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Microeconomics: Labor Markets
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  • I will spice this up a bit…
  • To explain this slide we refer back to slide 7 (previous slide) to show equilibrium movement.


  • 1. Thomas Ruschke Microeconomics Final Prof. Michael EppingEuropean University Summer Semester I - 2010
  • 2. Agenda Labor Market Basics Labor Market Diagram  Various Effects on Equilibrium 1990 Income Rise U.S. vs. France Burnout & Lower Productivity Causes Higher International Productivity?
  • 3. Labor Market Basics Labor Supply (Workers)  Hours Worked Labor Demand (Employers)  Labor Wage Market Equilibrium Various Labor Market Effects Hours Worked Wage
  • 4. Cause + Effect: Working Longer “Americans work 2 ½ weeks more than Japanese, 6 weeks more than British workers, and 12 ½ weeks more than German workers”Hours Worked •Increase in Supply (Hours Worked) •Decrease in Effective Wage •Equilibrium Shifts Up + Left Wage Rate
  • 5. Cause + Effect: Mothers Return Sooner returning to work sooner.” “Mothers areHours Worked •Increase in Supply (Hours Worked) •Decrease in Effective Wage •Equilibrium Shifts Up + Left Wage Rate
  • 6. Cause + Effect: More Professionals “Many people have taken jobs as salaried professionals and are working long hours, while low-wage workers need to work more to make ends meet.” •Increase in Wages •Decrease in Hours Worked •Equilibrium Shifts Down + RightHours Worked Wage Rate
  • 7. Cause + Effect: Economic Boom “Others believe that the U.S.„90 economic boom of the 1990‟s provided more work and higher incomes, whereas growth was slower elsewhere.”Hours Worked •Wages Increase •Increase in Hours Worked •Equilibrium Shifts Up + Right Wage Rate
  • 8. More Work, More Wage? “Incomes have risen in the 90’s” Resulted in Higher Wage Rates? “Economic boom provided more work and higher incomes”  Increase in Wage Rate  Increase in Hours Worked
  • 9. U.S. vs. France A) U.S. – Increase Overtime  Less people to hire (more “professionals”) ○ Cheaper to let employees work more hours ○ Expensive to hire more workers to work more hours ○ Less holidays = More Overtime (More Supply) B) France – Decreased Overtime  Create More Jobs  Greater Productivity / Hour Worked ○ More efficient
  • 10. Diminishing Returns •Marginal Return on Productivity peaks (Maximum)Output •Diminishing Returns •Maximum Work Capacity •Burnout causes: •Diminishing Returns •Loss of Output Quantity of Hours Worked
  • 11. French + Belgian Productivity “…in terms of productivity per hour, France and Belgium edged out the U.S.” Due to Labor?  Greater Productivity = More Work in Less Time  Combination of: ○ Company Schedule for Hours Worked / Week ○ Ability of Labor Force (Education) In the United States  Long Hours lead to: ○ Burnout ○ Diminishing Returns ○ Loss of Output