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Labor Economics

Purpose of Course  showclose

In economics, the term "labor" refers to workers.  As a factor of production, labor earns wages for the services that it renders.  As such, students of labor economics have traditionally set out to understand wage formation, the level of employment, and all elements that go into the making of a wage relationship.  Over the years, the social and economic contexts in which labor markets operate have become increasingly complex; nowadays, labor economics is no longer limited to the study of wages.  Modern labor economics instead seeks to understand the complex workings of the labor market by studying the dynamics between employers, employees, and their wage-, price-, and profit-making incentives.  In other words, modern labor economics explores the outcomes of the labor market under the assumption that workers strive to maximize their wellbeing and firms strive to maximize profits.  It also analyzes the behavior of employers and employees and studies their responses to changes in government policies and/or in the demographic composition of the labor force. In order to study how labor markets work, we must first build a good theory of the labor market with empirical implications that can be tested with real world data.  This course is accordingly designed to teach both fact and theory.  By looking at facts through data and empirical findings, we can better understand the mechanisms of the labor market.  The theory, on the other hand, will help us in understanding how this data is generated. Prior to taking this course, you should have completed ECON101: Principles of Microeconomics or, at a minimum, have a basic understanding of the topics covered in microeconomics—namely, the demand and supply model and the concept of elasticity.  The purpose of this course is to teach you how workers and firms make decisions in the labor market.  The course will also teach you how the government can alter the economic opportunities available to both workers and firms by changing the "rules of the game" through social policies, thus influencing the decisions of these two players.  At the end of the course, you should be able to use the tools learned in this course to understand, analyze, and predict some of labor market outcomes and examine the different ways social policy can affect the interaction between workers and firms.

Course Information  showclose

Welcome to ECON303. Below, please find general information on the course, including its requirements. 

Course Designer: Jubeet Kaur Singh

Primary Resource: The study material for this course includes a range of free online content.  However, the following material has been assigned as the main reading for the course:

Requirements for completion: In order to successfully complete this course, you will need to work through each unit and its assigned material.  Please note that this course is designed to teach theory and the application of it and as such, it includes a lot of examples and assessments along with the reading material.  In order to ensure a thorough understanding of each topic, it is imperative that you complete all the assessments after you go through the study material.

Note that you will be officially graded only for the final exam.  In order to "pass" the course, you will have to attain a minimum of 70% on the final exam.  Your score on the final exam will be tabulated as soon as you complete it.  You will have the opportunity to retake the exam if you do not pass it.

Time Commitment: This course should take you approximately 92 hours to complete.  A time advisory is presented under each subunit to guide you on the amount of time that you may need for that subunit.  The running time for the video lectures is also listed, along with the time required for assessments and/or assignments (if any).  Please do not rush through the material to adhere to the time advisory.  The time advisory is provided so that you can look at the time suggested in order to plan out your week for study and make your schedule accordingly.  For example, Unit 1 should take you about 7 hours to complete.  Perhaps you can sit down with your calendar and decide to complete subunits 1.1 and 1.2 (a total of 3 hours) on Monday night, subunit 1.3 (a total of 2.5 hours) on Tuesday night, and subunit 1.4 (a total of 1.5 hours) on Wednesday night, and so forth.

Tips/Suggestions: As you read, it would be helpful if you simultaneously try to recreate the graphs on a separate sheet of paper and learn the mechanics of how the graphs change.  Practice the graphs on your own (and often) before moving on to the next topic.  Also make sure to mark down any concepts or definitions that stand out to you.  Preparing personal notes can be useful as a "cheat sheet" for review prior to taking the final exam.

The theoretical concepts presented in this course are pretty simple and logical, and what makes this course extremely interesting is its connection to the real world.  Although it is important to learn the theory behind every topic, it is more important to understand the techniques of labor market analysis and important economic and policy issues dealing with labor and labor markets.  To this end, it is important that you thoroughly understand the examples and the facts that are connected to every topic. 

Apart from reading the material presented in this course, students of labor economicsare encouraged to form a regular habit of reading news articles that are relevant to the issues covered in this course.  Good sources are The Wall Street Journal, The New York Times, The Economist, and Business Week.  Other important resources are the U.S. Bureau of Labor Statistics website or a labor and economics blog maintained at UC Berkeley.



Learning Outcomes  showclose

Upon successful completion of this course, students will be able to:

  • Demonstrate an understanding of basic labor economics theory, including labor market structures and wage determination.
  • Apply their understanding of theoretical models to analyze trends in data pertaining to topics in labor economics.
  • Apply their understanding of theoretical models to case studies presented in the course.
  • Construct, defend, and analyze important labor policy issues.
  • Comprehend, assess, and criticize existing empirical work in labor economics.

