A. Wage determination is of interest because most people devote much
of their time to wage-earning activities.
B. Wage earners include both blue and white collar workers and professionals.
A. Factors affecting labor productivity
1. Quality (health, education, etc.) of the work force
2. Quantity and quality of capital supporting labor
3. Use of technology
4. Management efficiency
5. Business, social and political climate
6. Cost and availability of natural resources
B. Wage determination models
1. Competitive model: many buyers and sellers acting independently such
as the market for unskilled workers
2. Monopoly power models
a. Monopsony model: one buyer, many sellers such as the one-factory
towns of rural America
b. Union models: one seller of labor
1) Exclusive craft model: electrical workers
2) Inclusive industrial model: auto workers
c. Bi-lateral monopoly: one buyer and one seller which occurs when
unionized workers such as major league baseball players negotiate
with one buyer such as major league baseball.
C. Krugman on the Need for Jobs Policies from Naked Capitalism
A. Many buyers and sellers, from a few to tens-of-thousands of workers and
a proportionate number of buyers (companies).
B. No single company has high enough demand to affect wages (price).
C. Workers (supply) act independently.
D. Industry supply is upsloping as companies must pay higher wages to induce
more people to work.
E. Marginal resource cost (MRC) is the change in total costs which results
from hiring one more unit of resource.
F. For a firm buying labor in a competitive market, supply is equal to marginal
resource cost (MRC) because the firm may buy all the workers it desires at
the rate set by industry supply and demand.
G. Worker skills and company needs are very similar. An example would be
unskilled workers seeking menial work.
H. In Defense of Sweatshops
From Page 60 of the April 24, 2010 edition of
The Economists. 
Productivity
is not the cause of stagnate wages in the US and Germany.
