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Labor Market

Labor Market

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Labor Market

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  1. Labor Market • Introductory Standard Analysis • Supply of labor • Demand for labor • Wages – real and nominal • Market clears – wage flexibility • The Evolution of Labor Markets • Length of work day • Age Restrictions • Working Conditions • Labor Movement • International Labor

  2. Labor Market • Segmented Market • High Wage – High Skills • Complex & Varied manipulation of Materials & Symbols • Low Wage – Low skills • Simple & repetitive manipulation of Materials & Symbols • Discrimination • Race • Gender • Age

  3. For Whom

  4. For Whom • Income • Flow of income • Consumption and saving • Wealth • Stock of past income • Income earning • Measuring Income and its distribution • How to measure income • Real • Nominal

  5. Distribution of Income • Quintile Distribution (20 percent increments) 1998 Income % total Cumulative % Quintile family Income total Family Income Lowest 20% 3.6 3.6 Second 20% 9.0 12.6 Third 20% 15.0 27.6 Fourth 20% 23.2 50.8 Highest 20% 49.2 100.0 1970 Lowest 20% 5.9 5.9 Second 20% 11.0 16.9 Third 20% 17.3 34.2 Fourth 20% 23.0 57.2 Highest 20% 42.8 100.0

  6. Income Distribution 1970 - 2002 • Quintile Distribution (20 percent increments) 1970 20021970 2002 Income % total Cumulative % Quintile family Income total Family Income Lowest 20% 5.9 3.5 5.9 3.5 Second 20% 11.0 8.8 16.9 12.3 Third 20% 17.3 14.8 34.2 27.1 Fourth 20% 23.0 23.3 57.2 50.4 Highest 20% 42.8 49.7 100.0 100.0

  7. Lorenz Curve of U.S. Income, 2003 100 80 Lowest fifth 60 3.4 % 3.4% Second fifth Cumulative percentage of income B 8.7 12.1 40 Third fifth 14.8 26.9 A Fourth fifth 23.4 50.3 20 Highest fifth 49.8 100.0 0 20 40 60 80 100 Percentage of Population Lorenz Curve Income by Quintiles (fifths) Percentage of Total Family Income Cumulative Percentage of Total Family Income Income Quintile

  8. 100 80 60 Cumulative percentage of income 40 20 0 20 40 60 80 100 Percentage of Population Lorenz Curve & Gini Coefficient Lorenz Curve Gini Coefficient A A + B A B

  9. A A + B Gini Coeficient • Gini between 0 and 1 • The bigger the Gini the less equal the distribution of income Examples • A = 50 • B = 60 • Then Gini = 50 / 110 • A = 80 • B = 30 • Then Gini = 80 /110 = .454 = .727

  10. 90 80 70 60 50 40 30 20 10 Percent Wealth 20 40 60 80 100 Percent Families Distribution of Wealth Bottom 5th = -0.2 Second 5th = 0.2 Third 5th = 2.7 Fourth 5th = 13.2 Top 5th = 84.1

  11. Theories of Income Distribution • Productivity • Talent • Skills • Contribution • Ambition • Class • Simple class theory • Marx-class struggle • Two classes • Haves and have nots -- • Modern class theory • Veblen • Leisure Class • Leisure and Industrial employments • Honorable (exploit) • Drudgery (industrial) • Emulation

  12. Theories of Distribution • Status Theory • Income is related to status • Relation to values of society • Social Cohesion theory • Enduring tension • Good for individual • Good for society • Rent Seeking • What is rent

  13. Redistribution of Income • Programs • Transfers • Social Security • Why • How • Public Assistance • AFDC –TANF • Food Stamps • Medicaid • General Assistance • SSI