Course Requirements  showclose

In order to take this course, students must:

√    Have access to a computer.

√    Have continuous broadband Internet access.

√    Have the ability/permission to install plug-ins (e.g., Adobe Reader or Flash) and software.

√    Have the ability to download and save files and documents to a computer.

√    Have the ability to open Microsoft files and documents (.doc, .ppt, .xls, etc.).

√    Have competency in the English language. 

√    Have read the Saylor Student Handbook.

√    Have completed ECON101: Principles of Microeconomics or at least have a knowledge of the demand and supply model and the concept of elasticity.

Unit Outline show close


Expand All Resources Collapse All Resources
  • Unit 1: Introduction  

    The three key players in the labor market are the worker, the firm, and the government.  In the first part of this unit, you will learn that the interactions between these players can be studied in one of two ways:  by observing and predicting their behavior in various situations in the labor market arena (the positive economics way) or by placing a value judgment on their interactions and determining whether the situation is desirable or harmful (the normative economics way).  This unit will also teach you how the labor force is measured and will provide you with a simple supply-demand framework designed to show you how the labor market works.

    Unit 1 Time Advisory   show close
    Unit 1 Learning Outcomes   show close
  • 1.1 Concepts in Labor Economics  
    • Lecture: SUNY-Oswego: Professor John Kane's Lecture notes on Introduction to Labor Economics: “Introduction (Chapter 1)”

      Link: SUNY-Oswego:  Professor John Kane's Lecture notes on Introduction to Labor Economics: “Introduction (Chapter 1)” (HTML, Adobe Flash, or Powerpoint)
       
      Instructions:  Please click on chapter 1 from the Table of Contents.  Note that the material is presented in three formats: single document HTML format, narrated PowerPoint, and PowerPoint Slideshow. Please go through the narrated PowerPoint to best understand the material.  You can read the HTML text to review the material after listening to the audio.  However, you may skip the notes presented in the PowerPoint slides as they are a repetition of the slides that accompany the audio.  If the audio does not work at first, refresh your browser.  This reading covers subunits 1.1.1-1.1.3.
       
      Terms of Use: Please respect the copyright and terms of use displayed on the web pages above.

      See a broken link? Please let us know!

  • 1.1.1 The Role of Positive Economics in Labor Economics  

    Note: This subunit is covered by the reading assigned under Unit 1.  

  • 1.1.2 Normative Economics and Government Policy  

    Note: This subunit is covered by the reading assigned under Unit 1.  

  • 1.1.3 Market Failure and its Inability to Achieve Pareto Efficiency in Labor Markets  

    Note: This subunit is covered by the reading assigned under Unit 1.  

  • 1.2 Measuring the Labor Force  
  • 1.3 The Labor Market  
    • Lecture: SUNY-Oswego: Professor John Kane's Lecture notes on Introduction to Labor Economics: “Labor Markets (Chapter 2)”

      Link: SUNY-Oswego:  Professor John Kane's Lecture notes on Introduction to Labor Economics: “Labor Markets (Chapter 2)” (HTML, Adobe Flash, or Powerpoint)
       
      Instructions:  Please click on chapter 2 from the Table of Contents.  Note that the material is presented in three formats: Single document HTML format, narrated PowerPoint, and PowerPoint Slideshow. Please go through the narrated PowerPoint to best understand the material.  You can read the HTML text to review the material after listening to the audio.  However, you may skip the notes presented in the PowerPoint slides as they are a repetition of the slides that accompany the audio. If the audio does not work at first, refresh your browser.  This reading covers subunits 1.3.1-1.3.5 and subunits 1.4.1-1.4.3.
       
      Terms of Use: Please respect the copyright and terms of use displayed on the web pages above.

      See a broken link? Please let us know!

  • 1.3.1 National and Local Labor Markets  

    Note: This subunit is covered by the reading assigned under Unit 1.3. 

  • 1.3.2 Labor Force and Unemployment  

    Note: This subunit is covered by the reading assigned under Unit 1.3. 

  • 1.3.3 Sectoral Pattern of Unemployment  

    Note: This subunit is covered by the reading assigned under Unit 1.3. 

  • 1.3.4 Nominal and Real Wages  

    Note: This subunit is covered by the reading assigned under Unit 1.3. 

  • 1.3.5 Wages, Earnings, Total Compensation, and Income  

    Note: This subunit is covered by the reading assigned under Unit 1.3. 

  • 1.4 Determining Wages in the Labor Market  
  • 1.4.1 The Demand for Labor  

    Note: This subunit is covered by the readings assigned beneath subunits 1.3 and 1.4. 

