chapter 14 markets for factor inputs. ©2005 pearson education, inc. chapter 142 topics to be...
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Chapter 14 2©2005 Pearson Education, Inc.
Topics to be Discussed
Competitive Factor Markets
Equilibrium in a Competitive Factor Market
Factor Markets with Monopsony Power
Factor Markets with Monopoly Power
Chapter 14 3©2005 Pearson Education, Inc.
Competitive Factor Markets
Characteristics1. Large number of sellers of the factor of
production
2. Large number of buyers of the factor of production
3. The buyers and sellers of the factor of production are price takers
Chapter 14 4©2005 Pearson Education, Inc.
Competitive Factor Markets
Demand for a factor input when only one input is variable: Factor demands are derived demand
Demand for an input that depends on, and is derived from, both the firm’s level of output and the cost of inputs
Demand for computer programmers is derived from how much software Microsoft expects to sell
Chapter 14 5©2005 Pearson Education, Inc.
Factor Input Demand – One Variable Input
Assume firm produces output using two inputs: Capital (K) and Labor (L) Hired at prices r (rental cost of capital) and w
(wage rate) K is fixed (short run analysis) and L is
variable Firm must decide how much labor to hire
Chapter 14 6©2005 Pearson Education, Inc.
Factor Input Demand – One Variable Input
How does a firm decide if it is profitable to hire another worker? If the additional revenue from the output of
hiring another worker is greater than its cost Marginal Revenue Product of Labor (MPRL)
Additional revenue resulting from the sale of output created by the use of one additional unit of an input
Chapter 14 7©2005 Pearson Education, Inc.
Factor Input Demand – One Variable Input
The incremental cost of a unit of labor is the wage rate, w
Profitable to hire more labor if the MRPL is at least as large as the wage rate, w
Must measure the MRPL
Chapter 14 8©2005 Pearson Education, Inc.
Factor Input Demand – One Variable Input
MRPL is the additional output obtained from an additional unit of labor, multiplied by the additional revenue from an extra unit of output
Additional output is given by MPL and additional revenue is MR
Chapter 14 9©2005 Pearson Education, Inc.
Factor Input Demand – One Variable Input
))(( MRMPMRP
L
Q
Q
R
L
R
Q
RMR
L
QMP
L
RMRP
LL
L
L
and
labor is L and revenue is R where
Chapter 14 10©2005 Pearson Education, Inc.
Factor Input Demand – One Variable Input
In a competitive market, MR = PThis means, for a competitive market
))(( PMPMRP LL Graphically, diminishing marginal
returns, MPL falls as L increases
Chapter 14 11©2005 Pearson Education, Inc.
Marginal Revenue Product
Hours of Work
Wages($ perhour)
MRPL = MPLx P
Competitive Output Market (P = MR)
MRPL = MPL x MR
Monopolistic Output Market
(P < MR)
Chapter 14 12©2005 Pearson Education, Inc.
Factor Input Demand – One Variable Input
Choosing the profit-maximizing amount of labor: If MRPL > w (the marginal cost of hiring a
worker): hire the worker If MRPL < w: hire less labor
If MRPL = w: profit maximizing amount of labor
Chapter 14 13©2005 Pearson Education, Inc.
SL
In a competitive labor market, a firm faces a perfectly elastic supply of labor and can hire as many workers
as it wants at w*.
Hiring by a Firm in the Labor Market
Quantity of Labor
Price ofLabor
MRPL = DL
w*
L*
The profit maximizing firm will hire L* units of labor at
the point where the marginal revenue product
of labor is equal to the wage rate.
Chapter 14 14©2005 Pearson Education, Inc.
Factor Input Demand – One Variable Input
Quantity of labor demand changes in response to the wage rate
If the market supply of labor increases relative to demand (baby boomers or female entry), a surplus of labor will exist and the wage rate will fall
Chapter 14 15©2005 Pearson Education, Inc.
A Shift in the Supply of Labor
Quantity of Labor
Price ofLabor
w1S1
MRPL = DL
L1 L2
w2 S2
Chapter 14 16©2005 Pearson Education, Inc.
Factor Input Demand – One Variable Input
Comparing Input and Output Markets
production of MC MP
MP MR
MR))((MP
MRP workersofnumber
maximizingprofit at and
MR))(MP(MRP
L
L
L
L
LL
w
w
w
w
Chapter 14 17©2005 Pearson Education, Inc.
