请选择 进入手机版 | 继续访问电脑版
 找回密码
 Register Now~

© Dlwlrma A   /  2019-1-9 20:15  /   0 人收藏 版权:保留作者信息

(a)  Some top executives and some sports people are paid very high salaries. It is argued that this is inevitable as people are paid the market rate for the job. Use economic analysis to support this opinion.

The economic theory suggested that the wages are determined by factors such as marginal revenue product of labor (MRPL), and the supply of the labor. MRPL is the increase in total revenue by hiring additional unit of labor; it is the result of Marginal Physical product times the marginal revenue of product. MPP is the increase in total product by hiring additional labor, which is influenced by labor productivity; and MR is the increase in total revenue by selling additional unit of products, influenced by the demand of the goods and services produced by labor. For any profit maximizing firms, their demand of labor is determined by MRPL. the wage difference can also be explained by the MRPL theory.
*
the theory suggests a perfect competition labor market which both demand side and supply side have no power to influence the wage rate. The firms are the wage taker.
We could apply this theory the explain why it is necessary for the top executives and the sports people to get the high wage. They will have higher marginal product of labor than the other occupations like the cleaner. The top executives and the sports people can affect the revenue for the company significantly. Therefore, the boss of them hence willing to pay high wage for them, as long as their MRP is greater or equal to the wage paid.
As well as difference in demand, labor supply to an industry can be influenced by the number of qualified people, the non-wage benefit or cost of a job. If the barriers of entry to a job are low, then many people will be qualified, the labor supply will be large, and hence lower the wage rate. In the top executives and sports people’s market, the supply of them are limited. It took lots of time to train and therefore, the supply curve is inelastic. The top executives and the sports people are easier to bargain for higher wages.
In conclusion, the nature of the occupation can allow them to earn higher wages than other jobs. The economic theory can support that it’s necessary for these group of people deserve higher salaries.
(b)  It is argued that the wage determination in imperfect markets leads to exploitation. It is therefore necessary and beneficial if the government intervenes in the determination of wage rates. Discuss whether there is any truth in this argument.
In imperfect labor markets, the imperfection in the labor market cause wages to differ from competitive equilibrium such as the monopsony. The monopsony is a market with a single buyer and many sellers. Therefore, the firm have the power to influence wage rates in the labor market.
2.png
*
The diagram shows how the wage determined in the monopsony. For the firm with some market power, can restrict employment and lower the wage rate. To maximize profit, they will likely choose the number of labor to hire at Q2, which the MRPL is equal to the MC. Therefore, the corresponding wage rate is at W2. In perfect competition labor market, the wage rate only determined by the supply and the demand of labor so the number of labor to be employed is at Q1 and the wage rate is W1. The monopolists offer a pay level below the marginal revenue product of the last worker. In this sense the monopolist exploiting labor by not paying them the full value of their marginal revenue product.
In this situation the government may necessary to make a policy to eliminate the exploiting wage situation. the government can set the minimum wage to prevent the exploited workers. The minimum wage rate may increase the employment level in industries where there is some monopsony power among the buyers of labor. Besides, a minimum wage may encourage firms to invest in both human and physical capital which can lead to higher economic growth in the long term.
However, in the reality it is not necessary to figure out the issue by the government intervention. The trade union can also play his role to negotiating with the firms.
(diagram)
the trade union can control the total supply curve in the market. They have power to negotiate with the monopolist. The monopolist has a profit incentive to hire extra workers when the MRPL lower than the MC, so it will employ more workers. What’s more, it is not always beneficial when the government intervention exists. It’s hard to identify what is the minimum wage level, the incorrect minimum wage will create unemployment, especially in industries which face fierce international competition. Another negative impact is the low-paid workers would seek a wage increase to main their differential with the lowest paid. The cost of production of the firm will increase. The cost push inflation could well result, and affect the economy as a whole.
In conclusion, although the wage is exploited in the imperfect competition labor market, however, the government intervention is not always necessary and beneficial. It depends on what the market situation is

分享至 : QQ空间
收藏

0 个回复