  • 1.4.2 The Supply of Labor  

    Note: This subunit is covered by the readings assigned beneath subunits 1.3 and 1.4. 

  • 1.4.3 Equilibrium in the Labor Market  

    Note: This subunit is covered by the readings assigned beneath subunits 1.3 and 1.4. 

  • Unit 2: Labor Supply  

    The past century has seen a number of dramatic shifts in labor trends.  This section attempts to explain some of major stylized facts observed over the last century.  For example, labor force participation rates in the United States have experienced dramatic changes in the past century.  This holds true for both men and women, though in different capacities: while labor force participation rates have steadily declined for men, there has been a huge increase in participation rates for women.  It is worth emphasizing that female labor force participation has been particularly steep among married women.  These dramatic shifts have been accompanied by sizeable declines in the average hours worked per week.  Economists have also observed that the labor supply tends to vary across other dimensions, such as race and education level, phenomena observed in other industrialized countries as well.  This observation has motivated much of the recent research conducted in the area of labor economics. 

    In this section, you will first learn about the neo-classical model of labor-leisure choice.  This model seeks to explain the factors that determine an individual's decision to work for pay and the number of hours he/she is willing to work.  You will then learn about the derivation of the labor supply curve and the measure of elasticity before discussing the impact that different government policies have on an individual’s decision to work.

    Please note that the material covered in subunit 2.1 pertains to the static theory of labor supply.  The last section in this unit, however, will present topics in labor supply studied over time.

    Unit 2 Time Advisory   show close
    Unit 2 Learning Outcomes   show close
    • Lecture: SUNY-Oswego: Professor John Kane's Lecture notes on Introduction to Labor Economics: “Labor Supply I (Chapter 6)”

      Link: SUNY-Oswego:  Professor John Kane's Lecture notes on Introduction to Labor Economics:“Labor Supply I (Chapter 6)” (HTML, Adobe Flash, or Powerpoint)
       
      Instructions:  Please click on chapter 6 from the Table of Contents.  Note that the material is presented in three formats: Single document HTML format, narrated PowerPoint, and PowerPoint Slideshow.  Please go through the narrated PowerPoint to best understand the material.  Note that there is no audio on these sets of slides.  You can read the HTML text to review the material after listening to the audio.  However, you may skip the notes presented in the PowerPoint slides as they are a repetition of the slides that accompany the audio. If the audio does not work at first, refresh your browser. This reading covers subunits 2.1.1-2.1.3 and subunit 2.2.
       
      Note: This reading explains the material with the aid of graphs.
       
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  • 2.1 The Decision to Work Model  
    • Reading: New York University: Professor Matthew Wiswall's “Lecture Notes on Labor Economics”

      Link: New York University: Professor Matthew Wiswall's “Lecture notes on Labor Economics” (PDF)
       
      Instructions:  Please click on “Lecture Notes” to access the pdf file with the lecture notes.  Scroll down to page 33, section 4 ("Labor Supply") and read the section in its entirety (i.e. all the way up to page 48).  This reading covers subunits 2.1.1-2.1.3.
       
      Note: This reading explains the material with the aid of mathematical tools.  If you wish to review the mathematical concepts on which this section is based, please read the pages 1-6 of these lecture notes and then return to the numerical examples covered in section 4.
       
      Terms of Use: Please respect the copyright and terms of use displayed on the web pages above.

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  • 2.1.1 Setting up the Model  

    Note: This subunit is covered by the reading assigned under Unit 2.

  • 2.1.2 Labor-Leisure Choice  

    Note: This subunit is covered by the reading assigned under Unit 2.

  • 2.1.3 Income Effects and Substitution Effects  

    Note: This subunit is covered by the reading assigned under Unit 2.

  • 2.2 Policy Implications  
  • 2.2.1 Cash Grants  

    Note: This subunit is covered by the reading assigned under Unit 2.

  • 2.2.2 The Earned Income Tax Credit  

    Note: This subunit is covered by the reading assigned under Unit 2.

  • 2.3 Labor Supply Overtime  
    • Reading: SUNY-Oswego: Professor John Kane's Lecture notes on Introduction to Labor Economics: “Labor Supply II (Chapter 7)”

      Link: SUNY-Oswego:  Professor John Kane's Lecture notes on Introduction to Labor Economics: “Labor Supply II (Chapter 7)” (HTML, Adobe Flash, or Powerpoint)
       
      Instructions:  Please click on Chapter 7 from the Table of Contents.  Note that the material is presented in three formats: Single document HTML format, narrated PowerPoint, and PowerPoint Slideshow.  Please go through the narrated PowerPoint to best understand the material.  You can read the HTML text to review the material after listening to the audio.  However, you may skip the notes presented in the PowerPoint slides as they are a repetition of the slides that accompany the audio. If the audio does not work at first, refresh your browser. This reading covers subunits 2.3.1-2.3.3.
       