Factor Input Demand – One Variable Input
Both the hiring and output choices of the firm follow the same rule Inputs or outputs are chosen so that marginal
revenue from the sale of output is equal to marginal cost from the purchase of inputs
True for both competitive and noncompetitive markets
Chapter 14 18©2005 Pearson Education, Inc.
Factor Input Demand – Many Inputs
In choosing more than one variable input, a change in the price of one input changes the demand for the others
Scenario Producing farm equipment with two variable
inputs:LaborAssembly-line machinery
Chapter 14 19©2005 Pearson Education, Inc.
Factor Input Demand – Many Inputs
If the wage rate falls: More labor will be demanded even if amount
of machinery does not change MC of producing farm equipment falls Profitable for firm to increase output Will invest in additional machinery to expand
production MRPL will shift right, quantity of labor
demanded increases
Chapter 14 20©2005 Pearson Education, Inc.
Factor Input Demand – Many Inputs
If wage rate is $20/hr, firm hires 100 worker hours – point A
Wage rate falls to $15/hrMRPL > W, firm demands more labor
MRPL1 is demand for labor w/machinery fixed
Increased labor causes MPK to rise, encouraging the firm to rent more machinery
MPL increases
MRPL curve shifts right, firm uses 140 hrs labor
Chapter 14 21©2005 Pearson Education, Inc.
MRPL1MRPL2
Factor Input Demand – Many Inputs
Wages($ perhour)
5
10
15
20
Hours of Work0 40 80 120 160
When the wage rate falls to $15, theMRP curve shifts, generating a new
point C on the firm’s demand forlabor curve.
Thus A and C are on the demand for labor curve, but B is not.
DL
A
B
C
Chapter 14 22©2005 Pearson Education, Inc.
Market Demand Curve
All firms’ demand for labor vary substantially
Assume that all firms respond to a lower wage All firms would hire more workers Market supply would increase The market price will fall The quantity demanded for labor by the firm
will be smaller
Chapter 14 23©2005 Pearson Education, Inc.
Industry Demand for Labor
MRPL1
Labor(worker-hours)
Labor(worker-hours)
Wage($ perhour)
Wage($ perhour)
0
5
10
15
0
5
10
15
50 100 150 L0 L2120
MRPL2 DL1
Horizontal sum ifproduct price
unchanged
L1
IndustryDemandCurve DL2
Firm Industry
Chapter 14 24©2005 Pearson Education, Inc.
The Industry Demand for Labor
If the wage rate falls for all firms in industry, all firms will demand more labor
More industry output and supply for output will rise, causing prices to fall
The increase in labor is smaller than if the product price were fixed
Adding all labor demand curves in all industries gives market demand curve for labor
Chapter 14 25©2005 Pearson Education, Inc.
The Demand for Jet Fuel
Jet fuel is a factor (input) for airlinesCost of jet fuel
1971 – Jet fuel cost equaled 12.4% of total operating cost
1980 – Jet fuel cost equaled 30.0% of total operating cost
1990’s – Jet fuel cost equaled 15.0% of total operating cost
Chapter 14 26©2005 Pearson Education, Inc.
The Demand for Jet Fuel
Airlines responded to higher prices in the 1970’s by reducing the quantity of jet fuel used
Output of airlines (ton-miles) increased by 29.6% and jet fuel consumed rose by 8.8%
Effect of increased fuel costs on airlines depends on ability to cut fuel usage by reducing weight
Chapter 14 27©2005 Pearson Education, Inc.
The Demand for Jet Fuel
Price elasticity of demand for jet fuel depends on ability to conserve fuel and elasticities of demand and supply of travel
The demand for jet fuel impacts the airlines and refineries alike
The short-run price elasticity of demand for jet fuel is very inelastic
Chapter 14 28©2005 Pearson Education, Inc.
Short-Run Price Elasticityof Demand for Jet Fuel
American -0.06 Delta -0.15
Continental -0.09 TWA -0.10
Northwest -0.07 United -0.10
Airline Elasticity Airline Elasticity
Chapter 14 29©2005 Pearson Education, Inc.
The Demand for Jet Fuel
There is no good substitute for jet fuelLong run elasticity of demand is higher,
however, because airlines can eventually introduce more energy-efficient airplanes
Can show short- and long-run demands for jet fuel MRPSR is much less elastic than long run
demand since it takes time to substitute
Chapter 14 30©2005 Pearson Education, Inc.
