Principles of Microeconomics Scarcity and Social ProviChapter 21 Issues in Labor Markets Unions, Discrimination, Immigration

CHAPTER 21 . ISSUES IN LABOR MARKETS UNIONS , DISCRIMINATION , IMMIGRATION INTRODUCTION TO ISSUES IN LABOR MARKETS UNIONS , DISCRIMINATION , IMMIGRATION Figure . Arguing for Collective Bargaining . In 201 , thousands of people in Wisconsin protested against a bill that would eliminate the right to collective bargaining over everything except wages . Credit modification of work by Fibonacci Creative Commons ) COLLECTIVE BARGAINING IN WISCONSIN In 2011 , thousands of people crowded into the Wisconsin State Capitol rotunda carrying placards reading Kill the What were they protesting ?

The newly elected Wisconsin governor , Scott Walker , supported a bill proposed by Republican state legislators that would have effectively eliminated most collective bargaining rights of public sector union employees . Collective bargaining laws require employers to sit down and negotiate with the representative union of their employees . The governor argued that the state needed to close a deficit , so legislators proposed a Budget Repair Act that would eliminate collective bargaining over everything but Wages . The bill passed and was signed into law after a significant level of drama that saw Democratic legislators leaving the state so that there would not be enough legislators in house to continue the debate or bring the bill to a vote . The law proved so unpopular that Governor Walker faced a recall vote in 2012 . The recall attempt was defeated , but the law has been subjected to numerous court reviews . The discussion about the role of collective bargaining is not over .

PRINCIPLES or ECONOMICS 593 Why was a bill like this proposed ?

Are collective bargaining rights necessary for public sector employees ?

How would an economist respond to such a bill ?

This chapter lays out the changing role of unions in US . labor markets . CHAPTER Introduction to Issues in Labor Markets Unions , Discrimination , Immigration In this chapter , you will learn about Labor Unions Employment Discrimination Immigration hen a job applicant is bargaining with an employer for a position , the applicant is often at a the job more than the employer needs that particular Bates Clark ( often named as the first great American economist , wrote in 1907 In the making of the wages contract the individual laborer is always at a disadvantage . He has thing which he is obliged to sell and which his employer is not obliged to take , since he that is , the employer can reject single men with To give workers more power , the government has passed , in response to years of labor protests , a number of laws to create a more equal balance of power between workers and employers . These laws include some of the following Setting minimum hourly wages Setting maximum hours of work ( at least before employers pay overtime rates ) Prohibiting child labor Regulating health and safety conditions in the workplace Preventing discrimination on the basis of race , ethnicity , gender , sexual orientation , and age Requiring employers to provide family leave Requiring employers to give advance notice of layoffs Covering workers with unemployment insurance Setting a limit on the number of immigrant workers from other countries Table lists some prominent workplace protection laws . Many of the laws listed in the table were only the start of labor market regulations in these areas and have been followed , over time , by other related laws , regulations , and court rulings .