      Terms of Use: Please respect the copyright and terms of use displayed on the web pages above.

      See a broken link? Please let us know!

  • 2.3.1 The Theory of Household Production  

    Note: This subunit is covered by the reading assigned beneath subunit 2.3.

  • 2.3.2 Labor Supply over the Life Cycle  

    Note: This subunit is covered by the reading assigned beneath subunit 2.3.

  • 2.3.3 The Effect of Government Programs on Labor Supply  
  • 2.3.3.1 Social Security  

    Note: This subunit is covered by the reading assigned beneath subunit 2.3.

  • 2.3.3.2 Child Support Enforcement and Welfare Payments  

    Note: This subunit is covered by the reading assigned beneath subunit 2.3.

  • Unit 2 Guest Lecture  
  • Unit 3: The Demand for Labor  

    This unit focuses on the "demand side" of the labor market.  The demand for labor is quite similar to that of a firm's demand for other inputs in the production process.  However, the demand for labor can also be influenced by important social and political considerations, several of which will be discussed here.  After studying the mechanics of labor demand, you will take a look at how economic policies can regulate various aspects of a firm's labor demand.

    Unit 3 Time Advisory   show close
    Unit 3 Learning Outcomes   show close
  • 3.1 The Production Function  

    Note: This subunit is covered by the reading assigned beneath Unit 3.

  • 3.2 Profit Maximization  

    Note: This subunit is covered by the reading assigned beneath Unit 3.

  • 3.3 Short Run versus Long Run Demand for Labor  
  • 3.3.1 The Employment Decision in the Short Run  

    Note: This subunit is covered by the reading assigned beneath Unit 3.

  • 3.3.1.1 Demand for Labor under Perfect Competition  

    Note: This subunit is covered by the reading assigned beneath Unit 3.

  • 3.3.1.2 Demand for Labor under Monopsony  

    Note: This subunit is covered by the reading assigned beneath Unit 3.

  • 3.3.2 The Employment Decision in the Long Run  
  • 3.4 Labor Demand Elasticities  
    • Lecture: SUNY-Oswego: Professor John Kane's Lecture notes on Introduction to Labor Economics: “Labor Demand Elasticities (Chapter 4)”

      Link: SUNY-Oswego:  Professor John Kane's Lecture notes on Introduction to Labor Economics: “Labor Demand Elasticities (Chapter 4)” (HTML, Adobe Flash, or Powerpoint)
       
      Instructions:  Please click on “Chapter 4” from the Table of Contents.  Note that the material is presented in three formats: Single document HTML format, narrated PowerPoint, and PowerPoint Slideshow.  Please go through the narrated PowerPoint to best understand the material.  You can read the HTML text to review the material after listening to the audio.  However, you may skip the notes presented in the PowerPoint slides as they are a repetition of the slides that accompany the audio.  If the audio does not work at first, refresh your browser. This reading covers subunits 3.4.1-3.4.3.
       
      Terms of Use: Please respect the copyright and terms of use displayed on the web pages above.

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  • 3.4.1 Own Wage Elasticity  

    Note: This subunit is covered by the reading assigned under Unit 3.4

  • 3.4.2 Cross Wage Elasticity  

    Note: This subunit is covered by the reading assigned under Unit 3.4

  • 3.4.3 Policy Implications: Minimum Wage Laws  

    Note: This subunit is covered by the reading assigned under Unit 3.4

  • Unit 4: Labor Market Equilibrium  

    In order to complete the demand-supply framework of the labor market, we will now determine the model’s equilibrium levels.  This unit will focus on how the market clearing wage is generated in competitive and non-competitive market structures.  The equilibrium wage rate and the efficiency of competitive labor markets play important roles in determining appropriate public policies.  The most common policy methods that the government uses are taxes and subsidies; through their adoption, the government can shift the labor market to a new equilibrium.  This issue will be explored in the "Policy Implications" topic under this unit.