The Short- and Long-RunDemand for Jet Fuel
Quantity of Jet Fuel
Price
MRPLRMRPSR
Chapter 14 31©2005 Pearson Education, Inc.
The Supply of Inputs to a Firm
In a competitive market, a firm can purchase as much of an input it wants at the market price Determined by supply/demand of input
market
Input supply to a firm is perfectly elasticFirm is small part of market so does not
affect market price
Chapter 14 32©2005 Pearson Education, Inc.
A Firm’s Input Supply in a Competitive Factor Market
SMarket Supplyof Fabric
Yards ofFabric (thousands)
Yards ofFabric (thousands)
Price($ peryard)
Price($ peryard)
D
Market Demandfor Fabric
100
ME = AE10 10
Supply ofFabric Facing Firm
Demand for Fabric
MRP
50
Chapter 14 33©2005 Pearson Education, Inc.
The Supply of Inputs to a Firm
Remember that the supply curve is the average expenditure curve Supply curve representing the price per unit
that the firm pays for a good
Also, marginal expenditure curve represents the firm’s expenditures on an additional unit that it buys Analogous to MR curve in output market
Chapter 14 34©2005 Pearson Education, Inc.
The Supply of Inputs to a Firm
When factor market is competitive, average expenditure and marginal expenditure are identical horizontal lines
How much of the input should the firm purchase? As long as MRP > ME, profit can be
increased by buying more input When MRP < ME, benefits lower than costs
Chapter 14 35©2005 Pearson Education, Inc.
The Supply of Inputs to a Firm
Profit maximization requires the marginal expenditure to be equal to the marginal revenue product
ME = MRPA special case of competitive output
market shows profit maximization where
ME = w
Chapter 14 36©2005 Pearson Education, Inc.
The Market Supply of Inputs
The market supply for factor inputs is upward sloping Examples: jet fuel, fabric, steel
The market supply for labor may be upward sloping and backward bending
Chapter 14 37©2005 Pearson Education, Inc.
The Supply of Inputs to a Firm
The Supply of Labor The choice to supply labor is based on utility
maximization Leisure competes with income for utility Wage rate measures the price of leisure Higher wage rate causes the price of leisure
to increase
Chapter 14 38©2005 Pearson Education, Inc.
The Market Supply of Inputs
The Supply of Labor Higher wages encourage workers to
substitute work for leisureThe substitution effect
Higher wages allow the worker to purchase more goods, including leisure, which reduces work hours
The income effect
Chapter 14 39©2005 Pearson Education, Inc.
Competitive Factor Markets
The Supply of Labor If the income effect exceeds the substitution
effect, the supply curve is backward bending By using utility and budget line graph, we can
show how the supply curve can be backward bending
Can show how the income effect can exceed the substitution effect
40©2005 Pearson Education, Inc.
Substitution and Income Effects of Wage Increase
Worker initially chooses point A:•16 hours leisure, 8 hour work•Income = $80
Q
P
w = $10
Income($ per
day)
240
720
12 16 Hours of Leisure
0 8 2419
Wage increases to $30.New budget line RQ.•19 hours leisure, 5 hours work•Income = $150
Substitution effectIncome effect
A
BC
w = $30
R
Income effect overrides substitution effect
Chapter 14 41©2005 Pearson Education, Inc.
Income Effect <Substitution Effect
Income Effect >Substitution Effect
Backward-Bending Supply of Labor
Hours of Work per Day
Wage($ perhour) Supply of Labor
Chapter 14 42©2005 Pearson Education, Inc.
Labor Supply for One- andTwo-Earner Households
In twentieth century, the percent of females in labor force has increased 1950 – 34% 2001 – 60%
Compared the work choices of 94 unmarried females with work decisions of heads of households and spouses in 397 families Can describe work decisions by calculating elasticity
of supply for labor
Chapter 14 44©2005 Pearson Education, Inc.
Labor Supply for One- andTwo-Earner Households
When higher wage rate leads to fewer hours worked: Labor supply curve is backward bending Income effect outweighs the substitution
effect Elasticity of labor supply is negative
Chapter 14 45©2005 Pearson Education, Inc.
