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Chapter 1

Introduction

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What is Labor Economics?

• Unique Market– Non-pecuniary factors– Government regulations

• Study of Behavior

• Study of Policy

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Examples

• Behavior– Wages, opportunities, decision to work,

occupational choice, family decisions, willingness to accept poor working conditions, educational decisions, unions, migration, turnover, productivity

• Policies– Minimum wage, overtime laws, pension

reform, OSHA, Social Security reform, income taxes, unemployment insurance, welfare reform, discrimination laws, immigration

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Government Intervention• What are Non-Economics Reasons?• What are Economic Reasons?

– Market failure• How do Markets Fail?

– Ignorance, information– Barriers (laws, education costs)– Price distortions (taxes)– No Market (smoking)

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How Govt. Solves Problems• Public Goods – where no market exists• Provides Information

– Wage information– Safety statistics

• Capital Imperfections – Student loans

• Establish market substitute – non-smoking areas

• Equity/Efficiency

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Estimated Relationship between Wages and Quit Rates Using Data from Table 1A.1Figure 1A.1

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True Relationships between Wages and Quit RatesFigure 1A.2

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Estimated Relationships between Wages and Quit Rates Using Data from Table 1A.2Figure 1A.3