594 Law National Management Relations Act of 1935 ( the Wagner Act ) Social Security Act of 1935 Fair Labor Standards Act of 1938 Act of 1947 Civil Rights Act of 1964 Occupational Health and Safety Act of 1970 Employee Retirement and Income Security Act of 1974 Pregnancy Discrimination Act of 1978 Immigration Reform and Control Act of 1986 Worker Adjustment and Retraining Notification Act of 1988 Americans with Disabilities Act of 1990 Family and Medical Leave Act of 1993 Pension Protection Act of 2006 Lilly Fair Pay Act of 2009 ERIK DEAN , JUSTIN , MITCH GREEN , BENJAMIN WILSON , AND SEBASTIAN BERGER Protection Establishes procedures for establishing a union that firms are obligated to follow sets up the National Labor Relations Board for deciding disputes Under Title III , establishes a system of unemployment insurance , in which Workers pay into a state fund when they are employed and received benefits for a time when they are unemployed Establishes the minimum Wage , limits on child labor , and rules requiring payment of overtime pay for those in jobs that are paid by the hour and exceed 40 hours per week Allows states to decide whether all workers at a firm can be required to join a union as a condition of employment in the case of a disruptive union strike , permits the president to declare a period during which workers have to return to work Title of the Act prohibits discrimination in employment on the basis of race , gender , national origin , religion , or sexual orientation Creates the Occupational Safety and Health Administration ( which protects workers from physical harm in the workplace Regulates employee pension rules and benefits Prohibits discrimination against Women in the Workplace who are planning to get pregnant or who are returning to work after pregnancy Prohibits hiring of illegal immigrants requires employers to ask for proof of citizenship protects rights of legal immigrants Requires employers with more than 100 employees to provide written notice 60 days before plant closings or large layoffs Prohibits discrimination against those with disabilities and requires reasonable accommodations for them on the job Allows employees to take up to 12 weeks of unpaid leave per year for family reasons , including birth or family illness firms for their pension plans and gives employees more information about their pension accounts Restores protection for pay discrimination claims on the basis of sex , race , national origin , age , religion , or disability Table . Prominent . Workplace Protection Laws This chapter covers three issues in the labor markets labor unions , discrimination against women or minority groups , and immigration and labor market issues .

UNIONS LEARNING OBJECT ES By the end of this section , you will be able to Explain the concept of labor unions , including membership levels and wages Evaluate arguments for and against labor unions Analyze reasons for the decline in US . union membership labor union is an organization of workers that negotiates with employers over wages and working conditions . A labor union seeks to change the balance of power between employers and workers by requiring employers to deal with workers collectively , rather than as als . Thus , negotiations between unions and firms are sometimes called collective bargaining . The subject of labor unions can be controversial . Supporters of labor unions View them as the ers primary line of defense against efforts by firms to hold down wages and benefits . Critics of labor unions View them as having a tendency to grab as much as they can in the short term , even if it means injuring workers in the long run by driving firms into bankruptcy or by blocking the new technologies and production methods that lead to economic growth . We will start with some facts about union membership in the United States . FACTS ABOUT UNION MEMBERSHIP AND PAY According to the Bureau of Labor and Statistics , about of all workers belong to unions . Following are some of the facts provided by the bureau for 2014 of male workers belong to unions of female workers do of white workers , of black workers , and of Hispanic workers belong to unions of workers and of workers are union members of workers ages belong to unions , as do 14 of workers ages Occupations in which relatively high percentages of workers belong to unions are the federal government ( belong to a union ) state government ( local government ( transportation and utilities ( natural resources , construction , and maintenance ( and production , transportation , and material moving (

596 ERIK DEAN , JUSTIN , MITCH GREEN , BENJAMIN WILSON , AND SEBASTIAN BERGER Occupations that have relatively low percentages of unionized workers are agricultural workers ( financial services ( professional and business services ( leisure and hospitality ( and wholesale and retail trade ( In summary , the percentage of workers belonging to a union is higher for men than women higher for blacks than for whites or Hispanics higher for the age range and higher among workers in government and manufacturing than workers in agriculture or jobs . Table lists the largest labor unions and their membership . Union Membership National Education Association ( NEA ) million Service Employees International Union ( million American Federation of Teachers ( AFT ) million International Brotherhood of Teamsters ( million The American Federation of State , County , and Municipal Workers ( million United Food and Commercial Workers International Union million United Steelworkers million International Union , United Automobile , Aerospace and Agricultural Implement Workers of America ( International Association of Machinists and Aerospace Workers International Brotherhood of Electrical Workers ( Table . The Largest American Unions in 2013 . Source US . Department of Labor , Bureau of Labor Statistics ) In terms of pay , benefits , and hiring , unions offer a good bad news story . The good news for unions and their members is that their members earn about 20 more than nonunion workers , even after adjusting for factors such as years of work experience and education level . The bad news for unions is that the share of workers who belong to a labor union has been steadily ing for 50 years , as shown in Figure . About of all workers belonged to a union in the , but only of workers are union members today . If you leave out workers employed by the government ( which includes teachers in public schools ) only of the workers employed by private firms now work for a union . The following section analyzes the higher pay union workers receive compared the pay rates for nonunion workers . The following section analyzes declining union membership levels . An overview of these two issues will allow us to discuss many aspects of how unions work . HIGHER WAGES FOR UNION WORKERS Why might union workers receive higher pay ?

