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Chapter 1: Labor Economics: Introduction and Overview: 

Chapter 1: Labor Economics: Introduction and Overview

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1. Labor Economics as a Discipline

Importance of Labor Economics: 

Socioeconomic Issues Gender and race discrimination Legal and illegal immigration Fall in unionization Free trade Quantitative Importance 75% of national income goes to labor. Unique Characteristics Labor is rented and not bought/sold Non-monetary aspects Importance of Labor Economics

Importance of Labor Economics: 

Institutional factors Unions, licensing, minimum wage, discrimination Labor demand is a derived demand Importance of Labor Economics

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2. The “Old” and the “New”

Change in Labor Economics: 

Old Approach Change in Labor Economics Highly descriptive and historical. Little economic analysis New Approach Uses applied micro and macro theory

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3. Economic Perspective

Choice: 

Labor economics uses theories of choice to explain behavior of labor market participants and resulting outcomes. Theories rest on three assumptions Relative scarcity Purposeful behavior Choices involve giving something up -an opportunity cost Individuals make choices purposefully with an expected net gain Choice

Choice: 

Adaptability Workers and firms adapt to changes in expected costs and benefits Choice

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4. Overview

Overview: 

Microeconomics Individual economic units or markets Macroeconomics Economy as a whole Overview

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1. Why must the concepts of supply and demand as they pertain to products be modified when applied to labor markets? Questions for Thought: 2. Indicate whether each of the following statements pertains to microeconomics or macroeconomics: (a) The unemployment rate in the United States was 4.2 percent in 1999. (b) Bartenders at Andrew’s Capital Bar and Grill earn $9.25 per hour. (c) The productivity of American workers as a whole has increased by more than 2 percent per year in the last 4 years.

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End Chapter 1