Earnings-and-Discriminat課件

1、19Earnings and DiscriminationEarnings and DiscriminationDifferences in Earnings in the United States TodayThe typical physician earns about $200,000 a year.The typical police officer earns about $50,000 a year.The typical farm worker earns about $20,000 a year.Earnings and DiscriminationWhat causes

2、earnings to vary so much?Wages are governed by labor supply and labor demand.Labor demand reflects the marginal productivity of labor.In equilibrium, each worker is paid the value of his or her marginal contribution to the economys production of goods and services.SOME DETERMINANTS OF EQUILIBRIUM WA

3、GESCompensating differentialsHuman capitalAbility, effort, and chanceSignalingThe superstar phenomenonCompensating DifferentialsCompensating differential refers to a difference in wages that arises from nonmonetary characteristics of different jobs.Coal miners are paid more than others with similar

4、levels of education.Night shift workers are paid more than day shift workers.Professors are paid less than lawyers and doctors.Human CapitalHuman capital is the accumulation of investments in people, such as education and on-the-job training. The most important type of human capital is education.Hum

5、an CapitalEducation represents an expenditure of resources at one point in time to raise productivity in the future.By the year 2000, a man with a college degree earned more than 89 percent more than without one. Women showed a 70 percent increase in earnings due to a college degree.Table 1 Average

6、Annual Earnings by Educational AttainmentCopyright2004 South-WesternAbility, Effort, and Chance Why has the gap in earnings between skilled and unskilled workers risen in recent years?International trade has altered the relative demand for skilled and unskilled labor.Changes in technology have alter

7、ed the relative demand for skilled and unskilled labor.Ability, Effort, and ChanceNatural ability is important for workers in all occupations.Many personal characteristics determine how productive workers are and, therefore, play a role in determining the wages they earn.An Alternative View of Educa

8、tion: SignalingFirms use educational attainment as a way of sorting between high-ability and low-ability workers.It is rational for firms to interpret a college degree as a signal of ability.The Superstar PhenomenonSuperstars arise in markets that exhibit the following characteristics:Every customer

9、 in the market wants to enjoy the good supplied by the best producer.The good is produced with a technology that makes it possible for the best producer to supply every customer at a low cost.Above-Equilibrium Wages: Minimum-Wage Laws, Unions, and Efficiency WagesWhy are some workers wages set above

10、 the level that brings supply and demand into equilibrium?Minimum-wage lawsMarket power of labor unionsEfficiency wagesAbove-Equilibrium Wages: Minimum-Wage Laws, Unions, and Efficiency Wages UnionsA union is a worker association that bargains with employers over wages and working conditions.StrikeA

11、 strike refers to the organized withdrawal of labor from a firm by a union.Above-Equilibrium Wages: Minimum-Wage Laws, Unions, and Efficiency Wages Efficiency WagesThe theory of efficiency wages holds that a firm can find it profitable to pay high wages because doing so increases the productivity of

12、 its workers. High wages may: reduce worker turnover. increase worker effort. raise the quality of workers that apply for jobs at the firm.THE ECONOMICS OF DISCRIMINATIONDiscrimination occurs when the marketplace offers different opportunities to similar individuals who differ only by race, ethnic g

13、roup, sex, age, or other personal characteristics.THE ECONOMICS OF DISCRIMINATIONAlthough discrimination is an emotionally charged topic, economists try to study the topic objectively in order to separate myth from reality.Measuring Labor-Market DiscriminationDiscrimination is often measured by look

14、ing at the average wages of different groups.Measuring Labor-Market DiscriminationEven in a labor market free of discrimination, different people have different wages.Measuring Labor-Market DiscriminationPeople differ in the amount of human capital they have and in the kinds of work they are willing

15、 and able to do.Measuring Labor-Market DiscriminationSimply observing differences in wages among broad groupswhite and black, men and womensays little about the prevalence of discrimination.Table 2 Median Annual Earnings by Race and SexCopyright2004 South-WesternMeasuring Labor-Market Discrimination

16、Because the differences in average wages among groups in part reflect differences in human capital and job characteristics, they do not by themselves say anything about how much discrimination there is in the labor market.Discrimination by EmployersFirms that do not discriminate will have lower labo

17、r costs when they hire the employees discriminated against.Discrimination by EmployersNondiscriminatory firms will tend to replace firms that discriminate.Discrimination by EmployersCompetitive markets tend to limit the impact of discrimination on wages.Firms that do not discriminate will be more pr