What are the limits on how much higher pay they can receive ?

To analyze these questions , let consider a situation where all firms in an industry must negotiate with a single union , and no firm is allowed to hire nonunion labor . If no labor union existed in this market , then equilibrium ( in the labor market would occur at the intersection of the demand for labor ( and the supply of labor ( in Figure . The union can , however , threaten that , unless firms agree to the wages they demand , the workers will strike . As a result , the labor union manages to achieve , through negotiations with the firms , a union wage of Wu for its members , above what the equilibrium wage would otherwise have been .

PRINCIPLES OF ECONOMICS 597 I ' Figure . Percentage of Wage and Salary Workers Who Are Union Members . The share of wage and salary workers who belong to unions rose sharply in the and , but has tailed off since then to of all workers in 2014 . This labor market situation resembles what a monopoly firm does in selling a product , but in this case a union is a monopoly selling labor to firms . At the higher union wage Wu , the firms in this industry will hire less labor than they would have hired in equilibrium . Moreover , an excess supply of workers want union jobs , but firms will not be hiring for such jobs . From the union point of view , workers who receive higher wages are better off . However , notice that the quantity of workers ( hired at the union wage Wu is smaller than the quantity Qe that would have been hired at the original equilibrium wage . A sensible union must recognize that when it pushes up the wage , it also reduces the incentive of firms to hire . This situation does not necessarily mean that union workers are fired . Instead , it may be that when union workers move on to other jobs or retire , they are not always replaced . Or perhaps when a firm expands production , it expands ment somewhat less with a higher union wage than it would have done with the lower equilibrium wage . Or perhaps a firm decides to purchase inputs from nonunion producers , rather than producing them with its own highly paid unionized workers . Or perhaps the firm moves or opens a new facility in a state or country where unions are less powerful . From the firm point of view , the key question is whether the higher wage of union workers is matched by higher productivity . If so , then the firm can afford to pay the higher union wages and , indeed , the demand curve for unionized labor could actually shift to the right . This could reduce the job losses as the equilibrium employment level shifts to the right and the difference between the equilibrium and the union wages will have been reduced . If worker unionization does not increase productivity , then the higher union wage will cause lower profits or losses for the firm . Union workers might have higher productivity than nonunion workers for a number of reasons . First , higher wages may elicit higher productivity . Second , union workers tend to stay longer at a given job , a trend that reduces the employers costs for training and hiring and results in workers with more years of experience . Many unions also offer job training and apprenticeship programs .

593 ERIK DEAN , JUSTIN , MITCH GREEN , BENJAMIN WILSON , AND SEBASTIAN BERGER Excess supply of labor , Wu WU Od Qe Quantity of Labor Figure . Union Wage Negotiations . Without a union , the equilibrium at would have involved the wage We and the quantity of labor Qe . However , the union is able to use its bargaining power to raise the wage to Wu . The result is an excess supply of labor for union jobs . That is , a quantity of labor supplied , is greater than firms quantity demanded for labor , In addition , firms that are confronted with union demands for higher wages may choose production methods that involve more physical capital and less labor , resulting in increased labor productivity . Table provides an example . Assume that a firm can produce a home exercise cycle with three ent combinations of labor and manufacturing equipment . Say that labor is paid 16 an hour ( ing benefits ) and the machines for manufacturing cost 200 each . Under these circumstances , the total cost of producing a home exercise cycle will be lowest if the firm adopts the plan of 50 hours of labor and one machine , as the table shows . Now , suppose that a union negotiates a wage of 20 an hour including benefits . In this case , it makes no difference to the firm whether it uses more hours of labor and fewer machines or less labor and more machines , though it might prefer to use more machines and to hire fewer union workers . After all , machines never threaten to they do not buy the final product or service either . In the final column of the table , the wage has risen to 24 an hour . In this case , the firm clearly has an incentive for using the plan that involves paying for fewer hours of labor and using three machines . If management responds to union demands for higher wages by investing more in machinery , then union workers can be more productive because they are working with more or better physical capital equipment than the typical nonunion worker . However , the firm will need to hire fewer workers .