    Unit 4 Time Advisory   show close
    Unit 4 Learning Outcomes   show close
  • 4.1 Competitive Labor Markets  
  • 4.1.1 Single Competitive Labor Market  
  • 4.1.2 Equilibrium Across Labor Markets  
  • 4.2 Non Competitive Labor Markets  
  • 4.2.1 Monopsony  
  • 4.2.2 Monopoly  
  • 4.3 Policy Implications: Payroll Taxes  
  • Unit 5: Compensating Wage Differentials  

    In the previous units, you learned how a worker decides whether he or she should work or not, and how long he or she should work for.  These units worked from a competitive labor market model based on the assumption that all jobs and workers are homogenous in nature.  In this scenario, the compensation was the sole factor that determined whether an individual would take a job or not.  In reality, however, we cannot ignore the heterogeneous nature of both the work force and the job market; we know that different workers focus on different aspects of a job when making the decision to work or not.  Therefore, we will now adopt a more realistic approach, considering the roles that both compensation and non-wage characteristics play in an individual’s decision to accept a given job offer.  The differences between types of labor and the skill sets that workers have result in corresponding differences in wages.  In this unit, you will study how differences in job characteristics have an impact on the determination of wages and employment.  (The determination of wages and employment due to differences in skills of workers will be presented in the next section.)

    Unit 5 Time Advisory   show close
    Unit 5 Learning Outcomes   show close
    • Lecture: SUNY-Oswego: Professor John Kane's Lecture notes on Introduction to Labor Economics: “Compensating Wage Differentials (Chapter 8)”

      Link: SUNY-Oswego:  Professor John Kane's Lecture notes on Introduction to Labor Economics: “Compensating Wage Differentials (Chapter 8)” (HTML, Adobe Flash, or Powerpoint)
       
      Instructions:  Please click on chapter 8 from the Table of Contents.  Note that the material is presented in three formats: Single document HTML format, narrated PowerPoint, and PowerPoint Slideshow.  Please go through the narrated PowerPoint to best understand the material.  You can read the HTML text to review the material after listening to the audio.  However, you may skip the notes presented in the PowerPoint slides as they are a repetition of the slides that accompany the audio.  If the audio does not work at first, refresh your browser. This reading covers subunits 5.1-5.2.
       
      Terms of Use: Please respect the copyright and terms of use displayed on the web pages above.

      See a broken link? Please let us know!

  • 5.1 Understanding Compensating Wage Differentials  

    Note: This subunit is covered by the reading assigned under Unit 5.

  • 5.2 The Hedonic Pricing Model  
  • 5.2.1 Workers' Indifference Curves  

    Note: This subunit is covered by the reading assigned under Unit 5.

  • 5.2.2 Firms' Isoprofit Curves  

    Note: This subunit is covered by the reading assigned under Unit 5.

  • 5.2.3 Equilibrium: Employer Employee Matching  

    Note: This subunit is covered by the reading assigned under Unit 5.

  • 5.2.4 Analysis: Occupational Safety and Health Administration (OSHA) Requirements  

    Note: This subunit is covered by the reading assigned under Unit 5.

  • 5.3 The Market for Risky Jobs  
  • 5.3.1 The Demand Curve for Risky Jobs  

    Note: This subunit is covered by the reading assigned under Unit 5.3.

  • 5.3.2 The Supply Curve when Jobs are Risky  

    Note: This subunit is covered by the reading assigned under Unit 5.3.

  • 5.3.3 Equilibrium  

    Note: This subunit is covered by the reading assigned under Unit 5.3.

  • 5.4 Using Compensating Differentials  
  • 5.4.1 A Model of Compensating Differentials  
  • 5.4.2 What Is the Value of a Human Life?  
  • 5.4.3 What Is the Value of School Quality?  
  • 5.4.4 Limitations of Compensating Differentials  
  • Unit 5 Assessment and Guest Lecture  
  • Unit 6: Human Capital Investments  

    The theory of compensating wage differentials (studied in the previous unit) explains differences in wages as differences in job characteristics.  The theory of human capital (presented in this unit) explains differences in wages as differences in the skills and abilities of workers.  Note that "skills and abilities" are acquired by the worker through education, job training, and so forth—“investments” he or she makes with the hope that the returns will be higher in the future.  Unlike the models studied so far, the models presented in this section do not occur "at a given point in time," but are seen from a lifetime perspective.

    Unit 6 Time Advisory   show close
    Unit 6 Learning Outcomes   show close
  • 6.1 Introduction  
  • 6.1.1 The Economics of Education  

    Note: This subunit is covered by the reading assigned under Unit 6.1.

  • 6.1.2 The Cobweb Model of Educational Attainment  

    Note: This subunit is covered by the reading assigned under Unit 6.1.

