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Chapter 17: Problem 2
What are the three most important variables that cause the market supply curve of labor to shift?
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Baseball writer Rany Jazayerli assessed then Kansas City Royals outfielder Jose Guillen as follows: "Guillen has negative value the way his contract stands." How could a baseball player's contract cause him to have negative value to a baseball team?
An article in the Wall Street Journal on the use of driverless trucks at Rio Tinto's Australian mines observed, "The new equipment cut many driving jobs. ... But the reductions will be partly offset by new types of work. The company now needs more network technicians \(\ldots\) a hybrid of electrical and mechanical engineering that hardly existed five years ago." Is it likely that total employment at Rio Tinto's mines will have increased or decreased as a result of its use of robots? Are the average wages Rio Tinto pays likely to be higher or lower? Are the wages of the truck drivers who were replaced by robots likely to end up higher or lower in the drivers' new jobs? Briefly explain
Daniel Hamermesh, an economist at the University of Texas, has done a great deal of research on labor markets. According to an article in Forbes, Hamermesh wrote that "below-average-looking men earn \(17 \%\) less than those considered good-looking, while below-average-looking females earn \(12 \%\) less than their attractive counterparts." Is this difference in earnings due to economic discrimination? Briefly explain.
Research by economists Susan Helper, Morris Kleiner, and Yingchun Wang found that the use of pay-forperformance, or piece-rate pay, has declined in manufacturing industries in recent decades. In a summary of this research, Lester Picker explained, “This change has come about with the adoption of modern manufacturing systems in which firms produce a greater variety of products to a more demanding quality and delivery standard." a. What characteristics determine whether a salary system or a piece-rate system is likely to be more profitable for a manufacturing firm? b. Why would modern systems "in which firms produce a greater variety of products to a more demanding quality and delivery standard" than manufacturers used previously result in firms choosing to pay their workers salaries rather than use piece rates?
Two employers made the following comments about a proposed increase in the federal minimum wage: Dillon Edwards, founder of Parlor Coffee: "[The increase] should definitely be [to] more than $$[\$ 8.75$$ an hour \(] \ldots\) It needs to be at least in double digits." Beth Fahey, owner of Creative Cakes: "If you raise the minimum wage ... I can't raise everybody. If I do, the price of a doughnut is going to be $$\$ 3$$ and nobody's going to buy it." Briefly explain for which employer the marginal revenue product of labor is likely to be greater. Source: Leslie Josephs and Adam Janofsky, "As Minimum Wages Rise, Smaller Firms Get Squeezed," Wall Street Journal, June \(11,\) \(2015 .\)
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