PRINCIPLES or ECONOMICS 599 Hours of Number of Cost of Labor Cost of Cost of Labor Cost of Cost of Labor Cost of Labor Machines Machine hour Machine hour Machine 30 480 600 600 600 720 600 40 640 400 800 400 960 400 50 800 200 200 200 Table . Three Production Choices to Manufacture a Home Exercise Cycle In some cases , unions have discouraged the use of physical capital of the reasonable fear that new machinery will reduce the number of union jobs . For example , in 2002 , the union representing longshoremen who unload ships and the firms that operate shipping and port facilities staged a work stoppage that shut down the ports on the western coast of the United States . Two key issues in the dispute were the desire of the shipping companies and port operators to use handheld scanners for and cabs for loading and unloading which the union opposed , along with overtime pay . President Obama threatened to use the Labor Management Relations Act of known as the ley a court can impose an period in order to allow time for to proceed without the threat of a work stoppage . Federal mediators were called in , and the two sides agreed to a deal in February 2015 . The ultimate agreement allowed the new technologies , but also kept wages , health , and pension benefits high for workers . In the past , presidential use of the Act sometimes has made labor negotiations more bitter and argumentative but , in this case , it seems to have smoothed the road to an agreement . In other instances , unions have proved quite willing to adopt new technologies . In one prominent example , during the 19505 and , the United union demanded that mining install machinery in the mines . The union realized that over time , the new machines would reduce the number of jobs in the mines , but the union leaders also knew that the mine owners would have to pay higher wages if the workers became more productive , and was a necessary step toward greater productivity . In fact , in some cases union workers may be more willing to accept new technology than nonunion workers , because the union workers believe that the union will negotiate to protect their jobs and wages , whereas nonunion workers may be more concerned that the new technology will replace their jobs . In addition , union workers , who typically have higher job market experience and training , are likely to suffer less and benefit more than workers from the introduction of new . Overall , it is hard to make a definitive case that union workers as a group are always either more or less welcoming to new technology than are nonunion workers . THE DECLINE IN UNION MEMBERSHIP The proportion of workers belonging to unions has declined dramatically since the early . Economists have offered a number of possible explanations The shift from manufacturing to service industries The force of globalization and increased competition from foreign producers A reduced desire for unions because of the workplace protection laws now in place

500 ERIK DEAN , JUSTIN , MITCH GREEN , BENJAMIN WILSON , AND SEBASTIAN BERGER legal environment that makes it relatively more difficult for unions to organize workers and expand their membership Let discuss each of these four explanations in more detail . A first possible explanation for the decline in the share of workers belonging to unions involves the patterns of job growth in the manufacturing and service sectors of the economy shown in Figure . The economy had about 15 million manufacturing jobs in 1960 . This total rose to 19 million by the late and then declined to 17 million in 2013 . Meanwhile , the number of jobs in service industries and in government combined rose from 35 million in 1960 to over 118 million by 2013 , according to the Bureau of Labor Statistics . Because over time unions were stronger in manufacturing than in service industries , the growth in jobs was not happening where the unions were . It is to note that several of the biggest unions in the country are made up of government workers , including the American Federation of State , County and Municipal Employees ( the vice Employees International Union and the National Education Association . The membership of each of these unions is listed in Table . Outside of government employees , however , unions have not had great success in organizing the service sector . 90 80 . 70 ' 50 Ag , 30 ' 90 Government 20 A , A A AA 10 ' oO ' resources and Il I I I I I I I on ) 39 99 Ye Figure . The Growth of Service obs . obs in services have increased dramatically in the last few in government have increased modestly . jobs in manufacturing have not changed much , although they have down in recent years . Source Department of Labor , Bureau of Labor Statistics .