18、ofitable than those firms that do discriminate.Discrimination by Customers and GovernmentsAlthough the profit motive is a strong force acting to eliminate discriminatory wage differentials, there are limits to its corrective abilities.Customer preferencesGovernment policiesDiscrimination by Customer

19、s and GovernmentsCustomer preferences: If customers have discriminatory preferences, a competitive market is consistent with a discriminatory wage differential. This will happen when customers are willing to pay to maintain the discriminatory practice.Discrimination by Customers and GovernmentsGover

20、nment policies: When the government mandates discriminatory practices or requires firms to discriminate, this may also lead to discriminatory wage differentials.SummaryWorkers earn different wages for many reasons.To some extent, wage differentials compensate workers for job attributes.Workers with

21、more human capital get paid more than workers with less human capital.SummaryThe return to accumulating human capital is high and has increased over the past decade.There is much variation in earnings that cannot be explained by things economists can measure.SummaryThe unexplained variation in earni

22、ngs is largely attributable to natural ability, effort, and chance.Some economists have suggested that more-educated workers earn higher wages because workers with high natural ability use education as a way to signal their high ability to employers.SummaryWages are sometimes pushed above the equili

23、brium level because of minimum-wage laws, unions, and efficiency wages.Some differences in earnings are attributable to discrimination on the basis of race, sex, or other factors.When measuring the amount of discrimination, one must correct for differences in human capital and job characteristics.Su

24、mmaryCompetitive markets tend to limit the impact of discrimination on wages.Discrimination can persist in competitive markets if customers arewilling to pay more to discriminatory firms,or if the government passes laws requiring firms to discriminate.20Income Inequality and PovertyIncome Inequality

25、 and PovertyA persons earnings depend on the supply and demand for that persons labor, which in turn depend on natural ability, human capital, compensating differentials, discrimination, and so on.THE MEASUREMENT OF INEQUALITYHow much inequality is there in our society?How many people live in povert

26、y?What problems arise in measuring the amount of inequality?How often do people move among income classes?Table 1 The Distribution of Income in the United States: 2000Copyright2004 South-WesternU.S. Income InequalityImagine that you. . .lined up all of the families in the economy according to their

27、annual income. divided the families into five equal groups (bottom fifth, second fifth, etc.)computed the share of total income that each group of families received.Table 2 Income Inequality in the United StatesCopyright2004 South-WesternU.S. Income InequalityIf income were equally distributed acros

28、s all families, each one-fifth of families would receive one-fifth (20 percent) of total income.U.S. Income InequalityFrom 1935-1970, the distribution of income gradually became more equal.In more recent years, this trend has reversed itself.U.S. Income Inequality Reasons for Recent Increase in Inco

29、me InequalityThe following have tended to reduce the demand for unskilled labor and raise the demand for skilled labor:Increases in international trade with low-wage countriesChanges in technology Therefore, the wages of unskilled workers have fallen relative to the wages of skilled workers.This has

30、 resulted in increased inequality in family incomes.CASE STUDY: The Womens Movement and the Income DistributionThe percentage of women who hold jobs has risen from about 32 percent in the 1950s to about 54 percent in the 1990s.CASE STUDY: Income Equality around the WorldThe Poverty RateThe poverty r

31、ate is the percentage of the population whose family income falls below an absolute level called the poverty line.Problems in Measuring InequalityThe Poverty LineThe poverty line is an absolute level of income set by the federal government for each family size below which a family is deemed to be in

32、 poverty.Figure 1 The Poverty RateCopyright2003 Southwestern/Thomson LearningPercent of thePopulationbelow PovertyLine196019651970197519801985199019952000Poverty rate510152025Problems in Measuring Inequality The Poverty Line and Income InequalityAs economic growth pushes the entire income distributi

33、on upward, more families are pushed above the poverty line because the poverty line is an absolute rather than a relative standard.Despite continued economic growth in average income, the poverty rate has not declined.Although economic growth has raised the income of the typical family, the increase

34、 in inequality has prevented the poorest families from sharing in this greater economic prosperity.Table 4 Who Is Poor?Copyright2004 South-WesternProblems in Measuring Inequality Three Facts About PovertyPoverty is correlated with race.Poverty is correlated with age.Poverty is correlated with family