  • 6.2 Investing in Human Capital  
  • 6.2.1 Human Capital and Productivity  
  • 6.2.2 A Model of Human Capital Investments  
  • 6.2.2.1 Present Value Calculations  
  • 6.2.2.2 Foregone Earnings and College Attendance  
  • 6.2.2.3 Why Does Schooling Vary?  
  • 6.3 Life Cycle Human Capital Investment  
  • 6.4 Human Capital Production Functions  
  • 6.5 Complementarities in Human Capital Production  
  • 6.6 Education as a Signal  
  • 6.7 Non-Schooling Human Capital  
  • 6.8 On-the-job Training  
  • 6.9 Estimating the Returns to Education  
  • Unit 7: Labor Mobility  

    Labor mobility takes place when workers are incentivized to find better jobs and/or firms are incentivized to find better workers.  Labor mobility is broadly categorized into two subcategories: "geographical mobility" (moving across physical space) and “occupational mobility” (moving between or across jobs).  At the personal level, increased labor mobility may imply better financial situations for most workers because, assuming that mobility is voluntary, workers will decide to move only if the present value of the benefits from moving exceed the costs of moving.  At the aggregate level, one of the most important benefits of labor mobility is its impact on growth and production.  The economic benefits of reallocating workers often leads to the discovery and exploitation of new resources, the use of new technologies, and the growth of new industries.  However, looking beyond economics, labor mobility is also closely tied to issues of state sovereignty, political concerns, and governmental control, especially with regards to immigration.
               
    In this unit, you will study migration and its determinants, consequences (both for the migrant and the place of emigration), and constituents (in terms of the characteristic differences between migrants).

    Unit 7 Time Advisory   show close
    Unit 7 Learning Outcomes   show close
    • Lecture: SUNY-Oswego: Professor John Kane's Lecture notes on Introduction to Labor Economics: “Worker Mobility (Chapter 10)”

      Link: SUNY-Oswego:  Professor John Kane's Lecture notes on Introduction to Labor Economics:“Worker Mobility (Chapter 10)” (HTML, Adobe Flash, or Powerpoint)
       
      Instructions:  Please click on chapter 10 from the Table of Contents.  Note that the material is presented in three formats: Single document HTML format, narrated PowerPoint, and PowerPoint Slideshow.  Please go through the narrated PowerPoint to best understand the material.  You can read the HTML text to review the material after listening to the audio.  However, you may skip the notes presented in the PowerPoint slides as they are a repetition of the slides that accompany the audio.  If the audio does not work at first, refresh your browser.  This reading covers subunits 7.1-7.3.
       
      Terms of Use: Please respect the copyright and terms of use displayed on the web pages above.

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  • 7.1 Migration  
  • 7.1.1 Determinants of Migration  

    Note: This subunit is covered by the reading assigned under Unit 7.

  • 7.1.2 Characteristic Differences between Migrants  

    Note: This subunit is covered by the reading assigned under Unit 7.

  • 7.2 Immigration  
  • 7.2.1 Immigration in the United States  

    Note: This subunit is covered by the reading assigned under Unit 7.

  • 7.2.2 Causes of Immigration  

    Note: This subunit is covered by the reading assigned under Unit 7.

  • 7.2.3 The Effects of Immigration on Native Workers  

    Note: This subunit is covered by the reading assigned under Unit 7.

  • 7.3 Job Turnover  
  • 7.3.1 Effects of Job Turnover  

    Note: This subunit is covered by the reading assigned under Unit 7.

  • 7.3.2 Determinants of Turnover  

    Note: This subunit is covered by the reading assigned under Unit 7.

  • 7.3.3 Costs of Turnover  

    Note: This subunit is covered by the reading assigned under Unit 7.

  • Unit 8: Discrimination in the Labor Market  

    Most of the world has seen a dramatic diversification of the labor market, especially in the last fifty years.  The demographic changes that have occurred in the past few decades are particularly apparent in labor data collected during that period.  The proportion of women in the labor force has increased dramatically in the past and their rate of growth continues to be higher than that of men.  In addition, the participation of racial/ethnic groups in the American labor force has also increased substantially as a result of immigration.  However, a certain level of discrepancy in earnings and employment opportunities on the basis of gender and race persists.  Economists study this discrimination by examining the relationship between the socio-economic backgrounds of workers and their productivity and skills.  In order to “measure” discrimination, economists have developed various frameworks for decomposing racial and gender wage differentials.  Economists also study long-run trends in wage differentials based on gender and race in order to gain valuable insight into governmental policies designed to mitigate discrimination.

    Unit 8 Time Advisory   show close
    Unit 8 Learning Outcomes   show close
  • 8.1 Differences in Earnings by Race and Gender  
  • 8.1.1 Differences in Earnings by Gender  

    Note: There are two topics under this subunit, 8.1.1.1 and 8.1.1.2, each of which have their respective readings.