PRINCIPLES or ECONOMICS 601 A second explanation for the decline in the share of unionized workers looks at import competition . Starting in the , carmakers and faced increasing competition from Japanese and European manufacturers . As sales of imported cars and steel rose , the number of jobs in auto manufacturing fell . This industry is heavily unionized . Not surprisingly , membership in the United Auto Workers , which was in 1985 , had fallen to roughly by 2015 . Import tion not only decreases the employment in sectors where unions were once strong , but also decreases the bargaining power of unions in those sectors . However , as we have seen , unions that organize workers , who are not threatened by import competition , have continued to see growth . A third possible reason for the decline in the number of union workers is that citizens often call on their elected representatives to pass laws concerning work conditions , overtime , parental leave , of pensions , and other issues . Unions offered strong political support for these laws aimed at protecting workers but , in an ironic twist , the passage of those laws then made many workers feel less need for unions . These first three possible reasons for the decline of unions are all somewhat plausible , but they have a common problem . Most other developed economies have experienced similar economic and ical trends , such as the shift from manufacturing to services , globalization , and increasing ment social benefits and regulation of the workplace . Clearly there are cultural differences between countries as to their acceptance of unions in the workplace . The share of the population belonging to unions in other countries is very high compared with the share in the United States . Table shows the proportion of workers in a number of the worlds economies who belong to unions . The United States is near the bottom , along with France and Spain . The last column shows union age , defined as including those workers whose wages are determined by a union negotiation even if the workers do not officially belong to the union . In the United States , union membership is almost identical to union coverage . However , in many countries , the wages of many workers who do not belong to a union are still determined by collective bargaining between unions and firms . Union Density Percentage of Workers Union Coverage Percentage of Workers Whose Wages Are Country Belonging to a Union Determined by Union Bargaining Austria 37 99 France 95 Germany 26 63 japan 22 23 Netherlands 25 82 Spain I 81 Sweden 82 92 United Kingdom 29 35 United States Table International Comparisons of Union Membership and Coverage in 2012 . Source , CIA World , retrieved from ) These international differences in union membership suggest a fourth reason for the decline of union membership in the United States perhaps laws are less friendly to the formation of unions than such laws in other countries . The close connection between union membership and a friendly legal

602 ERIK DEAN , JUSTIN , MITCH GREEN , BENJAMIN WILSON , AND SEBASTIAN BERGER environment is apparent in the history of unions . The great rise in union membership in the followed the passage of the National Relations Act of 1935 , which that workers had a right to organize unions and that management had to give them a fair chance to do so . The government strongly encouraged the formation of unions during the early in the belief that unions would help to coordinate the production efforts needed during World War II . However , after World War II came the passage of the Act of 1947 , which gave states the power to allow workers to opt out of the union in their workplace if they so desired . This law made the legal climate less encouraging to those seeking to form unions , and union membership levels soon started declining . The procedures for forming a union differ substantially from country to country . For example , the procedures in the United States and those in Canada are strikingly different . When a group of ers wish to form a union in the United States , they announce this fact and an election date is set when the employees at a firm will vote in a secret ballot on whether to form a union . Supporters of the union lobby for a yes vote , and the management of the firm lobbies for a no even ing outside consultants for assistance in swaying workers to vote In Canada , by contrast , a union is formed when a sufficient proportion of workers ( usually about 60 ) sign an official card saying that they want a union . There is no separate election The management of Canadian firms is limited by law in its ability to lobby against the union . In addition , though it is illegal to discriminate and fire workers based on their union activity in the United States , the penalties are slight , making this a not so costly way of deterring union activity . In short , forming unions is easier in in many other in the United States . In summary , union membership in the United States is lower than in many other tries , a difference that may be due to different legal environments and cultural attitudes toward unions . Visit this Website to read about recent protests regarding minimum wage for fast food employees . KEY CONCEPTS AND SUMMARY A labor union is an organization of workers that negotiates as a group with employers over and work conditions . Union workers in the United States are paid more on average than other workers with comparable education and experience . Thus , either union workers must be more to match this higher pay or the higher pay will lead employers to find ways of hiring fewer union workers than they otherwise would . American union membership has been falling for decades . Some possible reasons include the shift of jobs to service industries greater competition from

