Chapter 12 - Labor markets, poverty & income distribution

Earnings

________ differ among people in part because of differences in their human capital, an amalgam of personal characteristics that affect productivity.

Minimum wage laws

________ reduce total economic surplus by contracting employment.

Labor union

________: group of workers who bargain collectively with employers for better wages and working conditions.

Poverty threshold

________: level of income below which the federal government classifies a family as poor.

Winner take all labor market

________: one in which small differences in human capital translate into large differences in pay.

Customer discrimination

________: willingness of consumers to pay more for a product produced by members of a favored group, even if the quality of the product is unaffected.

negative income tax

The ________ is an expanded version of the earned- income tax credit that includes those who are not employed.

Employer discrimination

________: arbitrary preference by an employer for one group of workers over another.

Marginal product of labor (MP)

additional output a firm gets by employing one additional unit of labor

Value of marginal product of labor (VMP)

dollar value of the additional output a firm gets by employing one additional unit of labor

Human capital theory

theory of pay determination that says a worker's wage will be proportional to his/her stock of human capital

Human capital

amalgam of factors such as education, training, experience, intelligence, energy, work habits, trustworthiness, and initiative that affects the value of a worker's marginal product

Labor union

group of workers who bargain collectively with employers for better wages and working conditions

Compensating wage differential

difference in the wage rate (negative/positive) that reflects the attractiveness of a job's working conditions

Employer discrimination

arbitrary preference by an employer for one group of workers over another

Customer discrimination

willingness of consumers to pay more for a product produced by members of a favored group, even if the quality of the product is unaffected

Winner-take-all labor market

one in which small differences in human capital translate into large differences in pay

In-kind transfer

payment made not in the form of cash, but in the form of a good/service

Means-tested

benefit program whose benefit level declines as the recipient earns additional income

Negative income tax (NIT)

system under which the government would grant every citizen a cash payment each year, financed by an additional tax on earned income

Poverty threshold

level of income below which the federal government classifies a family as poor

Earned-income tax credit (EITC)

policy under which low-income workers receive credits on their federal income tax