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Click here to Login. A main factor, however, for a resource, productivity is the biggest factor. They're firm. Want to see how much they can produce from that one resource, how much output take and how they want the maximum capacity available. But a demand for resource is derived from product demand because if there's no demand for the product and the resource is are no good on now onto the demand curve for it.
Like all other demand curves, it's Dharma stooping on. If you compare the prices of quantity, it has an inverse relationship. The cheaper the price, the more the quantity of course, in accordance to the law of diminishing returns until the point where input off price is no longer with the benefit game.
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Upgrade today to get a personal Numerade Expert Educator answer! Ask unlimited questions. Test yourself. In addition, administrative costs involved in implementing the transfer constitute another leak. While some economists concede the existence of the first problem associated with the incomeearning behavior of the affluent, they contend that in the long run redistribution programs will increase economic efficiency by providing the poor with sufficient resources to increase their own earning potential or that of their offspring.
The need for the leaky bucket will therefore be decreased over time. Should society attempt to equalize income o r economic opportunities? Are the issues of "equity" and "equality" in the distribution of income synonymous? To what degree, if any, is income inequality equitable? The answer to this question is inextricably tied to value judgments, but most of us probably favor a combination of the two types of income distribution. A purely capitalist system, in which incomes are determined exclusively by the market mechanism, would mean that those who, for whatever reason, are unable to contribute to production would have to depend exclusively on private charity for their livelihood.
A hypothetical communist state also leads to a seemingly intractable problem --If income is to be distributed purely on the basis of need, why would anyone engage in production? Most modern societies represent attempts to seek a compromise of one sort or another between these two extremes. The compromise that is actually found often differs markedly from what prevailing political rhetoric in that society might suggest.
Socialist economies historically exhibited large differences in income, and wideranging government transfer programs are a seemingly permanent fixture in most capitalist economies. Conservatives contend that because of the tradeoff between equality and efficiency, society should content itself with attempting to ensure equality of opportunity.
Liberals argue that income redistribution is essential since equality of economic opportunity is impossible in an economy with wide differences in income, especially when these differences are related to the inheritance of property.
Income equity refers to how fairly income is distributed. One can argue that some inequality of income is not only necessary for reasons of efficiency but is fairer than an equal distribution of income, since those who produce more deserve to be rewarded for their efforts. But unequal incomes are not necessarily related to differences in individual ability or effort. It is difficult to defend the inequalities that result from market power and discrimination as being equitable.
The justness of inherited wealth is also questionable. Liberals argue that by creating inequality of opportunity, property inheritance is inherently unjust.
Conservatives contend that allowing individuals to pass on wealth to whom they wish is much fairer than having wealth appropriated by the government.
What is the most important single factor underlying the longrun increase in average real wage rates in the United States? The general level of wages is higher in the United States than in most foreign nations because of the high demand for labor in the United States in relation to supply. Moreover, demand for American labor is high because of its high productivity, which has several causes: 1 capital per worker is very high; 2 natural resources are abundant relative to the size of the labor force; 3 technology is advanced in the United States relative to most of the rest of the world; 4 labor quality is high in the United States because of health, vigor, training, and work attitudes compared to labor in most other countries; 5 other factors contributing to high American productivity are the efficiency and flexibility of American management; the business, social, and political environment that greatly emphasizes production and productivity; and the vast domestic market, which facilitates the gaining of economies of scale.
The most important single factor underlying the longrun increase in average real wage rates in the United States is the increase in output per worker, that is, in productivity. The rate of capital accumulation has declined in recent years; labor has been reallocated from high-productivity manufacturing industries to lower-productivity service industries; labor force skills have declined due to lesser quality of education; and management strategies may have stressed short-term profitability at the expense of research and development and innovative labor relations programs.
Competition from workers in other countries may also have pulled down the real wages of less skilled American workers according to the text. Hence, the notion of compensating wage differentials is disproved. Rightly or wrongly, shortorder cooks are considered to need little skill; practically anyone is thought capable of flippng burgers.
