Free «Labor Market Research» UK Essay Paper
Table of Contents
Economic Justification of High Salaries for Professional Athletes
High salaries of some professional athletes are justified by the economical principle of demand and supply. On the market of professional athletes, demand is produced by sports clubs or organizations that arrange games. On the other hand, supply is produced by the athletes who have special skills that allow them to do sports professionally. Demand and supply meet at the point of equilibrium, which in other words, is a situation on the market when the amount of money that the organizations are willing to pay for athletes’ performance is equal to the total sum of money that the athletes want to earn at specific moment of time. Professional athletes have high salaries because there is small supply of such sportsmen. Small supply of professional athletes is caused by the requirement of special skills that few people possess, as well as high training costs.
The decision to hire a new pitcher for $4 million per year can be justified by marginal principle which implies that the level of activity will grow in case if marginal benefits are bigger than marginal costs. The marginal benefits of labor are the monetary value of the output produced with an additional hour of labor. This concept is also called marginal revenue product, or the extra revenue, generated by one additional worker. In order to determine marginal revenue, one needs to multiply the price of output by the number of marginal products. Marginal product is the additional quantity of product manufactured by an additional worker in a unit of time. The marginal cost of labor is the hourly wage on the market (The labor market, 2016). Thus, if marginal revenue product of a new player can be determined, and if it exceeds the marginal cost per year, which is $4 million, then hiring the sportsman makes sense for the team.
Impact of the Law Requiring a Tougher State Licensing Examination for Electricians
Every electrician has to pass a state licensing examination before entering the labor market. At the moment, when the law about a tougher state licensing examination still has not been passed, the market is balanced. If the electricians have to pass a tougher examination, not all of them will succeed in it; therefore, fewer electricians will be able to offer their services. As a result, the supply produced by electricians will decrease, which in turn will lead to the increase of wage because there will be less electricians, and their services will be more expensive (“The Labor Market,” 2016). However, the safety may not necessarily improve. A tougher state licensing examination is not the way to warranty safer electrician's work, because injuries and deaths might have occurred because of poor quality material usage, poor state of health of electrician, lack of experience etc.
An inexperienced electrician with good theoretical knowledge may pass an examination, but will not work as good as an experienced electrician, and what is more, may be involved in an accident leading to injury or death. Some better ways to improve safety without the negative impact on the labor market of electricians are as follows: additional education on safety, qualification courses, state inspections of work materials and instruments, bonuses for the safest work, etc. Thus, a tougher state licensing examination will present a drawback for the market, which might cause the increase of wage and less number of electricians, and it will not warranty safety improvement.
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Impact of Product's Market Price Raise on Demand of Labor
The market price of a firm’s product has direct impact on the demand of labor. According to the supply and demand principle, the demand is presented by consumers who pay certain amount of money for the product, and the supply is presented by sellers. The equilibrium on the market is set when both consumers and sellers agree on the price that the former are willing to pay, and the latter are willing to sell their product for. When the market price of a good or a service increases, the demand will decrease because fewer consumers will be able to afford the product or wish to purchase it. When the price grows and supply decreases, the organization’s total revenue and profit will also become lower. Therefore, the firm will not have as much labor force as it had before the product’s price has increased because it will not be able to pay the salaries, and some workers will be fired. This way, the demand for labor will decrease.
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The Effect of Living Wage Raise on Firms
The living wage is the amount of income needed to provide a decent standard of living. It differs from the minimum wage. The latter is the amount of money set by a government while the living wage is determined by costs (Amadeo, 2016). The raise of a living wage leads to severe major consequences. One of the positive effects is the higher standard of living for the families whose income equals to living wage (Fillion, 2009). On the other hand, it means that firms’ costs for labor will increase, therefore, they will not be able to retain all of their employees. As a result, many people will lose their jobs.
The main factor that shows advantages and disadvantages of living wage raise in a certain city is the living wage calculator. In this calculator, common expenses, the living wage, and typical wages are listed for the chosen city or county (Glasmeier & Massachusetts Institute of Technology, 2016). The living wage provided by the calculator is the wage per hour that a worker must earn in order to support his/her family, if they work alone (are lone providers) and work at a full-time job, which requires 8 hours per day. The stated numbers are set per 1 working adult with no children.
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