35、 composition.Problems in Measuring InequalityData on income distribution and the poverty rate give an incomplete picture of inequality in living standards because of the following: In-kind transfers Life cycle Transitory versus permanent incomeProblems in Measuring InequalityIn-Kind TransfersTransfe

36、rs to the poor given in the form of goods and services rather than cash are called in-kind transfers.Measurements of the distribution of income and the poverty rate are based on families money income.The failure to include in-kind transfers as part of income greatly affects the measured poverty rate

37、.Problems in Measuring InequalityThe Economic Life CycleThe regular pattern of income variation over a persons life is called the life cycle.A young worker has a low income at the beginning of his or her career.Income rises as the worker gains maturity and experience.Income peaks at about age 50.Inc

38、ome falls sharply at retirement, around age 65.Problems in Measuring InequalityTransitory versus Permanent Income Incomes vary because of random and transitory forces.Acts of natureTemporary layoffs due to illness or economic conditions, etc.A familys ability to buy goods and services depends largel

39、y on its permanent income, which is its normal, or average, income. Permanent income excludes transitory changes in income.Economic MobilityThe movement of people among income classes is called economic mobility.Economic mobility is substantial in the U.S. economy.Economic Mobility Movements up and

40、down the income ladder can be due to:Good or bad luck.Hard work or laziness.Persistence of economic success from generation to generation.POLITICAL PHILOSOPHY OF REDISTRIBUTING INCOMEWhat should the government do about economic inequality?Economic analysis alone cannot give us the answer.The questio

41、n is a normative one facing policymakers.POLITICAL PHILOSOPHY OF REDISTRIBUTING INCOMEThree Political PhilosophiesUtilitarianismLiberalismLibertarianismUtilitarianismUtilitarianism is the political philosophy according to which the government should choose policies to maximize the total utility of e

42、veryone in society.The founders of utilitarianism are the English philosophers Jeremy Bentham and John Stuart Mill.UtilitarianismThe utilitarian case for redistributing income is based on the assumption of diminishing marginal utility. An extra dollar of income to a poor person provides that person

43、with more utility, or well-being, than does an extra dollar to a rich person.LiberalismLiberalism is the political philosophy according to which the government should choose policies deemed to be just, as evaluated by an impartial observer behind a “veil of ignorance.”This view was originally develo

44、ped by the philosopher John Rawls.LiberalismPublic policy should be based on the maximin criterion, which seeks to maximize the utility or well-being of the worst-off person in society.That is, rather than maximizing the sum of everyones utility, one should maximize the minimum utility.This idea wou

45、ld allow for the consideration of the redistribution of income as a form of social insurance.LibertarianismLibertarianism is the political philosophy according to which the government should punish crimes and enforce voluntary agreements, but should not redistribute income. Libertarians argue that e

46、quality of opportunity is more important than equality of income.POLICIES TO REDUCE POVERTYMinimum-wage lawsWelfareNegative income taxIn-kind transfersMinimum-Wage LawsAdvocates view the minimum wage as a way of helping the working poor.Critics view the minimum wage as hurting those it is intended t

47、o help.Minimum-Wage LawsThe magnitude of the effects of the minimum wage depends on the elasticity of the demand for labor.Minimum-Wage LawsAdvocates argue that the demand for unskilled labor is relatively inelastic, so that a high minimum wage depresses employment only slightly.Critics argue that l

48、abor demand is more elastic, especially in the long run when firms can adjust employment more fully.WelfareThe government attempts to raise the living standards of the poor through the welfare system.Welfare is a broad term that encompasses various government programs that supplement the incomes of

49、the needy.Temporary Assistance for Needy Families (TANF)Supplemental Security Income (SSI)Negative Income TaxA negative income tax collects tax revenue from high-income households and gives transfers to low-income households.Negative Income TaxHigh-income families would pay a tax based on their inco

50、mes.Low-income families would receive a subsidya “negative tax.”Poor families would receive financial assistance without having to demonstrate need.In-Kind TransfersIn-kind transfers are transfers to the poor given in the form of goods and services rather than cash. Food stamps and Medicaid are exam

51、ples. In-Kind TransfersAdvocates of in-kind transfers argue that such transfers ensure that the poor get what they most need.Advocates of cash payments argue that in-kind transfers are inefficient and disrespectful.Antipoverty Programs and Work IncentivesMany policies aimed at helping the poor can have the unintended effect of discou