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There are two sectors of the construction industry that currently pay their employees the market-clearing wage. The demand for labor in each sector is w = 18 - Ed, where Ed = the number (in thousands) of workers. The supply of labor in each sector is Es = w - 2, where w = the wage rate (dollars per hour). A union organizes in one of the sectors, and it restricts supply to that sector by insisting that only those in the union are hired by firms in that sector (and it is difficult to get into the union). When the employees in this sector unionize, the supply of labor in that sector changes to Es = w - 4.

a) What is the wage rate in both sectors before unionization? How many employees will be hired in each sector?

b) What is the wage rate in the unionized sector? How many employees will be hired in the unionized sector?

c) If the unemployed workers in the newly unionized sector spill over into the non-union sector, what will be the wage rate in the non-union sector? How many employees will be hired in that sector?

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Joshua Stredder
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28 Sep 2019

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Suppose that the government gives a fixed subsidy of T per firm in one sector of the economy to encourage firms to hire more workers. What is the effect on the equilibrium wage, total employment, and employment in the covered and uncovered sectors if we assume to start that each of the two sectors - I and II - employs workers who are equally skilled, with each sector having a labor demand curve given by w = 12 - 0.1L (where L = the number of hours of labor) and with each sector initially facing a labor supply curve given by w = 0.1L? This will allow you to specify the initial equilibrium wage rates in each of the two sectors. Then assume that a government subsidy is given in the covered sector I of $2 per hour (while the other sector II gets no subsidy).

1. Critically evaluate each of these statements:

a. "The relative decline of the American Labor movement can be explained by the shift from good-producing to service-providing industries and by the closely related shifts from blue- to white-collar occupations and from male to female employees."

b. "The success of unions in raising their wages relative to nonunion workers has contributed to the decline of unionism."

c. " Unionized firms have tended to become less profitable and, therefore, employers are more resistant to unionization."

 

2. Comment on each of the following statements:

a. "Unions tie the hands of management and inhibit efficient decision making."

b. "Unions contribute to economic efficiency in that union wage pressure hastens the weeding out of the high-cost, least efficient producers in each industry."

c. "Although unions may reduce wage inequality, to the extent that they reduce wage differentials based on individual merit and effort, the outcome may be rightly perceived as both inequitable and inefficient."

d. "Unions impair the efficiency of our economy indirectly by diminishing profits and thereby reducing investment and economic expansion."

 

3. Speculate about the reason(s) for each of the following facts about public sector pay:

a. The pay premium received by federal employees declined in the middle and late 1980s.

b. Local governments tend to pay less skilled workers more, and more skilled workers less, than comparably trained and experienced private-sector workers.

c. Female and African-American workers in government receive higher pay on average than their equally qualified counterparts in the private sector.

 

4. Evaluate this statement: "Profit-maximizing firms lack an incentive to provide job safety, and consequently, the federal government must intervene legislatively to protect workers against the unsafe working conditions that will surely result."

Could you give the solutions to me? I really appreciate your help. Thank you!!

Consider the economy of the Queensland that produces juice and soup. Each industry employs workers, but land is specific to the production of juice, and dishes a specific factor in the soup industry. The amounts of land (L) and dishes (D) are L=1 and D=16, while the population size of the Queensland is 10 workers. The production functions and the marginal products of labor are:

J=(Wj)^0.5(L)^0.5, MPWj=0.5(L)^0.5/(Wj)^0.5
S=(Ws)^0.5(D)^0.5, MPWs=0.5(D)^0.5/(Ws)^0.5

where J is the juice output in litres, S is the soup output in litres, and Wj and Ws are the numbers of workers employed in the juice and soup sectors, respectively.

If the price of 1 litre of juice is $2 and the price of 1 litre of soup is $8, what is the wage rate paid to workers in the Queensland? How many workers are in the juice sector? In the soup sector?

Thank you for your help!

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