Labor Problems

Prof. J. Peoples


Bolton 808

University of Wisconsin-Milwaukee

Department of Economics

Course Requirements

Work required for this course will consist of two problem sets worth 15 percent of the final grade, a term paper and a midterm worth 25 percent of the final grade and a final examination worth 35 percent of the final grade


Howard M. Wachtel, Labor and the Economy, third edition, Dryen Press.

Course Outline

I. Introduction and Review of Basic Economic Concepts: Chapter-1, week 1

A. Labor demand curve

B. Labor supply curve

C. Partial equilibrium

D. Labor economics after WWII

1. Structuralist

2. Human capitalist

II. The Labor Force and the Economy: Chapter-2, week-2

A. The U.S. labor force

1. Trends

2. Unemployment


B. The changing structure of employment in the American economy

C. Union membership

1.reasons for joining a union

2.brief history of U.S. unions

III. Wage Theory: Labor Demand : Chapter-3, week-3-4

A. Neoclassical Wage Theory

1. Wage determination

B. Changes in Labor Supply and Demand: the baby boom and the labor force

C. Demand for labor in the firm: initial observations

D. Combining labor with capital

1. Production function

2. Marginal productivity

3. Law of diminishing returns: allows for input choice

4. Value marginal productivity

5. Marginal Revenue Productivity

6. Wage Determination in a competitive labor market

      1. The elasticity of demand for labor

IV. Wage Theory: Labor Supply, Chapter-4 week-5-6

A. Introduction: Three major questions

1. How many hours of labor to offer to the labor market

2. Whether to seek work at all

3. How much human capital the individual will bring to the labor market

B. Hours of work

1. Indifference curve

2. Wage line

C. Hours of work in the U.S. economy

1. Fair Labor Standards Act (1938)

D. Labor supply elasticity

1. Income effect

2. Substitution effect

E. Income maintenance experiments in the 1970s

F. The quality of labor supply: human capital

V. Wage Determination and Market Structure, Chapter-5 week-7

A. Four cases for wage determination

B. Bilateral monopoly

VI. Trade Unions and Wage Determination, Chapter -6, weeks 8-9

A. Trade union membership in the U.S.

B. The trade union and its goals

1. Union preference path

C. Institutional theory and wage determination

D. Wachtel's model of union wage outcome

1. External factors influencing the union's relative bargaining strength

2. Internal union structure

3. Union policy

E. Labor Legislation

1. 1926 Railway Labor Act

2. 1933 Norris-LaGuardia Act

3. 1935 Wagner Act (NLRB)

4. 1947 Taft-Hartley Act

F. Bargaining model of wage determination

G. Collective bargaining and wage determination

VII. The Impact of Trade Unions on Wages, Chapter-7, weeks 11-12

A. Measuring union wage premiums

1. Hirsch and Macpherson's union source book

B. Methodological problems

C. Wage differentials for union an nonunion workers over time

1. Hirsch and Macpherson's union source book

2. Case study: the trucking industry

D. The Impact of trade unions on wages at a fixed point in time

E. The magnitude of trade union impacts on wages

F. Spillover effect and pattern bargaining

1. Case study: The telecommunications industry

G. Union wage impacts and the 1980s

1. Foreign competition

2. Mergers

3. Divestiture

4. Deregulation

VIII. Theory of Human Capital, Chapter-10, weeks 13-14

A. Major Question: what explains the difference in income among individuals?

B. Definition of human capital

C. Individual investment on human capital

1. Net present discount value (NPV)

D. Human capital investment by the firm

E. Public investment in human capital

F. Investment in human capital and individual income