Transcript Labor Market Equilibrium

LABOR MARKET
EQUILIBRIUM
1
Hwei-Lin Chuang, Ph.D.
2014/04/17
勞動基準法
 意義:
•
規定勞動條件最低標準，為保障勞工權益，加強勞雇關
係，促進經濟發展，適用勞基法之勞工權益將獲得最基
本之保障，雇主與勞工所訂勞動條件，不得低於本法所
定之最低標準。
 「勞工」認定:
•
雇主與勞工之間一定會有「僱傭關係」，通常以勞工與
雇主要具有從屬性之關係，成為判斷是否為勞工的重要
依據。
•
勞工特徵-勞工的報酬是提供勞務之對價、勞工有接受
管理考核及獎懲等義務、勞工應辦理請假手續、勞工對
提供勞務之方法較沒有較大之決定權、勞工通常有出勤
記錄及差勤管理、勞工有專屬性。
2
勞動基準法
 勞動契約:
•
不以書面為必要，口頭即可成立，而內容只要不違反法
律強制禁止規定或公序良俗，即為有效。勞動契約也是
約定勞雇關係之契約，其約定事項諸如工資、工時、工
作內容等等，皆可於契約中加以約定。
•
契約種類則依工作性質之有無繼續性，可分為定期契約
與不定期契約(非一定時間可以完成之繼續性工作)兩種，
定期契約又可再細分為臨時性、短期性、季節性及特定
性4種。
 資遣費:
•
•
勞退舊制-每滿1年發給1個月平均工資。有剩餘月數或工
作未滿1年者，以比例計給之。未滿1個月以1個月計。
勞退新制-每滿1年發給二分之一個月之平均工資，最高
發給6個月平均工資。未滿1年者以比例計給。
3
勞動基準法
 工資
•
勞工因工作而獲得之報酬，包括工資、薪金及按計時、
計日、計月、計件以現金或實物等方式給付之獎金、津
貼及其他任何名義之經常性給與均屬之。
•
延長工作時間者，按平日每小時工資額加倍發給之-延長
工作時間在2小時以內者，按平日每小時工資額加給三分
之一以上。
 工時
•
勞工每日正常工作時間不得超過8小時，每2週工作總時
數不得超過84小時。
•
延長工時連同正常工時，1日不得超過12小時。延長之工
時，一個月不得超過46小時(不含休假日加班)。
•
勞工繼續工作4小時，至少應有30分鐘之休息。
4
勞動基準法
 休假:
•
勞工在同一雇主或事業單位，繼續工作滿一定期間，每年
應依規定給予特別休假，工資照給：(1)1年以上3年未滿者7
日。(2)3年以上5年未滿者10日。(3)5年以上10年未滿者14
日。(4)10年以上者，每滿1年加給1日，加至30日為止。
 請假:
•
給薪假：婚假、喪假、公傷病假、公假、陪產假等
•
視情形給薪之假：普通傷病假、生理假等。
•
可不給薪假：事假、家庭照顧假等。
 例假:
•
勞工每7日中至少應有1日之休息，作為例假，工資照給。
5
勞動基準法
 退休:
•
條件分為1.自請退休(1)工作15年(須同一雇主)以上且年滿
55歲(2)工作25年(須同一雇主)以上(3)工作10年(須同一雇
主)以上且年滿60歲。2.強制退休(1)年滿65歲(2)心神喪失
或身體殘廢不堪勝任工作。
•
退休金為年滿 60 歲以上者，勞工即得向勞保局請領之。
年資滿 15 年以上，請領月退休金；年資未滿 15 年，則
請領一次退休金。勞工於請領退休金前死亡時，由遺屬
或指定請領人請領一次退休金。
 職業傷害
•
勞工因遭遇職業災害而致死亡、 殘廢、傷害或疾病時，
雇主應依規定予以補償，但如同一事故，依勞工保險條
例或其他法令規定，已由雇主支付費用補償者，雇主得
予以抵充之。
6
就業市場指標
年月別
95年
96年
97年
98年
99年
100年
101年
年月別
95年
96年
97年
98年
99年
100年
101年
15 歲 以 勞 動 力
上人口 人數
千
18,166 10,522
18,392 10,713
18,623 10,853
18,855 10,917
19,062 11,070
19,253 11,200
19,436 11,341
就業
人數
人
10,111
10,294
10,403
10,279
10,493
10,709
10,860
失業
人數
411 57.92 67.35
419 58.25 67.25
450 58.28 67.09
639 57.90 66.40
577 58.07 66.51
491 58.17 66.67
