1 labor market. 2 deindustrialization? u.s. manufacturing employment millions of jobs manufacturing...
TRANSCRIPT
![Page 1: 1 Labor Market. 2 Deindustrialization? U.S. Manufacturing Employment Millions of Jobs Manufacturing Wage Rate, 2005](https://reader031.vdocuments.us/reader031/viewer/2022020117/56649ec15503460f94bcd6ec/html5/thumbnails/1.jpg)
1
Labor Market
![Page 2: 1 Labor Market. 2 Deindustrialization? U.S. Manufacturing Employment Millions of Jobs Manufacturing Wage Rate, 2005](https://reader031.vdocuments.us/reader031/viewer/2022020117/56649ec15503460f94bcd6ec/html5/thumbnails/2.jpg)
2
Deindustrialization?
U.S. Manufacturing EmploymentMillions of Jobs
Manufacturing Wage Rate, 2005
![Page 3: 1 Labor Market. 2 Deindustrialization? U.S. Manufacturing Employment Millions of Jobs Manufacturing Wage Rate, 2005](https://reader031.vdocuments.us/reader031/viewer/2022020117/56649ec15503460f94bcd6ec/html5/thumbnails/3.jpg)
3
Wages by Education in the U.S.
![Page 4: 1 Labor Market. 2 Deindustrialization? U.S. Manufacturing Employment Millions of Jobs Manufacturing Wage Rate, 2005](https://reader031.vdocuments.us/reader031/viewer/2022020117/56649ec15503460f94bcd6ec/html5/thumbnails/4.jpg)
4
Marginal Product of Labor
• Marginal Product of Labor is the additional output produced by a worker
•Firms employ workers to produce good and services
![Page 5: 1 Labor Market. 2 Deindustrialization? U.S. Manufacturing Employment Millions of Jobs Manufacturing Wage Rate, 2005](https://reader031.vdocuments.us/reader031/viewer/2022020117/56649ec15503460f94bcd6ec/html5/thumbnails/5.jpg)
5
Diminishing Marginal Productivity
• Diminishing marginal productivity of labor
3.0
7.0
n
kAMPN
n
Fix k
MPN• MPN depends on A and k/n
• For given k and A a rise in n leads to a fall in MPN
![Page 6: 1 Labor Market. 2 Deindustrialization? U.S. Manufacturing Employment Millions of Jobs Manufacturing Wage Rate, 2005](https://reader031.vdocuments.us/reader031/viewer/2022020117/56649ec15503460f94bcd6ec/html5/thumbnails/6.jpg)
6
The Determination of Short-Run Labor Demand
• w = real wage rate
• To maximize profits the firm should– Increase n if MPN > w*– Decrease n if MPN < w*
• It follows that the demand for labor function equals the MPN functionMPN
MPN & w
n
W*
MPN1
MPN2
n1 n2n*
w = MPNCondition of profit maximization
![Page 7: 1 Labor Market. 2 Deindustrialization? U.S. Manufacturing Employment Millions of Jobs Manufacturing Wage Rate, 2005](https://reader031.vdocuments.us/reader031/viewer/2022020117/56649ec15503460f94bcd6ec/html5/thumbnails/7.jpg)
7
Factors that Shift the Aggregate Labor Demand Curve
• An increase in TFP causes the labor demand curve to shift right.
• An increase in the capital stock causes the labor demand curve to shift right.
w
n
Increase in A or k
![Page 8: 1 Labor Market. 2 Deindustrialization? U.S. Manufacturing Employment Millions of Jobs Manufacturing Wage Rate, 2005](https://reader031.vdocuments.us/reader031/viewer/2022020117/56649ec15503460f94bcd6ec/html5/thumbnails/8.jpg)
8
The Supply of Labor
• Labor is supplied by households
• Aggregate labor supply increases with wages
• Higher wealth lowers labor supply at any wage
w
n
ns
![Page 9: 1 Labor Market. 2 Deindustrialization? U.S. Manufacturing Employment Millions of Jobs Manufacturing Wage Rate, 2005](https://reader031.vdocuments.us/reader031/viewer/2022020117/56649ec15503460f94bcd6ec/html5/thumbnails/9.jpg)
9
Short-Run Labor Market Equilibrium(fix k)
• Real wage is determined so that labor demand equals labor supply at point X.
• An increase in TFP shifts the MPN curve to MPN*.
• The new equilibrium is at point Z with higher real wage and employment.