  • 8.1.1.1 Evidence from Data  
  • 8.1.1.2 Explaining the Male-Female Wage Differential  
  • 8.1.2 Differences in Earnings by Race and Ethnicity  

    Note: There are two topics under this subunit, 8.1.2.1 and 8.1.2.2, each of which have their respective readings

  • 8.1.2.1 Evidence from Data  
  • 8.1.2.2 Explaining the Black-White Earnings Gap  
  • 8.2 Theories of Market Discrimination  
  • 8.2.1 Neo-Classical Models of Discrimination  
  • 8.2.1.1 Becker's 'Employer Taste' Model  

    Note: This subunit is covered by the reading assigned under Unit 8.2.1.

  • 8.2.1.2 Statistical Discrimination  

    Note: This subunit is covered by the reading assigned under Unit 8.2.1.

  • 8.2.2 Personal Prejudice Models  
  • 8.2.2.1 Employer Discrimination  

    Note: This subunit is covered by the reading assigned under Unit 8.2.2.

  • 8.2.2.2 Employee Discrimination  

    Note: This subunit is covered by the reading assigned under Unit 8.2.2.

  • 8.2.2.3 Customer Discrimination  

    Note: This subunit is covered by the reading assigned under Unit 8.2.2.

  • 8.2.3 Segmented Labor Markets  
  • 8.2.3.1 Introduction  

    Note: This subunit is covered by the reading assigned under Unit 8.2.3.

  • 8.2.3.2 The Dual Labor Market Hypothesis  

    Note: This subunit is covered by the reading assigned under Unit 8.2.3.

  • 8.2.3.3 The Roots of Segmentation  

    Note: This subunit is covered by the reading assigned under Unit 8.2.3.

  • 8.3 Measuring Discrimination  
    • Reading: Measuring Discrimination

      Note: This missing resource also covers subunits 8.3.1-8.3.3.

      The Saylor Foundation does not yet have materials for this portion of the course. If you are interested in contributing your content to fill this gap or aware of a resource that could be used here, please submit it here.

      Submit Materials

  • 8.3.1 Measuring Occupational Discrimination  
  • 8.3.2 Measuring Wage Discrimination  
  • 8.3.3 Problems with Measuring Wage Discrimination  
  • 8.4 Government Policy and Labor Market Discrimination  
  • Unit 9: Unemployment  

    The equilibrium level of unemployment in a country can never be zero because, at any given time, there are people who are entering the labor force, or are between jobs, and are counted as unemployed.  Most people perceive the unemployed as those who have been laid off from their jobs.  Although it is true that this group of people comprises the majority of the unemployed population when the economy is experiencing a cyclical slowdown or recession, during normal years, the unemployed population encompasses a wider group that also includes those who are new entrants or reentrants to the labor force. 
               
    In this unit, we will study different types of unemployment and then move on to the different components of job-hunting, followed by the impact of unemployment insurance on the length of unemployment.  We will conclude the unit by learning about efficiency wages and its relation to unemployment.

    Unit 9 Time Advisory   show close
    Unit 9 Learning Outcomes   show close
  • 9.1 A Brief Look at Unemployment Data  
  • 9.2 Types of Unemployment  
    • Reading: Professor Robert Schenk's CyberEconomics: “Overview: Resource Markets”

      Link: Professor Robert Schenk's CyberEconomics: “Overview: Resource Markets” (PDF)
       
      Instructions: Clicking on the link above will take you to the main page of the reading.  Please select "Types of Unemployment" from the left side tab to read about the difference between the three types of unemployment.  After reading the article, please click on the "Review" tab to assess yourself.
       
      Terms of Use: The linked material above has been reposted by the kind permission of Professor Schenk, and can be viewed in its original form here.  Please note that this material is under copyright and cannot be reproduced in any capacity without explicit permission from the copyright holder. 

      See a broken link? Please let us know!

  • 9.2.1 Frictional Unemployment  

    Note: This subunit is covered by Professor Karen Lappel's reading above unit 9.2  and the reading assigned under Unit 9.2.

  • 9.2.2 Structural Unemployment  

    Note: This subunit is covered by Professor Karen Lappel's reading above unit 9.2  and the reading assigned under Unit 9.2.

  • 9.2.3 Cyclical Unemployment  

    Note: This subunit is covered by Professor Karen Lappel's reading above unit 9.2  and the reading assigned under Unit 9.2.

  • 9.3 The Natural Rate of Unemployment  

    Note: This subunit is covered by Professor Karen Lappel's reading above unit 9.2  and the reading assigned under Unit 9.2.

  • 9.4 Underemployment  

    Note: This subunit is covered by Professor Karen Lappel's reading above unit 9.2  and the reading assigned under Unit 9.2.

