Labor Market

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 2002 1970 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
Lorenz Curve
Income by Quintiles (fifths)
Percentage of Total Family Income
Cumulative Percentage of Total Family Income
Income Quintile
8
Lorenz Curve Gini Coefficient
Lorenz Curve
Gini Coefficient
A
A B
A
B
9
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
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