481 58.35 66.83
就業者之行業結構
農、林、
漁、牧業
千人
%
千人
%
554
543
535
543
550
542
544
3,700
3,788
3,833
3,685
3,769
3,892
3,935
36.59
36.80
36.85
35.85
35.92
36.34
36.23
5.48
5.28
5.14
5.28
5.24
5.06
5.01
勞動力參與率
平均 男
女
工 業
失業率
平均 男
女
%
48.69 3.91
49.45 3.91
49.67 4.14
49.62 5.85
49.89 5.21
49.97 4.39
50.19 4.24
4.05
4.05
4.39
6.53
5.80
4.71
4.49
3.71
3.72
3.82
4.96
4.45
3.96
3.92
服務業
製造業
千人 %
營造業
千人 %
千人
%
2,777
2,842
2,886
2,790
2,861
2,949
2,975
829
846
842
788
797
831
845
5,857
5,962
6,035
6,051
6,174
6,275
6,381
57.93
57.92
58.01
58.87
58.84
58.60
58.75
27.47
27.61
27.74
27.14
27.27
27.54
27.39
8.20
8.22
8.09
7.67
7.60
7.76
7.78
資料來源：行政院主計處，中華民國台灣地區人力資源調查統計年報、速報。
7
失業規模指標
非初次尋職者
季節性或 臨
工作場所歇業 對原有工作
小計
時性工作 結
其他
年月別
或業務緊縮 不滿意
束
千人 千人 (%) 千人 (%) 千人 (%) 千人 (%) 千人 (%) 千人 (%)
95年
411
82 20.0 329 80.0 117 28.5 141 34.3 44 10.7 27 6.3
96年
419
87 20.8 332 79.2 126 30.1 138 32.9 41
9.8
27 6.4
97年
450
93 20.7 357 79.3 152 33.8 139 30.9 43
9.6
23 5.1
98年
639
102 16.0 536 83.9 337 52.7 119 18.6 57
8.9
23 3.6
99年
577
105 18.2 472 81.8 240 41.6 142 24.6 64 11.1 26 4.5
100年
491
100 20.4 391 79.6 148 30.1 160 32.6 56 11.4 27 5.5
101年
481
105 21.8 375 78.0 137 28.5 162 33.7 50 10.4 26 5.4
失業者之失業週數
年齡別
教育程度別
年月別
初次 非初次
總計
國中及
大專及
尋職 尋職 15-24歲 25-44歲 45-64歲
高中(職)
以下
以上
95年
24.3
23.2 24.5
17.8
25.5
29.8
26.0
23.6
24.0
96年
24.2
23.0 24.6
17.7
25.8
28.2
25.4
24.5
23.3
97年
25.3
25.6 25.2
19.3
27.1
27.6
25.2
25.9
24.7
98年
27.5
30.6 26.9
23.0
28.5
28.9
26.7
28.1
27.4
99年
29.7
29.8 29.7
21.3
31.5
32.5
28.4
30.8
29.48
100年
27.7
27.3 27.8
19.8
29.9
30.1
27.9
108.4
98.4
101年
16.0
28.5 25.4
18.0
28.8
27.9
24.4
25.2
27.2
資料來源：行政院主計處，中華民國台灣地區人力資源調查統計年報、速報。
總計
初次尋職
者
INTRODUCTION
 Labor
market equilibrium coordinates the desires
of firms and workers, determining the wage and
employment observed in the labor market.
 Market
types:

Perfect Competition

Monopsony: one buyer of labor

Monopoly: one seller of product
 These
market structures generate unique labor
market equilibria.
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LABOR MARKET EQUILIBRIUM
 Workers
prefer to work when the wage is high,
and firms prefer to hire when the wage is low.
Labor market equilibrium “balance out” the
conflicting desires of workers and firms and
determines the wage and employment observed
in the labor market.
10
1. EQUILIBRIUM IN A SINGLE COMPETITIVE LABOR
MARKET
Dollars
supply curve gives the
total number of employeehours that agents in the
economy allocate to the
market at any given wage
level; the demand curve
gives the total number of
employee-hours that firms
in the market demand at
that wage. Equilibrium
occurs when supply equals
demand, generating the
competitive wage w * and
employment E *.
S
 The
W*
D
E*
Employment
Equilibrium in a Competitive Labor Market
Note: There is no unemployment in a
competitive labor market. Persons
who are not working are also not
looking for work at the going wage.
11
 Note:
The “single wage” property of competitive
equilibrium has important implications for
economic performance. That is, workers of given
skills have the same value of marginal product of
labor in all markets. The allocation of workers to
firms which equates the value of marginal product
across markets is also the allocation which
maximizes national income. This type of allocation
is called an efficient allocation.
12
(PARETO) EFFICIENCY
 Pareto
efficiency exists when all possible gains from
trade have been exhausted.
 When
the state of the world is Pareto Efficient, to
improve one person’s welfare necessarily requires
decreasing another person’s welfare.
 In
policy applications, ask whether a change can make
any one better off without harming anyone else. If the
answer is yes, then the proposed change is said to be
“Pareto-improving”.
13
EQUILIBRIUM IN A COMPETITIVE
LABOR MARKET
Dollars
S
P
w*
Q
D0
EL
E* EH
Employment
The labor market is in
equilibrium when supply
equals demand; E* workers
are employed at a wage of w*.
In equilibrium, all persons
who are looking for work at
the going wage can find a job.
The triangle P gives the
producer surplus; the triangle
Q gives the worker surplus. A
competitive market maximizes
14
the gains from trade, or the
sum P + Q.
EFFICIENCY REVISITED
 The
“single wage” property of a competitive
equilibrium has important implications for economic
efficiency.

Recall that in a competitive equilibrium the wage equals the
value of marginal product of labor. As firms and workers
move to the region that provides the best opportunities,
they eliminate regional wage differentials. Therefore,
workers of given skills have the same value of marginal
product of labor in all markets.
 The
allocation of workers to firms that equates the
value of marginal product across markets is also the
sorting that leads to an efficient allocation of labor
resources.
15
2. COMPETITIVE EQUILIBRIUM ACROSS LABOR MARKETS
The economy typically consists of many labor markets, even for
workers who have similar skills. As long as either workers or firms
are free to enter and exit labor markets, a competitive economy will
be characterized by a single wage.
Dollars
SN
Dollars
S’S
S’N
SS
WN
W*
W*
WS
DN
Employment
DS
Employment
Competitive Equilibrium in Two Labor Markets Linked by Migration
16
COMPETITIVE EQUILIBRIUM ACROSS
LABOR MARKETS
 If
workers were mobile and entry and exit of workers
to the labor market was free, then there would be a
single wage paid to all workers.
 The
allocation of workers to firms equating the wage
to the value of marginal product is also the allocation
that maximizes national income (this is known as
allocative efficiency).
 The
“invisible hand” process: self-interested workers
and firms accomplish a social goal that no one had in
17
mind, i.e., allocative efficiency.
自由貿易協議(FTA)對就業政策之影響
18
自由貿易協議(FTA)對就業政策之影響

