Final Flashcards
(60 cards)
compensating differential
a difference in wages required to offset the undesirable (or desirable) aspects of the job
Labor market discrimination
occurs when people are treated differently based on characteristics like their gender, race, ethnicity, sexual orientation, religion, disability, social class, or other factors.
Three sources of discrimination:
Prejudice
Implicit bias
Statistical discrimination
prejudice
which refers to a preconceived bias against a group that’s not based on reason or experience.
implicit bias
in which employers’ judgments are shaped by their unconscious attribution of particular qualities to members of specific groups
statistical discrimination
Another type of discrimination occurs when employers don’t have a lot of information about job applicants, and rely instead on stereotypes.
Using observations about the average characteristics of a group to make inferences about an individual
Wages vary due to differences in
Labor demand and human capital
Labor supply and compensating differentials
Institutional factors
Discrimination
human capital
The accumulated knowledge and skills that make a worker more productive.
signal
a costly action that you take to credibly convey information that would otherwise be hard for someone else, like a potential employer, to verify. A useful signal helps employers figure out which workers are likely to be more productive
efficiency wage
Indeed, some employers have calculated that a higher wage might inspire you to work so much harder that your higher wage pays for itself, a higher wage paid to encourage greater worker productivity, by increasing worker effort and reducing worker turnover.
what jobs pay more?
jobs that are harder to monitor
undesirable attributes
unions boost the wages of their workers (can make business more productive)
monopsony power
a business using its bargaining power as a major buyer to pay lower prices, including lower wages. (And if monopsony sounds like an odd word, it might help to realize that just as a monopoly is the only seller of a good, a monopsony is the only buyer.)
Personnel economics says to:
Ensure your workers have the right skills for the job. Motivate your staff with incentives. Shape your corporate culture. Offer the right benefits package. Attract and retain better workers.
general skills
Investing in general skills might help your workers get better jobs elsewhere.
Most of what you’re learning in college
means they’re skills that would be useful to many employers.
job-specific skills
Investing in job-specific skills helps your workers do a better job for you.
those skills that are only useful in a job with one particular employer.
pay-for-performance
Linking the income your workers earn to measures of their performance. Examples include commissions, piece rates, bonuses, or promotions.
extrinsic motivation
The desire to do something for its external rewards such as higher pay.
intrinsic motivation
the desire to do something for internal reasons, such as the enjoyment and pride you get from doing a good job
market power
which is the ability to raise your price without losing many sales to competing businesses. The more market power you have, the higher the price you can charge.
Perfect competition
occurs when your competitors sell an identical good and there are many sellers and many buyers, each of whom is small relative to the size of the market.
monopoly
which means it’s the only seller in the market. If you’re a monopolist, you have a lot of market power because you can raise your price without losing customers to your competitors. After all, you don’t have any direct competitors!
oligopoly
a market with only a handful of large sellers.
Managers of oligopolistic businesses are locked in a strategic battle for market share. When you have only a handful of rivals, their decisions can have a big impact on your bottom line. And this means that it’s critically important that you think through how your rivals will respond to your choices. Indeed, your best choices depend on how your rivals will respond, just as their best choices depend on how you’ll counter.
Oligopolies have market power, though not as much as a monopolist. That’s because when Verizon raises its prices, it loses some customers, but not all of them.
product differentiation.
By making each product slightly different from their competitors, sellers hope to make each specific variety especially attractive to a particular group of customers. In turn, they figure that you’ll be willing to pay more for a style the more it flatters you. This gives the seller market power, because the most devoted followers of a particular brand or style will stick with it, even if the price is higher
monopolistic competition
This occurs when there are many competing businesses, each selling somewhat differentiat
ed products. It’s a useful term, highlighting the fact that such markets are both monopolistic and competitive. The jeans market is monopolistic because there’s only one seller making each specific model of jeans. But it’s also competitive because there are dozens of businesses competing to sell you jeans.
