
Module SLO: 13.1.1 - Describe the demand for labor in perfectly competitive output markets
Section 1 of the textbook introduces the First Rule of Labor Markets, which says that an employer or firm will not pay a worker more than the marginal revenue that the worker benefits. For this discussion, your task is to:
1. Read the “Clear it Up: Do Profit Maximizing Employers Exploit Labor”
2. Explain how workers and employers benefit in a voluntary labor market (a market where both sides may enter and leave at their own discretion).
3. What issues might we run into from the profit maximizing firm?
Instructor Notes:
This post can end up going almost anywhere. The overall benefit is that a voluntary labor market functions much like the dating market; workers and employers can complete job searches or recruitment to find best matches. If an employee is not happy with their employer, they can leave, and if an employer finds and employee to be lackluster, then they can release the employee. A popular issue that may come up is that employees and employers may not have equal footing; that is, an individual worker is relatively replaceable, while an employee losing their job can be very detrimental. Students may propose policy to help with this, but may also mention improved technology to make the job search easier for employees to conduct.
Background Colour
Font Face
Font Kerning
Font Size
Image Visibility
Letter Spacing
Line Height
Link Highlight
Text Colour