The Obama Administration finalized negotiations with South Korea in
early December 2010 on a bilateral free trade agreement. As a result,
the administration is expected to submit implementing legislation to
the 112th Congress on the proposed agreement, but to date has not
indicated a timeline for doing so. The 112th Congress may also be
asked to consider implementing legislation for proposed free trade
agreements with Columbia and Panama. Congress not only plays a
direct role in approving legislation that implements the provisions of
free trade agreements, but also authorizes and appropriates funding
for programs that are meant to provide special assistance to firms and
workers that are dislocated as a result of lower barriers to trade. Since
the proposed agreement covers a wide range of trade and investment
issues, it could have substantial economic implications for both the
United States and South Korea. South Korea is the seventh-largest
trading partner of the United States, and the United States is South 19
Korea’s third-largest trading partner.
自由貿易協議(FTA)對就業政策之影響

Similar to other trade agreements, the proposed U.S.-South Korea Free Trade
Agreement(KORUS-FTA) has attracted both supporters and detractors,
primarily over the impact the agreement could have on employment in the
economy. Supporters argue that the agreement could create as many as
280,000 jobs in the economy. Others, however, argue that the agreement could
lead to an overall loss of up to 159,000 jobs in various sectors of the economy.
Still others contend that the United States stands to lose exports, employment,
and extended economic opportunities if it fails to sign a trade agreement,
while the European Union and other nations are lining up to finalize similar
agreements with South Korea.

Estimating the economic impact of trade agreements, however, is a daunting
task, due to a lack of data and important theoretical and practical matters
associated with generating results from economic models. In addition, such
estimates provide an incomplete accounting of the total economic effects of
trade agreements. This report assesses the results of a number of models that
are being used to generate estimates of the effect of the KORUS FTA on
20
employment.
自由貿易協議(FTA)對就業政策之影響

These studies were chosen specifically because they estimate (or can be used
to estimate) data on employment effects of the trade agreement. All economic
models incorporate various assumptions that are necessary in order for the
model to generate results. Invariably, these approaches determine, to some
extent, the results that are generated and, therefore, limit their representation
of the real world economy. Currently, the various models produce widely
disparate estimates of the number of jobs affected by the trade agreement,
reflecting the various assumptions that are used in the models and differences
in the approaches.

From the perspective of a large open economy such as the U.S. economy,
international trade is not a major determinate of total employment in the
economy, real wages in the economy, or the overall level of production. This
is especially true for bilateral trade agreements with individual countries
where the impact on the economy as a whole is expected to be small.
Nevertheless, some sectors of the economy are likely to be affected more
than others. Congress has demonstrated an ongoing interest in assessing the
21
economic impact of trade agreements and, at times, has provided assistance
to those workers and firms that are disproportionately affected.
自由貿易協議(FTA)對就業政策之影響
 內容:
22
自由貿易協議(FTA)對就業政策之影響
 內容(續):
23
3. THE COBWEB MODEL

Our analysis of labor market equilibrium assumes that markets
adjust instantaneously to shifts in either supply or demand
curves, so that wages and employment change swiftly from the
old equilibrium levels to the new equilibrium level. Many
labor markets, however, do not adjust so quickly to shifts in the
underlying supply and demand curves.