  • 9.5 Gender Differences in Unemployment and Involuntary Part-Time Employment  

    Note: This subunit is covered by Professor Karen Lappel's reading above unit 9.2  and the reading assigned under Unit 9.2.

  • 9.6 Job Search: External and Internal  
    • Reading: McGraw Hill Higher Education: Online Learning Center: Campbell R. McConnell, Stanley L. Brue, and David A. Macpherson's “Contemporary Labor Economics, 8th edition: Student Edition: Chapter 15 (PowerPoint Presentations)”

      Link: McGraw Hill Higher Education: Online Learning Center: Campbell R. McConnell, Stanley L. Brue, and David A. Macpherson's “Contemporary Labor Economics, 8th edition: Student Edition: Chapter 15 (PowerPoint Presentations)” (Powerpoint)
       
      Instructions:  Please click on the above link and then click on the "Chapter 15 PowerPoint Presentations."  Please go through all of the slides to learn about the costs and benefits of job search, the acceptance wage, and unemployment benefits under “External Job Search.”  Under “Internal Job Search,” you will learn about labor unions, the labor allocation and wage structure, and efficiency issues pertaining to job search.
       
      Terms of Use: Please respect the copyright and terms of use displayed on the web pages above.

      The Saylor Foundation does not yet have materials for this portion of the course. If you are interested in contributing your content to fill this gap or aware of a resource that could be used here, please submit it here.

      Submit Materials

  • 9.7 Efficiency Wages and Unemployment  
  • Unit 10: Unions  

    We will now introduce labor unions and collective bargaining models to our study of the workings of the labor market.  Although labor unions attempt to maximize the well-being of their members and improve their economic status, they are often condemned because of the costs they impose on other members of society.  In order to protect the interests of both employers and employees, legislation has played a huge role in determining the power of unions. 

    Since the political and institutional environment plays an important role in defining employer-union relationship, differences in the proportions of unionized workers between countries can be explained by the differences in the political effectiveness of various union movements.  In the United States, private sector unions have nearly vanished, but public sector workers have continued to maintain their unionism over the years.

    Unit 10 Time Advisory   show close
    Unit 10 Learning Outcomes   show close
  • 10.1 Introduction to Unions  
  • 10.1.1 Collective Bargaining  
  • 10.1.2 Rents and Unions  
  • 10.1.3 Unions in the Public Sector  
  • 10.2 Monopoly Unions  

    Note: This subunit is covered by the reading assigned above Unit 10.2.

  • 10.3 The Efficient Bargains Model  

    Note: This subunit is covered by the reading assigned above Unit 10.2.

  • 10.4 Strikes and the Bargaining Process  

    Note: This subunit is covered by the reading assigned above Unit 10.2.

  • 10.5 The Effects of Unions  
  • 10.5.1 The Theory of Union Wage Effects  

    Note: This subunit is covered by the reading assigned above Unit 10.5.

  • 10.5.2 The Effects of Unions on Employment  

    Note: This subunit is covered by the reading assigned above Unit 10.5.

  • 10.5.3 The Effects of Unions on Productivity and Profits  
  • Unit 11: Compensation and Productivity  

     Labor market contracts and the overall compensation packages that firms provide to their employees can affect a worker's productivity level.  Even if two workers have the same level of human capital, they may differ from one another in their respective work habits, level of motivation, and responsiveness to their environment, among other things.  Quite often, the firms cannot gauge the productivity of their employees when they are hired.  Given the above situation, firms must choose appropriate management strategies and offer the right compensation packages to their employees so as to provide a high level of work incentive and optimize worker productivity.  This unit examines how compensation packages affect worker productivity and firm profits.

    Unit 11 Time Advisory   show close
    Unit 11 Learning Outcomes   show close
  • 11.1 The Principal Agent Problems in Labor Markets  

    Note: This subunit is covered by the reading assigned below Unit 11.

  • 11.2 Incentives and Motivation for Employees  
  • 11.2.1 Compensation levels on the basis of Productivity: Piece Rates  

    Note: This subunit is covered by the reading assigned below Unit 11.

  • 11.2.2 Compensation on the Basis of Performance  
  • 11.2.2.1 Bonuses and Profit Sharing  

    Note: This subunit is covered by the reading assigned below Unit 11.

  • 11.2.2.2 Tournaments  

    Note: This subunit is covered by the reading assigned below Unit 11.

  • 11.3 Deferred Compensation  

    Note: This subunit is covered by the reading assigned below Unit 11.

  • 11.4 Efficiency Wages  

    Note: This subunit is covered by the reading assigned below Unit 11.

  • Final Exam  

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