Labour Markets, Transfers, and Personal Taxes

… a core topic in Economic Analysis and Atlas102

LabourMarketsTopic description

This topic deals with labour markets and income distribution, and with the tax and transfer policies that can affect the income distribution.

The treatment of this topic in respect of labour markets follows closely that in Chapter 13, Labor Markets, in the open access Principles of Microeconomics course offered by Tyler Cowen and Alex Tabarrok at the Marginal Revolution University online education platform (http://www.mruniversity.com/courses/principles-economics-microeconomics, accessed 9 May 2016). Other sources are used for personal transfers and taxes.

Topic learning outcome

Appropriately utilize and interpret results of applying to the analysis of public policy and management problems the basic principles of labour markets and personal taxes and transfers, including following core concepts.

Core concepts associated with this topic
Marginal Product of Labour

Human Capital and Signaling

Compensating Differentials

Unions and Wages

Derived Demand

Human Capital

Sheepskin (or Credential) Effects

Extensive Margin

Intensive Margin

Income Distribution

Income Tax

Progressive Taxation

Transfer Payment

Negative Income Tax

Social Welfare Function

Readings 

We believe that this topic and its core concepts can be mastered to the MPP/MPA level by watching and re-watching the 39 minutes of MRU course videos listed below and doing the 24 sample questions associated with these video segments and reproduced at the bottom of this page and repeated on the appropriate concept pages.

Atlas pages: Labour Markets and associated Concepts

Alex Tabarrok, The Marginal Product of Labour (10-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/labor-economics-marginal-product-labor, accessed 4 May 2016.

Tyler Cowen and Alex Tabarrok, Econ Duel: Is Education Signaling or Skill Building? (9-minute video), at http://www.mruniversity.com/courses/principles-economics-microeconomics/education-signaling-human-capital, accessed 4 May 2016.

Alex Tabarrok, Human Capital and Signaling (7-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/human-capital-wages-education-globalization, accessed 4 May 2016.

Alex Tabarrok, Human Capital and Signaling (3-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/tradeoff-wages-no-such-thing-as-free-lunch, accessed 4 May 2016.

Alex Tabarrok, Compensating Differentials (5-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/compensating-differentials-wages, accessed 4 May 2016.

Alex Tabarrok, Do Unions Raise Wages (5-minute video), Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/do-labor-unions-raise-wages-workers, accessed 9 May 2016.

Recommended readings in MPP and MPA courses 

[TO COME]

Sample assessment questions

From http://www.mruniversity.com/node/301755, http://www.mruniversity.com/node/301757, http://www.mruniversity.com/node/301759, http://www.mruniversity.com/node/301760, and http://www.mruniversity.com/node/301762, accessed 9 May 2016.

AQ102.10.01. Determine whether the following statements are true or false. The marginal product of labor is

AQ102.10.08. The director of human resources at ToyCo is hiring new engineers. She’s got a stack of 250 applications, and she’s going to do a little research. She sits down and does a little cyber-snooping on all 250, and she finds the following (Word to the wise- prospective employers do cyber-snoop!): i. Of the 150 who have Facebook pages, 50 are holding a bottle of beer in their profile photo, and 100 aren’t. ii. Of the 100 who have their own websites, 20 have more than two typos. iii. Of the 150 who have Facebook pages, 25 have at least two friends who have apparently spent time in prison, according to a quick check of public records. Finding (ii) is likely to signal which of the following to the human resources director:

AQ102.10.12. Let’s apply the idea of compensating differentials to janitorial jobs. Suppose there are two quite similar restaurants in the same town, Orange Bee’s and the City Inn. Both have the same demand for janitorial labor. But all the janitors in town know that it’s much more fun to work at City Inn. Which restaurant will pay a higher wage for janitors?

AQ102.10.14. According to the theory of compensating differentials, which low-skilled jobs in the United States will tend to pay the most: The safe jobs or the dangerous jobs?

AQ102.10.18. The main reason that an immigrant earns more when he moves from Algeria to France is because the French have strong labor unions.

Page created by: Ian Clark, last modified on 19 May 2016.

Image: Jaazle.com, Labor Market Information, at http://www.jaazle.com/diagnostic-job-search/labor-market-information/, accessed 18 April 2016.