Chapter 13: Wage Determination

Wage rate

Price paid per unit of labor services

Nominal wage

Amount of money received per hour/day/year

Real wage

Quantity of goods and services a worker can obtain with nominal wages; real wages reveal the “purchasing power” of nominal wages

Purely-competitive labor market

Numerous firms competing; qualified workers w/ identical skills; “wage takers”

Monopsony

A market in which a single employer of labor has substantial buying (hiring) power

Exclusive unionism

By excluding workers from unions and therefore from the labor supply, craft unions succeed in elevating wage rates

Occupational licensing

A group of workers in a given occupation pressure Federal, state, or municipal government to pass a law that says that some occupational group (for example, barbers, physicians, lawyers, plumbers, cosmetologists, egg graders, pest controllers) can practice their trade only if they meet certain requirements

Inclusive unionism

Organizing all available workers, no matter skill level.

Bilateral monopoly

Combo of monopsony + inclusive unionism

Wage differentials

Hourly wage rates and annual salaries differ greatly among occupations

Non-competing groups

Each representing different occupations for which members of a group qualify

Compensating differences

Wage differentials paid to compensate for nonmonetary differences in various jobs

Incentive pay plan

Ties worker compensation more closely to worker output or performance