Since the supply of unskilled workers is high relative to the demand for them, their wages are low. In this case, the concept of compensating wage differentials is swamped by the excess supply of lowwage workers. Use this concept to explain a wage differentials, and b the long-run rise in real wage rates in the United States. Investment in human capital is any action that improves the skills and abilities, the productivity, of workers. Expenditures on health and education are such investments as are any others that will shift workers from relatively low to relatively high-productivity jobs.
There is a strong positive correlation between time spent acquiring a formal education and lifetime earnings.
Of course, it can be said that the brain surgeon who spent over twenty years in training, starting in grade 1, had the qualities to succeed in the labor market without spending over twenty years in school. Though this counter-argument has some merit, the point still is that this highly-skilled individual would never have become a brain surgeon without the over twenty years in school and might not have achieved the particular high income that goes with being a medical specialist.
Without the increase in education and training of the American labor force that has occurred over the years, productivity output per person per hour would still have risen because of the investment in real capital, improved technology, and our abundant natural resource base.
But the real wage would undoubtedly now be very much lower, because an unskilled labor force could not possibly have made efficient use of the material resources and advancing technology of the economy. Explain: "Although unions get higher wages than nonunion workers, unions have not been successful in raising the average real wage of the American labor force. The average union wage advantage is currently estimated to be between 10 and 15 percent.
If fringe benefits are included, the difference increases significantly. There is a close empirical correlation between productivity and average real wages for the total economy even as the relative importance of unions in the American economy has fluctuated widely. It seems, therefore, that unions have not appreciably increased average real wages for the labor force taken as a whole.
In other words, wage increases in unionized sectors come at the expense of relative wage decreases in nonunionized sectors. This occurs because higher wages in the former cause a decrease in the quantity of labor demanded, which then leads to an increased labor supply and lower average wage levels in the latter.
Featherbedding, regulations that force firms to promote on the basis of seniority rather than productivity, and rules barring particular employees from engaging in tasks they could perform most productively, all decrease productive efficiency.
More generally, the existence of a union in the workplace can restrict the firm's use of productivityenhancing techniques. Furthermore, work stoppages decrease production directly and can adversely affect other industries or sectors, although such disruptions are relatively infrequent.
Finally, the fact that wages in unionized sectors are higher than those in nonunionized sectors can mean that the marginal revenue products in these sectors differ.
Total output would be increased if these wage differentials were eradicated. Some empirical evidence suggests the presence of unions plays a significant role in reducing worker turnover. Managerial efficiency can be enhanced through the effects of wage increases and higher production costs brought on by unionization. Finally, by enhancing security of employment and decreasing competition for particular jobs, unions encourage informal onthejob training of newer workers by senior employees.
That cost is the diminished efficiency with which labor resources are allocated. Evaluate: "Unions purport to be egalitarian institutions, but their effect is to increase earnings inequality among American workers.
Unions tend to increase the inequality of incomes between unionized and nonunionized occupations by restricting employment in the former and increasing labor supply in the latter. On the other hand, by focusing on setting wage rates for jobs rather than for particular workers they can standardize wages within a firm.
Collective bargaining also tends to standardize wages across a unionized industry. According to some empirical work, the net effect of unions on the distribution of income is to decrease inequality.
Not all economists agree with these results, however. Distinguish between the various kinds of economic discrimination. Do you believe on balance that the distribution of education and training in our society alleviates, or contributes to, income inequality?
Average incomes for blacks are just over half those for whites, black households are three times as likely to be poor, and unemployment rates for blacks are over twice as high as for whites. These differences are largely the result of various forms of economic discrimination and a relative lack of educational opportunities for blacks. Economic discrimination refers to inferior treatment of certain groups in the workplace. Occupational discrimination takes place when these groups face restrictions in entering certain occupations; wage discrimination occurs when minorities or women are paid less than white males for identical work; employment discrimination refers to the difficulty some groups have in acquiring and retaining jobs; discrimination also occurs in access to certain types of education and training.
The distribution of education and training worsens present income inequalities. In the case of blacks, the chances of graduating from high school are seven-eighths as high as for whites, while the chances of having a four-year college degree are about half those of whites.
The reasons for these differences in education and training are varied, but include the lesser financial ability to invest in education for blacks and the lower economic motivation, since their salaries are less on average after graduation.
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