Equilibrium in a Competitive Factor Market
Competitive factor market is in equilibrium when the prevailing price equates quantity supplied and quantity demanded
Since workers are well informed, all receive the same wage and generate identical MRPL when employed
Chapter 14 46©2005 Pearson Education, Inc.
Equilibrium in a Competitive Factor Market
If output market is perfectly competitive, demand curve for an input measures benefit consumers place on use of input in production process
Wage rate also reflects the cost of the firm and to society of using additional unit of input
At equilibrium, MBL = MCL = wage
Chapter 14 47©2005 Pearson Education, Inc.
Equilibrium in a Competitive Factor Market
When output and input markets are both perfectly competitive, resources are used efficiently Maximize TB – TC
Efficiency requires that MRPL equals the benefit to consumers of the additional output, given by (P)(MPL)
Chapter 14 48©2005 Pearson Education, Inc.
Equilibrium in a Competitive Factor Market
If output market is not competitive: MRPL = (P)(MPL) no longer holds
(P)(MPL) > MRPL
At equilibrium number of workers, marginal cost to firm, wM, is less than marginal benefit to consumers, vM
Although the firm maximizes profits, output is below efficient level and uses less than efficient level of output
Chapter 14 49©2005 Pearson Education, Inc.
Equilibrium in a Competitive Factor Market
If output market is not competitive: Although the firm maximizes profits, output is
below efficient level and uses less than efficient level of input
Economic efficiency would be increased if more laborers were hired and more output were produced
Gains to consumers would outweigh firm’s lost profit
Chapter 14 50©2005 Pearson Education, Inc.
Labor Market Equilibrium
SL = AESL = AE
DL = MRPL DL = MRPL
P * MPL
Number of Workers Number of Workers
Wage WageCompetitive Output Market Monopolistic Output Market
wC
LC
wM
LM
vM
A B
Chapter 14 51©2005 Pearson Education, Inc.
Equilibrium in aCompetitive Factor Market
Economic Rent For a factor market, economic rent is the
difference between the payments made to a factor of production and the minimum amount that must be spent to obtain the use of that factor
The economic rent associated with the employment of labor is the excess of wages paid above the minimum amount needed to hire workers
Chapter 14 52©2005 Pearson Education, Inc.
Total expenditure (wage) paidis 0w* x 0L*Economic Rent
Economic rent is ABW*
B
Economic Rent
Number of Workers
Wage
SL = AE
DL = MRPL
w*
L*
A
0
Chapter 14 53©2005 Pearson Education, Inc.
Equilibrium in aCompetitive Factor Market
Land: A Perfectly Inelastic Supply Occurs when land for housing or agriculture
is fixed, at least in short run Its price is determined entirely by demand When demand increases, rental value per
unit increases and total land rent increases
Chapter 14 54©2005 Pearson Education, Inc.
EconomicRent
s1
s2
Land Rent
Number of Acres
Price($ peracre)
Supply of Land
D2
D1
When demand increases, price and economic rent increase.
Chapter 14 55©2005 Pearson Education, Inc.
Pay in the Military
During the Civil War, 90% of the armed forces were unskilled workers involved in ground combat
Today, only 16% are unskilled workers involved in ground combat
Lead to severe shortages in skilled workers
Chapter 14 56©2005 Pearson Education, Inc.
Pay in the Military
Rank structure has stayed the same Pay increases are determined primarily by
years of service Similarly, officers with differing skill levels are
often paid similar salaries Many skilled workers leave the army since
salaries in private sector are much higher
Chapter 14 57©2005 Pearson Education, Inc.
The Shortage ofSkilled Military Personnel
Number of Skilled Workers
WageSL
DL = MRPL
w*
w0Shortage
Chapter 14 58©2005 Pearson Education, Inc.
Pay in the Military
Solution Selective reenlistment bonuses targeted at
skilled jobs where there are shortages With increases in demand for skilled military
jobs, we should expect the military to increase reenlistment bonuses and other market based incentives
Chapter 14 59©2005 Pearson Education, Inc.
Factor Markets with Monopsony Power
We showed before that many firms have monopsony buying power US automobile companies as buyers of parts
and components
Assume The output market is perfectly competitive Input market is pure monopsony
Chapter 14 60©2005 Pearson Education, Inc.
Factor Markets with Monopsony Power
Marginal and Average Expenditure When choosing to purchase a good, increase
amount purchased until the marginal value equals marginal expenditure
Price paid for good is average expenditure and is equal to marginal expenditure
Chapter 14 61©2005 Pearson Education, Inc.