603 PRINCIPLES OF ECONOMICS the passage of legislation and laws that are less favorable to organizing unions . SELF CHECK QUESTIONS . Table shows the quantity demanded and supplied in the labor market for driving city buses in the town of , where all the bus drivers belong to a union . Wage Per Hour Quantity of Workers Demanded Quantity of Workers Supplied 14 16 20 24 Table a . What would the equilibrium wage and quantity be in this market if no union existed ?

Assume that the union has enough negotiating power to raise the wage to per hour higher than it would otherwise be . Is there now excess demand or excess supply of labor ?

Do unions typically oppose new technology out of a fear that it will reduce the number of union jobs ?

Why or why not ?

Compared with the share of workers in most other countries , is the share of workers whose wages are determined by union bargaining higher or lower ?

Why or why not ?

Are firms with a high percentage of union employees more likely to go bankrupt because of the higher wages that they pay ?

Why or why not ?

Do countries with a higher percentage of unionized workers usually have less growth in productivity because of strikes and other disruptions caused by the unions ?

Why or why not ?

What is a labor union ?

Why do employers have a natural advantage in bargaining with employees ?

What are some of the most important laws that protect employee rights ?

How does the presence of a labor union change negotiations between employers and workers ?

What is the trend in American union membership ?

Would you expect the presence of labor unions to lead to higher or lower pay for ?

Would you expect a higher or lower quantity of workers hired by those employers ?

Explain . What are the main causes for the recent trends in union membership rates in the United States ?

Why are union rates lower in the United States than in many other developed countries ?

504 ERIK DEAN , JUSTIN , MITCH GREEN , BENJAMIN WILSON , AND SEBASTIAN BERGER CRITICAL THINKING QUESTIONS . Are unions and technological improvements complementary ?

Why or why not ?

Will union membership continue to decline ?

Why or why not ?

REFERENCES . Training and . Central Intelligence Agency . The World . Clark , John Bates . Essentials of Economic Theory As Applied to Modern Problems of Industry and Public icy . New York , 1907 , 501 . United Auto Workers ( About Who We . United States Department of Labor Bureau of Labor Statistics . Economic News Release Union Members Last modified January 23 , United States Department of Labor , Bureau of Labor Statistics . 2015 . Economic News Union Accessed April 13 , bargaining negotiations between unions and a firm or firms labor union an organization of workers that negotiates with employers over wages and working conditions SOLUTIONS Answers to Questions a . With no union , the equilibrium wage rate would be 18 per hour and there would be bus drivers . If the union has enough negotiating power to raise the wage to per hour higher than under the original equilibrium , the new wage would be 22 per hour . At this wage , workers would be demanded while would be supplied , leading to an excess supply of workers . Unions have sometimes opposed new technology out of a fear of losing jobs , but in other cases unions have helped to facilitate the introduction of new technology because unionized workers felt that the union was looking after their interests or that their higher skills meant that their jobs were essentially protected . And the new technologies meant increased productivity .

PRINCIPLES OF ECONOMICS 605 In a few other countries ( such as France and Spain ) the percentage of workers belonging to a union is similar to that in the United States . Union membership rates , however , are generally lower in the United States . When the share of Workers whose wages are determined by union negotiations is considered , the United States ranks by far the lowest ( because in countries like France and Spain , union negotiations often determine pay even for nonunion employees ) No . While some unions may cause firms to go bankrupt , other unions help firms to become more competitive . No overall pattern exists . From a social point of view , the benefits of unions and the costs seem to counterbalance . There is no evidence that in countries with a higher percentage of unionized workers , the economies grow more or less slowly .

