Question about perfectly competitive labor market

  • Thread starter gangsta316
  • Start date
In summary: In fact, if the marginal (physical) productivities of the different types of labor are not equal, then the wage rates will not be equal.In summary, in a perfectly competitive labor market, the total net advantages of all occupations would be equalized because workers are not just compensated with monetary wages, but also with non-monetary forms of compensation such as working conditions. Additionally, the idea of equal wages for all occupations is not realistic as individuals have different preferences and abilities, leading to differences in the marginal productivity of different types of labor.
  • #1
30
0
Explain why, in a perfectly competitive labor market, the total net advantages of all occupations would be equalized. (10)

In a perfectly competitive labor market, all workers have the same wage. So if they have the same wage how can net advantages be equalized? Jobs which have bad working conditions will pay the same as jobs with good working conditions. My reasoning is this: if say, lawyers earn more than builders, then builders will change their occupation to lawyer (perfect labor mobility) and the extra supply of lawyers will lower the wage rate and the lower supply of builders will increase the wage rate. This happens with all occupations and eventually all workers have the same wage rate. And isn't the whole principle of perfect competition that everyone is a price taker?

Thanks for any help.
 
Physics news on Phys.org
  • #2
You are forgetting about compensating differentials, monetary wage is only one form of the real wage workers receive. Working conditions also factor into the wage rate, so jobs with bad working conditions will have to pay a higher monetary wage to compensate for the bad working conditions. The general wage rate will equilibrate, but not the monetary wage rate.
 
  • #3
gangsta316 said:
Explain why, in a perfectly competitive labor market, the total net advantages of all occupations would be equalized. (10)

In a perfectly competitive labor market, all workers have the same wage. So if they have the same wage how can net advantages be equalized? Jobs which have bad working conditions will pay the same as jobs with good working conditions. My reasoning is this: if say, lawyers earn more than builders, then builders will change their occupation to lawyer (perfect labor mobility) and the extra supply of lawyers will lower the wage rate and the lower supply of builders will increase the wage rate. This happens with all occupations and eventually all workers have the same wage rate. And isn't the whole principle of perfect competition that everyone is a price taker?

Thanks for any help.

what you are asking is the crutch of social equality grues ..
not many will put forth the effort to get out of a bad or distasefull job
you make an assumption of all equility modvated to work for the common good
which will never happen
this is the fallacy of communism and the socicalish thought process involved..
ie: for get it kid it jest don't work
to many that want some thing for nothing..
so jest forget Walden's pond..
 
  • #4
what if that "equal wage" is simply free acces to anything in the market?
 
  • #5
334dave said:
what you are asking is the crutch of social equality grues ..
not many will put forth the effort to get out of a bad or distasefull job
you make an assumption of all equility modvated to work for the common good
which will never happen
this is the fallacy of communism and the socicalish thought process involved..
ie: for get it kid it jest don't work
to many that want some thing for nothing..
so jest forget Walden's pond..
Is this rap? "Man," it's beautiful...

"Wage" includes all "goods and services" that a worker receives to offset the discomfort of working. Although, this point is not free of a (somewhat semantic) debate:

[PLAIN said:
http://homepage.newschool.edu/het/essays/margrev/oppcost.htm#debate][In[/PLAIN] [Broken] his essay "The Common Sense of Political Economy" published in Journal of Political Economy, Vol. 42, issue 5, pages 660 to 673] Frank Knight (1934) poses the question whether opportunity cost captures the idea that wages in agreeable jobs are lower than wages in irksome jobs? The [Austrian School's] resolution here is even simpler if we consider the jobs and their irksomeness/agreeableness to be joint goods: the higher wages paid to the laborer in the "irksome job" does not compensate for greater disutility of that job, but rather for the displaced "agreeable job".

That is, you need to pay me a higher wage as a construction worker if the "next best" job available is being a lawyer (and I have already passed all the Bar exams), than if it were being a cashier in the grocery store (and they had already said they'd hire me).

As a cautionary note, in a competitive general equilibrium model with multiple types of labor (e.g., menial vs. mental) that cannot be costlessly converted into one another, wage rates for the different types of labor need not be equal; just as the price of wheat does not need to equal the price of automobiles for the markets to clear.
 
Last edited by a moderator:

1. What is a perfectly competitive labor market?

A perfectly competitive labor market is a theoretical economic model in which there are many buyers (employers) and sellers (workers) of labor, with no single buyer or seller having control over the market. This means that all buyers and sellers have access to the same information and there are no barriers to entry or exit in the market.

2. How does a perfectly competitive labor market differ from other types of labor markets?

In a perfectly competitive labor market, there is no wage discrimination or market power for either the employer or the employee. This means that all workers are paid the same wage for the same job, and employers cannot control wages by limiting the number of workers they hire.

3. What are the assumptions of a perfectly competitive labor market?

The assumptions of a perfectly competitive labor market include: a large number of buyers and sellers, perfect information and mobility, uniform product (labor), no barriers to entry or exit, and costless production and transaction.

4. What are the benefits of a perfectly competitive labor market?

The benefits of a perfectly competitive labor market include: efficient allocation of resources, increased competition leading to lower wages for employers and lower prices for consumers, and no discrimination based on factors such as race, gender, or age.

5. What are the limitations of a perfectly competitive labor market?

Some limitations of a perfectly competitive labor market include: the assumption of perfect information and mobility may not hold in the real world, and some jobs may require specific skills or qualifications that limit the number of potential workers. Additionally, there may be external factors such as government regulations or monopolies that can affect the competitiveness of the labor market.

Similar threads

  • General Discussion
Replies
18
Views
3K
  • General Discussion
2
Replies
35
Views
7K
  • General Discussion
Replies
31
Views
8K
Replies
27
Views
2K
Replies
34
Views
5K
  • General Discussion
Replies
10
Views
758
  • Computing and Technology
Replies
2
Views
963
Replies
31
Views
9K
  • General Discussion
2
Replies
65
Views
12K
Replies
50
Views
3K
Back
Top