Factor Markets with Monopsony Power
Since a monopsonist pays the same price for each unit, the supply curve is the average expenditure curve
Upward sloping, since deciding to buy an extra unit raises price it must pay for all units
For profit maximizing firm, marginal expenditure curve lies above the average expenditure curve
Firm must pay all units the higher price, not just last unit hired
62©2005 Pearson Education, Inc.
SL = Average Expenditure (AE)
MarginalExpenditure (ME)
D = MRPL
Marginal and Average Expenditure
Units of Input
Price(per unitof input)
0 1 2 3 4 65
5
10
15
20
w* = 13
L*
wc
Lc
C
•Hires where ME = MRP
•LC is competitive market level
Chapter 14 63©2005 Pearson Education, Inc.
Factor Markets with Monopsony Power
Examples of Monopsony Power Government
SoldiersMissilesB2 Bombers
NASAAstronauts
Company town
Chapter 14 64©2005 Pearson Education, Inc.
Monopsony Power in the Market for Baseball Players
Baseball owners operate a monopsonistic cartel Reserve clause prevented competition for
players Each player tied to one team for life Once drafted, could not play for another team
unless rights were sold Baseball owners had monopsony power in
negotiating new contracts
Chapter 14 65©2005 Pearson Education, Inc.
Monopsony Power in the Market for Baseball Players
During 1960’s and 70’s, players’ salaries were far below market value of MP
If competitive market Players receiving $42,000 in 1969 would
have instead received a salary of $300,000 in 1969 dollars
Strike in 1972 followed by lawsuit
Chapter 14 66©2005 Pearson Education, Inc.
Monopsony Power inthe Market for Baseball Players
In 1975, players could become free agents after playing for a team for six years
Reserve clause no longer in effectMarket became more competitiveFrom 1975 to 1980, expenditures on player’s
contracts went from 25% of team expenditures to 40%
Average player salary doubled in real terms
Chapter 14 67©2005 Pearson Education, Inc.
Factor Markets with Monopoly Power
Just as buyers of inputs can have monopsony power, sellers of inputs can have monopoly power
The most important example of monopoly power in factor markets involves labor unions
Chapter 14 68©2005 Pearson Education, Inc.
SL
DL
MR
•Demand with no monopsony power.•Supply of union labor w/ no monopoly power.
•Labor market competitive with L* workers hired at wage w*
•Demand equals Supply
Monopoly Power of Sellers of Labor
Number of Workers
Wageper
worker
A
L*
w*
Chapter 14 69©2005 Pearson Education, Inc.
Monopoly Power of Sellers of Labor
The union’s monopoly power allows it to choose any wage rate and quantity supplied If it wanted to maximize number of workers
hired, it would choose competitive outcome If it wanted to obtain higher wages, it would
restrict membership to L1 workers to get higher wage w1
Those who find jobs are better off. Those without jobs are worse off.
Chapter 14 70©2005 Pearson Education, Inc.
SL
DL
MR
•Labor market competitive with L* workers hired at wage w*
•Labor sellers with monopoly power at L1 and w1
Monopoly Power of Sellers of Labor
Number of Workers
Wageper
worker
A
L*
w*
L1
w1
Chapter 14 71©2005 Pearson Education, Inc.
Monopoly Power of Sellers of Labor
Is restrictive union worthwhile? Yes, if maximizing economic rent is the goal The union acts like a monopolist restricting
output to maximize profits Rent for a union represents the wages
earned in excess of opportunity cost Union must choose workers so that the
marginal cost equals the marginal revenue
Chapter 14 72©2005 Pearson Education, Inc.
Monopoly Power of Sellers of Labor
Cost is the marginal opportunity cost since it is a measure of what an employer has to offer an additional worker to get him or her to work for the firm
But, the wage necessary to encourage additional workers to take jobs is given by supply curve for labor, SL
Chapter 14 73©2005 Pearson Education, Inc.
Monopoly Power of Sellers of Labor
Rent maximizing combination of wage rate and number of workers is where MR crosses supply
Price comes from the demand curveThis gives a combination of L1 and w1
Shaded area below the demand curve and above the supply curve to the left of L1 is the economic rent that all workers receive
Chapter 14 74©2005 Pearson Education, Inc.