MPN*
MPN
w
n
X
Z
![Page 10: 1 Labor Market. 2 Deindustrialization? U.S. Manufacturing Employment Millions of Jobs Manufacturing Wage Rate, 2005](https://reader031.vdocuments.us/reader031/viewer/2022020117/56649ec15503460f94bcd6ec/html5/thumbnails/10.jpg)
10
Recession
Sharp oil price rise• Lowers A• Lowers demand for
labor• Lowers real wages and
real GDP
• This is a recession.
w
n
MPN*
MPN
ns
![Page 11: 1 Labor Market. 2 Deindustrialization? U.S. Manufacturing Employment Millions of Jobs Manufacturing Wage Rate, 2005](https://reader031.vdocuments.us/reader031/viewer/2022020117/56649ec15503460f94bcd6ec/html5/thumbnails/11.jpg)
11
Oil Price
Real
Nominal
![Page 12: 1 Labor Market. 2 Deindustrialization? U.S. Manufacturing Employment Millions of Jobs Manufacturing Wage Rate, 2005](https://reader031.vdocuments.us/reader031/viewer/2022020117/56649ec15503460f94bcd6ec/html5/thumbnails/12.jpg)
12
Unemployment
![Page 13: 1 Labor Market. 2 Deindustrialization? U.S. Manufacturing Employment Millions of Jobs Manufacturing Wage Rate, 2005](https://reader031.vdocuments.us/reader031/viewer/2022020117/56649ec15503460f94bcd6ec/html5/thumbnails/13.jpg)
13
Wages across countries and time
![Page 14: 1 Labor Market. 2 Deindustrialization? U.S. Manufacturing Employment Millions of Jobs Manufacturing Wage Rate, 2005](https://reader031.vdocuments.us/reader031/viewer/2022020117/56649ec15503460f94bcd6ec/html5/thumbnails/14.jpg)
14
Does the theory work?
• Are real wages proportional to labor productivity over time?
• Are real wages proportional to labor productivity across countries?
![Page 15: 1 Labor Market. 2 Deindustrialization? U.S. Manufacturing Employment Millions of Jobs Manufacturing Wage Rate, 2005](https://reader031.vdocuments.us/reader031/viewer/2022020117/56649ec15503460f94bcd6ec/html5/thumbnails/15.jpg)
15
Real Wages and Productivity over time
![Page 16: 1 Labor Market. 2 Deindustrialization? U.S. Manufacturing Employment Millions of Jobs Manufacturing Wage Rate, 2005](https://reader031.vdocuments.us/reader031/viewer/2022020117/56649ec15503460f94bcd6ec/html5/thumbnails/16.jpg)
16
International Wage Differences
![Page 17: 1 Labor Market. 2 Deindustrialization? U.S. Manufacturing Employment Millions of Jobs Manufacturing Wage Rate, 2005](https://reader031.vdocuments.us/reader031/viewer/2022020117/56649ec15503460f94bcd6ec/html5/thumbnails/17.jpg)
17
Productivity and Wages
![Page 18: 1 Labor Market. 2 Deindustrialization? U.S. Manufacturing Employment Millions of Jobs Manufacturing Wage Rate, 2005](https://reader031.vdocuments.us/reader031/viewer/2022020117/56649ec15503460f94bcd6ec/html5/thumbnails/18.jpg)
18
Real Wages and Productivity Across Countries
Wages and Productivity(Output per Worker) Across Countries
![Page 19: 1 Labor Market. 2 Deindustrialization? U.S. Manufacturing Employment Millions of Jobs Manufacturing Wage Rate, 2005](https://reader031.vdocuments.us/reader031/viewer/2022020117/56649ec15503460f94bcd6ec/html5/thumbnails/19.jpg)
19
Do real wages converge?
![Page 20: 1 Labor Market. 2 Deindustrialization? U.S. Manufacturing Employment Millions of Jobs Manufacturing Wage Rate, 2005](https://reader031.vdocuments.us/reader031/viewer/2022020117/56649ec15503460f94bcd6ec/html5/thumbnails/20.jpg)
20
Size Distribution of Firms in the US
Over half of all employment is in small firms.Source: Brian Headd, “The Characteristics of Small-Business Employees,” Monthly Labor Review, 2000.
![Page 21: 1 Labor Market. 2 Deindustrialization? U.S. Manufacturing Employment Millions of Jobs Manufacturing Wage Rate, 2005](https://reader031.vdocuments.us/reader031/viewer/2022020117/56649ec15503460f94bcd6ec/html5/thumbnails/21.jpg)
21
Job Creation and Destruction in the US
Job creation and destruction is significantly higher than net job creation.
