Eastern Michigan University

Kutztown University Department of Economics

ECO 301: Labor Economics

Prof. Alfredo G. Esposto, JD, Ph.D.

My website: http://faculty.kutztown.edu/esposto

Office: 125 deFrancesco Phone: 683-4595 E-mail: [email protected] Hours: MWF: 10:0-12:00; TTh: 11:00-12:00

Text: R.G. Ehrenberg and R.S. Smith, Modern Labor Economics, Eighth Edition, Addison- Wesley (2003).

A Study Guide is posted on my web site. Its not so extensive that it will help you if you don’t come to class and take good notes. But, it can make your life easier when it comes time to study for the exams.

Course Description: Labor economics examines the organization, functioning, and outcomes of labor markets; the decisions of prospective and present labor market participants; and the public policies related to the employment and payment of labor resources. In other words, we will discuss the forces of supply and demand that influence wage rates, the level of employment and working conditions.

Grading: There will be two examinations, a midterm (October 21) and a final (December 11: last day of class). Each will be worth 40% of your grade. The remaining 20% will be based on your homework. These are problem solving questions generally taken from the end of chapter questions in your textbook. Occasionally I add some of my own questions. Homework assignments will be posted on my web site, as well as distributed in class. After homework assignments are turned in, answers will also be posted on my web site. No homework assignments will be accepted after the due date. Homework assignments my be submitted by e- mail, if you are unable to attend class that day. I do not give extra credit assignments, please do not ask. Course Outline (The following course outline is always evolving. I therefore reserve the right to make changes as the semester proceeds)

I. Introduction to Labor Economics and Labor Markets

A. What makes labor markets different from other markets and what makes them similar? B. A brief introduction to the demand and supply sides of a labor market. C. Equilibrium and disequilibrium. D. Economic rent E. Work and consumption: Why we work less and consume more.

Readings: Ehrenberg and Smith, p. 2 (“The Labor Market”) & chp. 2.

II. The Demand for Labor.

A. The marginal product of labor and profit maximization B. Competitive markets vs. monpsony markets C. Short-run vs. long-run demand. That is, what happens when other inputs are and are not variable.

Readings: Ehrenberg and Smith, chap. 3.

D. The Elasticity of Demand (both own-wage and cross-wage)

Reading: Ehrenberg and Smith, chap. 4

E. Quasi-Fixed Labor Costs (hiring and training costs, benefits, overtime pay.)

Reading: Ehrenberg and Smith, chap. 5.

III. The Supply of Labor

A. What is behind the decisions to (1) work at all, (2) how many hours to work, and (3) work in one field instead of some other. B. Labor supply decisions within the household C. Life-cycle aspects of labor supply

Readings: Ehrenberg and Smith, chaps. 6 & 7

IV. Market Factors that Determine Why One Individual Gets Paid More than Another A. Worker preferences and information B. Risk of Injury and the Hedonic Value of Life C. Benefits

Readings: Ehrenberg and Smith, chap. 8

D. Investments in Human Capital (education, training, etc.). In other words: Is all that money spent on a college education really worth it?

E. Labor Mobility: Are you willing to leave mom and dad for a better paying job?

V. Labor Contracts, Productivity, and the Terms of Employment.

A. Employment contracts (implicit and explicit) B. The relationship between productivity and compensation C. Internal Labor Markets

Readings: Ehrenberg and Smith, chap. 11.

VI. Inequality Gaps in the Labor Market

A. Market forces, technology, and institutional changes underlying inequality.

Readings: Ehrenberg & Smith, chap. 14

B. Discrimination on the Part of Employers, Employees, and Consumers C. Comparable Worth D. Anti-Discrimination Law

Reading: Ehrenberg & Smith, chap. 12

VII. Unions and the Labor Market

A. “Monopoly-Union” model vs. the “Efficient-Contracts” model. B. The economics of strikes and bargaining C. Do unions affect wages, and if so for whom: Just their members or everyone else too? D. Do unions affect the level of employment? E. How does greater competition in the product market affect the influence of unions?

Readings:

Ehrenberg and Smith, chap. 13