EconomicRent
SL
DL
MR
Monopoly Power of Sellers of Labor
Number of Workers
Wageper
worker
L2
w2
Maximizing rents to workers means choosing labor where
MR crosses S.Wage comes from demand.
A
L*
w*
w1
L1
Chapter 14 75©2005 Pearson Education, Inc.
Factor Markets with Monopoly Power
Rent maximizing policy can help nonunion workers if they can find nonunion jobs
If jobs are not available, this could cause too much of a distinction between winners and losers
Looking back at graph, an alternative objective is to maximize aggregate wages that all union members receive This gives L2 and w2
Chapter 14 76©2005 Pearson Education, Inc.
Unionized and Non-Unionized Workers
When union uses monopoly power, some workers are not hired. Those workers either try to find nonunion jobs or choose initially not to join union.
Assume the total supply of workers is fixed – supply is SL
Demand for unionized labor is DU and demand for non-unionized labor is DNU
Total market demand is DU + DNU = DL
Chapter 14 77©2005 Pearson Education, Inc.
Unionized and Non-Unionized Workers
What if union chooses to raise wage above competitive wage w*, to wU ?
Number of workers hired by the union falls by amount LU
As these workers find employment in non-union sector, wage rate in that sector adjusts until labor market is in equilibrium
At new wage rate, wNU, additional numbers hired in sector is LNU Equals number of workers who left unionized sector
78©2005 Pearson Education, Inc.
Wage Discrimination in Labor Market
Number of Workers
Wageper
worker
DUDNU DL
SL
w*
wU
When a monopolistic unionraises the wage rate in the
unionized sector of theeconomy from w* to wU,
employment in that sector falls.
For the total supply of labor toremain unchanged, the wage in
the non-unionized sectormust fall from w* to wNU
wNU
UL MUL
Chapter 14 79©2005 Pearson Education, Inc.
The Decline of Private Sector Unionism
Observations Union membership and monopoly power has
been declining Initially, during the 1970’s, union wages
relative to non-union wages fell
Chapter 14 80©2005 Pearson Education, Inc.
The Decline of Private Sector Unionism
Observations In the 1980’s, union wages stabilized relative
to non-union wages Since the 1990’s, membership has been
falling and wage differential has remained stable
Chapter 14 81©2005 Pearson Education, Inc.
The Decline of Private Sector Unionism
Explanation The unions have been attempting to
maximize the individual wage rate instead of total wages paid
The demand for unionized employees has probably become increasingly elastic as firms find it easier to substitute capital for skilled labor
Chapter 14 82©2005 Pearson Education, Inc.
Wage Inequality – Have Computers Changed the Labor Market?
1950-1980 Relative wage of college graduates to high
school graduates hardly changed
1980-1995 The relative wage grew rapidly
Chapter 14 83©2005 Pearson Education, Inc.
Wage Inequality – Have Computers Changed the Labor Market?
In 1984, 25.1% of all workers used computers
1993 – 45.8%2001 – 53.5%
For managers and professionals, it was over 80%
Chapter 14 84©2005 Pearson Education, Inc.
Wage Inequality – Have Computers Changed the Labor Market?
Percent change in use of computers College degrees
1984-1993: from 42% to 82% Less than high school degree
11%: from 5% to 16% With high school degree
21%: from 19% to 40%
Chapter 14 85©2005 Pearson Education, Inc.
Wage Inequality – Have Computers Changed the Labor Market?
Growth in wages – 1983 to 1993 College graduates using computers – 11% Non-computer users – less than 4% Statistical analysis shows that, overall, the
spread of computer technology is responsible for nearly half the increase in relative wages during this period
Chapter 14 86©2005 Pearson Education, Inc.
Wage Inequality – Have Computers Changed the Labor Market?
Is this increase in the relative wages of skilled workers bad? Although growing inequality can
disadvantage low-wage workers, it can also motivate workers
Opportunities for upward mobility through high-wage jobs have never been better
Chapter 14 87©2005 Pearson Education, Inc.
Wage Inequality – Have Computers Changed the Labor Market?
Should you complete a college degree? In 2000, college graduates age 25 and over
earned nearly $400 more per week than those with only a high school diploma
This is a real wage increase for college grads and a real wage decrease for high school dropouts compared to 1979
Unemployment rate among college grads is four times less than for high school drop outs