Dismiss Notice
Join Physics Forums Today!
The friendliest, high quality science and math community on the planet! Everyone who loves science is here!

Question about perfectly competitive labor market

  1. Apr 18, 2009 #1
    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.
  2. jcsd
  3. May 4, 2009 #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.
  4. May 4, 2009 #3
    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 dont work
    to many that want some thing for nothing..
    so jest forget Walden's pond..
  5. Jun 6, 2009 #4
    what if that "equal wage" is simply free acces to anything in the market?
  6. Jun 6, 2009 #5


    User Avatar
    Science Advisor
    Homework Helper

    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:

    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: May 4, 2017
Share this great discussion with others via Reddit, Google+, Twitter, or Facebook