EC3361 Labour Economics I
AY2013/2014, Semester 1, Lecturer: Peter Mcgee
Course Coverage:
1. Introduction to Regression Analysis
2. The Labour Market: Supply & Demand
3. Compensating Wage Differentials
4. Human Capital
5. Wage Structure
6. Labour Mobility
7. Discriminiation
8. Compensation Schemes
9. Unemployment
This module is the first on labour economics, covering the microeconomic foundation of the labour market interactions and various elective topics on labour economics. Simple regression was taught at the start of the course, but played a rather insignificant role throughout the course.
The core syllabus of the module will cover derivation of supply and demand in the labour market, as well as establishing the equilibrium. Labour supply is simplistically determined using consumer choice analysis. The only difference is that, instead of a monetary budget constraint, the individual is now subjected to a time budget constraint, in which the maximum working hours is 24 per day, or 7 per week and so on. The sum of individual choices of working hour will then determine the total supply of labour in the market. Labour demand, on the other hand, is determined by firms depending on the given price. The demand for labour is derived from the optimal choice of goods the firm intend to produced. In this module, you will soon see that labour demand may differ significantly under different market structure. The equilibrium of the market will be derived from the supply and demand equations, with maximum labour supply forming the upper bound of the labour market equilibrium. These interactions are also analogous to the wage setting and price setting relations in EC3102, which determines the AS curve.
Then elective topics will cover different aspects of the labour market in greater detail. Compensating wage differential introduces risk into the work environment, and risk premium are often payed for such jobs to compensate the risk that they are taking. This results in differentiated wages in the labour market between risky and safe jobs. This is interesting because, in real life, the most dangerous jobs such as construction workers are often one of the lowest paid job. First, it could be because of the abundance of labour supply in this sector; and second, the entry requirement to this job is very low because very little skill is required. This brings us to the next topic on human capital where we examine how education and on-the-job experience could also result in wage differentials. College education analysis will also be analyzed from both social and economic perspective.
Wage structure examines the difference in income distribution and inequality across education, experience and age group where empiric studies show a general trend of increasing inequality among top, middle and bottom tiered wage earners. Some factors that were identified are sector shifts, technology and discrimination. Next, the immigration topic will demonstrate how economic growth, causing increasing return to skill, will inevitably widen income gap assuming common currency and perfect labour mobility across countries. Discrimination is also examined in details, with focus on racial and gender discrimination. Oaxaca decomposition is an interesting mathematical tool which breaks down wage differentials into two parts that attribute to skill/education difference and racial/gender difference.
Compensation schemes look at how basic remuneration package are designed and what are the pros and cons of each type of schemes. The basic four schemes are piece rate, time rate, profit sharing and tournament. Piece rate schemes compensate workers according to the absolute productivity; time rate schemes compensate workers on hourly, daily or monthly basis; profit sharing distribute the income across a group of workers according to predetermined shares; and tournament will reward workers on relative basis, driving up the competition. Each of the different schemes are suitable in different scenario, so it is one segment that might require some thinking in exams. The last part focus on unemployment rate, and how unemployment benefits and job search results in natural unemployment rate. It is a rather small topic, but it could make up a significant proportion of the final exam if the lecturer does not test the whole syllabus.
On the whole, this module is pretty easy so simple mistakes can be quite costly. If the lecturer uploads a specific research paper, read it. Especially if it's his own paper. I ignored Dr. Mcgee's paper and blanked a whole question on job search locus. Most of the content is pretty straightforward so it's mostly mathematics and some thinking on compensation schemes, other assumptions and extensions. Lastly, beware of the bell curve.
Workload: Light
Difficulty: Moderate
Grade: B+
Course Coverage:
1. Introduction to Regression Analysis
2. The Labour Market: Supply & Demand
3. Compensating Wage Differentials
4. Human Capital
5. Wage Structure
6. Labour Mobility
7. Discriminiation
8. Compensation Schemes
9. Unemployment
This module is the first on labour economics, covering the microeconomic foundation of the labour market interactions and various elective topics on labour economics. Simple regression was taught at the start of the course, but played a rather insignificant role throughout the course.
The core syllabus of the module will cover derivation of supply and demand in the labour market, as well as establishing the equilibrium. Labour supply is simplistically determined using consumer choice analysis. The only difference is that, instead of a monetary budget constraint, the individual is now subjected to a time budget constraint, in which the maximum working hours is 24 per day, or 7 per week and so on. The sum of individual choices of working hour will then determine the total supply of labour in the market. Labour demand, on the other hand, is determined by firms depending on the given price. The demand for labour is derived from the optimal choice of goods the firm intend to produced. In this module, you will soon see that labour demand may differ significantly under different market structure. The equilibrium of the market will be derived from the supply and demand equations, with maximum labour supply forming the upper bound of the labour market equilibrium. These interactions are also analogous to the wage setting and price setting relations in EC3102, which determines the AS curve.
Then elective topics will cover different aspects of the labour market in greater detail. Compensating wage differential introduces risk into the work environment, and risk premium are often payed for such jobs to compensate the risk that they are taking. This results in differentiated wages in the labour market between risky and safe jobs. This is interesting because, in real life, the most dangerous jobs such as construction workers are often one of the lowest paid job. First, it could be because of the abundance of labour supply in this sector; and second, the entry requirement to this job is very low because very little skill is required. This brings us to the next topic on human capital where we examine how education and on-the-job experience could also result in wage differentials. College education analysis will also be analyzed from both social and economic perspective.
Wage structure examines the difference in income distribution and inequality across education, experience and age group where empiric studies show a general trend of increasing inequality among top, middle and bottom tiered wage earners. Some factors that were identified are sector shifts, technology and discrimination. Next, the immigration topic will demonstrate how economic growth, causing increasing return to skill, will inevitably widen income gap assuming common currency and perfect labour mobility across countries. Discrimination is also examined in details, with focus on racial and gender discrimination. Oaxaca decomposition is an interesting mathematical tool which breaks down wage differentials into two parts that attribute to skill/education difference and racial/gender difference.
Compensation schemes look at how basic remuneration package are designed and what are the pros and cons of each type of schemes. The basic four schemes are piece rate, time rate, profit sharing and tournament. Piece rate schemes compensate workers according to the absolute productivity; time rate schemes compensate workers on hourly, daily or monthly basis; profit sharing distribute the income across a group of workers according to predetermined shares; and tournament will reward workers on relative basis, driving up the competition. Each of the different schemes are suitable in different scenario, so it is one segment that might require some thinking in exams. The last part focus on unemployment rate, and how unemployment benefits and job search results in natural unemployment rate. It is a rather small topic, but it could make up a significant proportion of the final exam if the lecturer does not test the whole syllabus.
On the whole, this module is pretty easy so simple mistakes can be quite costly. If the lecturer uploads a specific research paper, read it. Especially if it's his own paper. I ignored Dr. Mcgee's paper and blanked a whole question on job search locus. Most of the content is pretty straightforward so it's mostly mathematics and some thinking on compensation schemes, other assumptions and extensions. Lastly, beware of the bell curve.
Workload: Light
Difficulty: Moderate
Grade: B+