Chapter 13 Human capital, discrimination and trade unions David Begg, Stanley Fischer and Rudiger Dornbusch, Economics, 6th Edition, McGraw-Hill, 2000 Power Point presentation by Peter Smith 13.2 Hourly earnings in the UK 1998 0 2 4 6 8 10 12 14 £.p Manual Nonmanl Men Women ■ In both manual and non-manual occupations, men are seen to earn more than women. ■ Does this mean there is discrimination? 13.3 Sources of differential pay ■ Education and training ■ Job experience ■ Race and gender ■ Trade union membership 13.4 Human capital ■ The stock of expertise accumulated by a worker ■ It is valued for its income-earning potential in the future ■ A form of investment 13.5 Age-earnings profiles ■ Age-earnings profiles show how typical earnings vary with age and educational qualifications – education induces a differential – which tends to increase with age Age Income No formal qualifications A-level or equivalent University degree or equivalent 13.6 ■ Worker organizations designed to affect pay and working conditions ■ A closed shop – an agreement that all the firm's workers will be members of a trade union. ■ A trade union may raise wages by restricting labour supply Trade unions 13.7 Unions in the labour market Employment W a g e W 0 With no union, the industry faces a horizontal labour supply curve at the wage W 0 . Given industry demand for labour DD, equilibrium is at E 0 . D D E 0 N 0 By restricting labour supply to N 1 , the union can increase wage to W 1 N 1 W 1 The differential is larger for any given reduction in industry employment, the more inelastic is industry labour demand 13.8 Discrimination? ■ Women and non-whites on average receive lower incomes than white males ■ women and non-whites are concentrated in relatively unskilled jobs with fewer opportunities for promotion ■ This need not reflect blatant sexism or racism by employers 13.9 Discrimination? ■ It may reflect: – educational or other disadvantages before young workers reach the labour market – a low perceived rate of return for firms on money spent in training such workers ■ Only if we allow for all these effects can we show discrimination in the labour market. . Chapter 13 Human capital, discrimination and trade unions David Begg, Stanley Fischer and Rudiger Dornbusch, Economics, 6th Edition, McGraw-Hill, 2000 Power Point presentation by Peter Smith 13. 2 Hourly. this mean there is discrimination? 13. 3 Sources of differential pay ■ Education and training ■ Job experience ■ Race and gender ■ Trade union membership 13. 4 Human capital ■ The stock of expertise. expertise accumulated by a worker ■ It is valued for its income-earning potential in the future ■ A form of investment 13. 5 Age-earnings profiles ■ Age-earnings profiles show how typical earnings