Example: the Engineering Market
Note: The adjustment of college enrollments to changes in the
returns to education is not always smooth or rapid, particularly
in fields that are highly technical.
→ The inability to respond immediately to changed market
conditions can cause boom-and-bust cycles in the market for
highly technical workers.
24
Wage
S
W1
W3
We
W2
D’
W0
N0 N2
D
N3 N1
Number of Engineers
Demand increase to D’
temporary supply is N0 → W increase to W1
→ W1 wage induce increase in supply to N1→ excess supply
→ W reduce to W2 → W2 wage reduce supply to N2
→ W increase to W3 → at W3 , supply increase to N3
→ excess supply → W reduces, etc.
25
Overtime the swings become smaller and eventually
equilibrium is reached. → cobweb model.
Note: There are two key assumptions in the cobweb
model:
1.
It takes time to produce new engineers, so that the
supply of engineers can be thought of as being
perfectly inelastic in the short run.
2.
Students are very myopic when they are
considering whether to become engineers.
26
4. POLICY APPLICATION: PAYROLL TAXES
 Payroll
taxes on employers are heavily used in the
social insurance area. With our simple labor model,
we can show that the party making the social
insurance payment is not necessarily the one that
bears the burden of the tax.
Tax is a fixed dollar amount X.
D0→D1 with vertical distance of X.
pt. A: excess supply→ real wage↓
Employees bear part of the burden of the
payroll tax in the form of lower wage
rates and lower employment levels.
Tax
Real Wage
S0
W0+λ
W1+X
W0
W1
D0
D1
E2 E1 E 0
Employment
Note: In general, the extent to which the
labor supply curve is sensitive to wages
determines the proportion of the employer
payroll tax that gets shifted to employee’s
27
wages.
PAYROLL TAXES AND SUBSIDIES
 Payroll
taxes assessed on employers lead to a
downward, parallel shift in the labor demand curve.

The new demand curve shows a wedge between the amount
the firm must pay to hire a worker and the amount that
workers actually receive.

Payroll taxes increase total costs of employment, so these
taxes reduce employment in the economy.

Firms and workers share the cost of payroll taxes, since the
cost of hiring a worker rises and the wage received by
workers declines.