2006Q2:
- 7.8 million jobs created
- 7.3 million jobs destroyed
- .5 million net change in number of jobs
Job creation: net employment change of establishments expanding employment
Job destruction: net employment change of establishments reducing employment
![Page 22: 1 Labor Market. 2 Deindustrialization? U.S. Manufacturing Employment Millions of Jobs Manufacturing Wage Rate, 2005](https://reader031.vdocuments.us/reader031/viewer/2022020117/56649ec15503460f94bcd6ec/html5/thumbnails/22.jpg)
22
Productivity and Resource Reallocation
Churning is the key to economic growth.
Source: John Haltiwanger, “New Ideas for Measuring Labor Productivity,” Census Brief, 1998.
![Page 23: 1 Labor Market. 2 Deindustrialization? U.S. Manufacturing Employment Millions of Jobs Manufacturing Wage Rate, 2005](https://reader031.vdocuments.us/reader031/viewer/2022020117/56649ec15503460f94bcd6ec/html5/thumbnails/23.jpg)
23
Structural Transformation and Development
Source: Bah El-hadj, The University of Auckland, “Structural Transformation in Developed and Developing Countries,” 2008.
![Page 24: 1 Labor Market. 2 Deindustrialization? U.S. Manufacturing Employment Millions of Jobs Manufacturing Wage Rate, 2005](https://reader031.vdocuments.us/reader031/viewer/2022020117/56649ec15503460f94bcd6ec/html5/thumbnails/24.jpg)
24
Real Wages and Hours Worked
![Page 25: 1 Labor Market. 2 Deindustrialization? U.S. Manufacturing Employment Millions of Jobs Manufacturing Wage Rate, 2005](https://reader031.vdocuments.us/reader031/viewer/2022020117/56649ec15503460f94bcd6ec/html5/thumbnails/25.jpg)
25
Labor Market and Wealth
• A permanent rise in A raises MPN and thus shifts out the labor demand curve.
• A permanent rise in A raises wealth and thus shifts left the labor supply curve.
• The new equilibrium is at point Z with higher real wage and possibly lower employment.
• Note, though, that hours worked per person may fall, but a rise in wages may lead to a rise in the labor force participation rate (especially for relatively poor countries).
MPN*
MPN
w
n
X
Z
ns
*ns
![Page 26: 1 Labor Market. 2 Deindustrialization? U.S. Manufacturing Employment Millions of Jobs Manufacturing Wage Rate, 2005](https://reader031.vdocuments.us/reader031/viewer/2022020117/56649ec15503460f94bcd6ec/html5/thumbnails/26.jpg)
26
Income Inequality
![Page 27: 1 Labor Market. 2 Deindustrialization? U.S. Manufacturing Employment Millions of Jobs Manufacturing Wage Rate, 2005](https://reader031.vdocuments.us/reader031/viewer/2022020117/56649ec15503460f94bcd6ec/html5/thumbnails/27.jpg)
27
Rise in Real Wage Dispersion
• Two potential explanations– Open trade (greater globalization)– Technological improvements
![Page 28: 1 Labor Market. 2 Deindustrialization? U.S. Manufacturing Employment Millions of Jobs Manufacturing Wage Rate, 2005](https://reader031.vdocuments.us/reader031/viewer/2022020117/56649ec15503460f94bcd6ec/html5/thumbnails/28.jpg)
28
Skill Biased Technical Change
w
N_unskilled
ND_unskilled
ND’_unskilled
NS_unskilled
N_skilled
w
ND_skilled
ND’_skilled
NS_skilled
•Skill biased technical change increases demand for skilled workers and hence their wages
•The opposite is true for unskilled workers.
![Page 29: 1 Labor Market. 2 Deindustrialization? U.S. Manufacturing Employment Millions of Jobs Manufacturing Wage Rate, 2005](https://reader031.vdocuments.us/reader031/viewer/2022020117/56649ec15503460f94bcd6ec/html5/thumbnails/29.jpg)
29
![Page 30: 1 Labor Market. 2 Deindustrialization? U.S. Manufacturing Employment Millions of Jobs Manufacturing Wage Rate, 2005](https://reader031.vdocuments.us/reader031/viewer/2022020117/56649ec15503460f94bcd6ec/html5/thumbnails/30.jpg)
30
Key Message
• Wage premium for skills have gone up and relative supply have been catching up
• The information technology (IT) revolution is biased toward skilled labor
![Page 31: 1 Labor Market. 2 Deindustrialization? U.S. Manufacturing Employment Millions of Jobs Manufacturing Wage Rate, 2005](https://reader031.vdocuments.us/reader031/viewer/2022020117/56649ec15503460f94bcd6ec/html5/thumbnails/31.jpg)
31
Skill Premia Across Countries
• Skill premia are highest for poor countries
• Poor countries have a shortage of skilled workers
• Why?