Payroll taxes result in deadweight losses.
28
THE IMPACT OF A PAYROLL TAX
ASSESSED ON WORKERS
S1
Dollars
S0
w0 + 1
w1
w0
w1  1
D0
A payroll tax assessed
on workers shifts the
supply curve to the left
(from S0 to S1). The
payroll tax has the
same impact on the
equilibrium wage and
employment regardless
of who it is assessed
on.
D1
29
E1
E0
Employment
THE IMPACT OF A PAYROLL TAX PUT
ON FIRMS WITH INELASTIC SUPPLY
Dollars
S
D0
w0
w0 – 1
A
B
D0
A payroll tax assessed
on the firm is shifted
completely to workers
when the labor supply
curve is perfectly
inelastic. The wage is
initially w0. The $1 payroll
tax shifts the demand
curve to D1, and the
wage falls to w0 – 1.
D1
E0
Employment
30
PAYROLL SUBSIDIES
 An
employment subsidy lowers the cost of hiring for
firms.
 This
means payroll subsidies shift the demand curve
for labor to the right (up).
 Total
employment will increase as the cost of hiring
has fallen.
31
THE IMPACT OF AN EMPLOYMENT
SUBSIDY
S
An employment subsidy
of $1 per worker hired
shifts up the labor
demand curve, increasing
employment. The wage
that workers receive rises
from w0 to w1. The wage
that firms actually pay
falls from w0 to w1 – 1.
w0 + 1
w1
B
w0
A
w1 – 1
D1
D0
E0
E1
Employment
32
台灣基本工資
 台灣基本工資制度，目前由勞工委員會基本
工資審議委員會，於每年第三季實施討論，
並交由行政院核定公告後實施。現行基本工
資於2014年1月1日實施，月薪為19,047元新
台幣（約633美元），時薪為115元新台幣（
約3.82美元）。
33
台灣基本工資 - 實施歷程
 1968年，中華民國行政院發佈《基本工資暫
行辦法》，將基本工資（月工資）定為600元
，是台灣首次以法規命令規定全國性的最低
工資。
 1984年開始實施的《勞動基準法》第21條規
定：「工資由勞僱雙方議定之。但不得低於
基本工資。」。
 1986年11月21日，立法院廢止1936年12月11
日在大陸制定，12月23日公布，但施行日期
一直沒有以命令定之的《最低工資法》23條
，1986年12月3日總統公布廢止。
34
台灣基本工資 - 實施歷程(續)
 1988年，行政院勞工委員會通過《基本工資
審議辦法》之後，制定基本工資的相關政策
，並開始逐年審議調整。惟1997年調整至每
月新台幣15,840元過後，因亞洲金融風暴、
產業大量外移等影響，至2007年為止，曾近
十年不調整基本工資。
 2007年，基本工資計入假日工時制，大幅調
整時薪部分，但月薪僅做約9%的調整。
 2010年起，交由基本工資審議委員會由勞、
資、政三方各7位代表議決，並將會議結果上
呈行政院，由行政院核定公告後實施。
35
2012年基本工資審議
 2012年基本工資審議委員會於8月9日召開委
員會議，時值遭逢歐債危機、中國經濟成長
減緩，導致台灣出口產值下滑，但物價卻仍
持續上升，為此次審議增添爭議性，工商團
體亦是事隔3年後再次反對調整基本工資。原
決議基本工資調幅為1.42％（月薪制），為
每月19,047元新台幣，每小時109元新台幣，
但此後上呈至行政院時，遭到院會以經濟前
景不明為由拒絕提案，這是自1968年之後，
行政院首次拒絕基本工資審議委員會提出的
基本薪資。
36
2012年基本工資審議(續)
 最後行政院長陳冲於同年9月26日決議，2013
年1月1日起，如期調漲時薪至新臺幣109元，
而月薪制則暫緩調漲，維持每月18,780元，
並提出經濟成長率須連兩季大於3%，以及失
業率低於4%的兩項附帶條件。而時任勞委會
主委王如玄，也因此請辭獲准。
 2013年4月1日，行政院長江宜樺批示勞委會
提出的基本工資調漲案，並於4月2日宣布，
月薪制基本工資從1日開始，調整至每月
19,047元新台幣。
37
2013年基本工資審議
 2013年8月28日勞委會召開第26次基本工資審
議委員會。共識決議每小時基本工資自2014
年元旦起，從109元調整至115元。每月基本
工資自2014年7月1日起從19047元調整至
19273元，並於9月24日由行政院長江宜樺審
核通過。由於政府方面希望避免年度基本工
資審議造成的勞資爭端，因此在2014年元旦
開始，也設下物價指數累計上漲達3%，才能
再度召開基本工資審議會的門檻。
38
5. POLICY APPLICATION: THE IMPACT OF MINIMUM WAGES
 The
standard economic model of the impact of
minimum wages on employment is illustrated in the
following figure:
Note: A minimum wage
Dollars
S
W
W*
D
E
E*
ES Employment
The Impact of the Minimum Wage on Employment
creates unemployment
both because some
previously employed
workers lose their jobs,
and because some workers
who did not find it
worthwhile to work at the
competitive wage find it
worthwhile to work at the
higher minimum wage. 39
THE IMPACT OF MINIMUM WAGES ON THE
COVERED AND UNCOVERED SECTORS
Dollars
Dollars
(If workers migrate to
covered sector)
SU
SC
SU
w
SU
(If workers migrate to
uncovered sector)
w*
w*
DU
DC
E
EC
(a) Covered Sector
Employment
EU EU EU
Employment
(b) Uncovered Sector
If the minimum wage applies only to jobs in the covered sector, the displaced
workers might move to the uncovered sector, shifting the supply curve to the right
and reducing the uncovered sector’s wage. If it is easy to get a minimum wage
job, workers in the uncovered sector might quit their jobs and wait in the covered
sector until a job opens up, shifting the supply curve in the uncovered sector to the
left and raising the uncovered sector’s wage.
40
 Note:
In the absence of a minimum wage, the
migration of workers across sectors equates the
wage in the two sectors. The migration of workers
when the wage in one of the markets is set at the
minimum wage equates the expected wage across
sectors. I.e., the free migration of workers across
sectors ensure that the expected wage in the
covered sector equals the for-sure wage in the
uncovered sector.
41
6. NONCOMPETITIVE LABOR MARKETS
(1)
Monopsony
Because the firm is the only demander of labor in
this market, it can influence the wage rate.
Monopsnoists face an upward-sloping supply
curve. This is because the supply curve
confronting them is the market supply curve.
Note: To expand its work force, a monopsonist must
increase its wage rate, i.e., the marginal cost of
hiring labor excess the wage.
42
NONCOMPETITIVE LABOR
MARKETS: MONOPSONY
 Monopsony
market exists when a firm is the only
buyer of labor.
 Monopsonists
must increase wages to attract more
workers.
 Two
types of monopsonist firms:

Perfectly discriminating

Nondiscriminating
43
PERFECTLY DISCRIMINATING
MONOPSONIST
 Discriminating
monopsonists are able to hire
different workers at different wages.
 To
maximize firm surplus (profits), a perfectly
discriminating monopsonist “perfectly
discriminates” by paying each worker his or her
reservation wage.
44
THE HIRING DECISION OF A PERFECTLY
DISCRIMINATING MONOPSONIST
Dollars
S
A
w*
w30
VMPE
w10
10
30 E*
Employment
A perfectly discriminating
monopsonist faces an upwardsloping labor supply curve and
can hire different workers at
different wages. Therefore the
labor supply curve gives the
marginal cost of hiring. Profit
maximization occurs at point A.
The monopsonist hires the
same number of workers as a
competitive market, but each
worker is paid his or her
reservation wage.
45
NONDISRIMINATING MONOPSONIST
 Must
pay all workers the same wage, regardless of
each worker’s reservation wage.
 Must
raise the wage of all workers when attempting to
attract more workers.
 Employs
fewer workers than would be employed if
the market were competitive.
46
THE HIRING DECISION OF A
NONDISCRIMINATING MONOPSONIST
Dollars
MCE
VMPM
S
A
w*
wM
VMPE
EM
E*
Employment
A nondiscriminating
monopsonist pays the same
wage to all workers. The
marginal cost of hiring
exceeds the wage, and the
marginal cost curve lies
above the supply curve.
Profit maximization occurs
at point A; the monopsonist
hires EM workers and pays
them all a wage of wM.
47
To maximize profits, we know that any firm should hire
labor until the points at which marginal revenue product
equals marginal cost.
MCL
W
MRP = MCL
S
Wages are below marginal
revenue product for a
monopsonist.
WC
Wm
Wm < WC and Em < EC
MRP
L
Em
Ec
48
THE IMPACT OF THE MINIMUM WAGE ON A
NONDISCRIMINATING MONOPSONIST
Dollars
MCE
S
A
w*
w
wM
VMPE
EM E
Employment
The minimum wage may
increase both wages and
employment when
imposed on a
nondiscriminating
monopsonist. A minimum
wage set at w increases
employment to E.
49
(2) Monopoly
A monopoly trying to maximize profits and facing
a competitive labor market will hire workers until
its marginal revenue product equals the wage rate:
MRP = (MPL)(MR) = W
→ (MR/P)(MPL) = (W/P) <1
The demand-for-labor curve for a firm that has
monopoly power in the output market will lie
below and to the left of the demand-for-labor
curve for an otherwise identical firm that takes
product prices as given.
50
MONOPOLY IN THE PRODUCT MARKET:
A REVIEW
 Firms
that have monopoly power can influence the
price of the product that they sell.
 Monopolist
faces a downward sloped market demand
curve for its output and an even lower downward
sloped marginal revenue curve.
51
THE OUTPUT DECISION OF A
MONOPOLIST
Dollars
MC
pM
p*
A
MR
q M q*
D
Output
A monopolist faces a
downward-sloping demand
curve for her output. The
marginal revenue from
selling an additional unit of
output is less than the price
of the product. Profit
maximization occurs at
point A where the
monopolist produces qM
units of output and sells
each unit of output at a
price of pM dollars.
52
Note: The wage rates that monopolies pay are not necessarily
different from competitive levels even though employment levels
are. An employer with a product market monopoly may still be a
very small part of the market for a particular kind of employee, and
thus be a price taker in the labor market even though a price maker
in the product market.
Dollars
A
W
VMPE
MRPE
Em
E*
Employment
The Labor Demand of a Monopolist
53