EMPLOYMENT DISCRIMINATION LEARNING OBJECTIVES By the end of this section , you will be able to Analyze earnings gaps based on race and gender Explain the impact of discrimination in a competitive market Identify US . public policies designed to reduce discrimination involves acting on the belief that members of a certain group are inferior solely because of a factor such as race , gender , or religion . There are many types of discrimination but the focus here will be on discrimination in labor markets , which arises if workers with the same skill measured by education , experience , and different pay receive different pay or have different job opportunities because of their race or gender . EARNINGS GAPS BY RACE AND GENDER A possible signal of labor market discrimination is when one group is paid less than another . Figure shows the average wage of black workers as a ratio of the average wage of white workers and the average wage of female workers as a ratio of the average wage of male workers . Research by the Francine and Laurence shows that the gap between the earnings of women and men did not move much in the , but has declined since the . According to the Census , the gap between the earnings of blacks and whites diminished in the , but has not changed in 50 years . In both gender and race , an earnings gap remains . An earnings gap between average wages , in and of itself , does not prove that discrimination is ring in the labor market . We need to apply the same productivity characteristics to all parties ( ees ) involved . Gender discrimination in the labor market occurs when women are paid less than men despite having comparable levels of education , experience , and expertise . Read the Clear It Up about the suit brought against . Similarly , racial discrimination in the labor market exists when racially diverse employees are paid less than their coworkers of the majority race despite having comparable levels of education , experience , and expertise . To bring a successful gender discrimination lawsuit , a female employee must prove that she is paid less than a male employee who holds a similar job , with similar educational attainment , and with similar expertise . Likewise , one who wants to sue on the grounds of racial discrimination must prove that he or she is paid less than an employee of another race who holds a similar job , with similar educational attainment , and with similar expertise .

PRINCIPLES OF ECONOMICS 607 30 Black to whIte , I 70 Female to male 65 Percentage , Year Figure . Wage Ratios by Sex and Race . The ratio of wages for black workers to white workers rose substantially in the late and through the , but has not changed much since then . The ratio of wages for female to male workers changed little through the , but has risen substantially since the . In both cases , a gap remains between the average wages of black and white workers and between the average wages of female and male workers . Source Department of Labor , Bureau of Labor Statistics . WHAT WAS THE CASE AGAINST ?

In one of the largest cases in history , million female employees of claimed that the company engaged in Wage and promotion discrimination . In 2011 , the Supreme Court threw out the case on the grounds that the group was too large and too diverse for the case to be considered a class action suit . Lawyers for the Women regrouped and are now suing in smaller groups . Part of the difficulty for the female employees is that the court said that pay and promotion decisions were made by local managers and were not necessarily policies of the company as a whole . Consequently , female employees in Texas are arguing that their new suit will challenge the management of a discrete group of regional district and store managers . They claim these managers made biased pay and promotion decisions . However , in 2013 , a smaller California class action suit against the company was again rejected by a federal court . On other issues , made the news again in 2013 when the National Labor Relations Board found guilty of illegally penalizing and firing workers who took part in labor protests and strikes . has already paid lion in back wages and compensation damages to women in Kentucky who were denied jobs due to their sex . INVESTIGATING THE MALE EARNINGS GAP As a result of changes in law and culture , women began to enter the paid workforce in substantial numbers in the to century . By 2014 , of adult women held jobs while of adult men did . Moreover , along with entering the workforce , women began to ratchet up their education levels . In 1971 , 44 of undergraduate college degrees went to women by 2014 , women

603 ERIK DEAN , JUSTIN , MITCH GREEN , BENJAMIN WILSON , AND SEBASTIAN BERGER received 56 of bachelor degrees . In 1970 , women received of the degrees from law schools and of the degrees from medical schools . By 2014 , women were receiving 47 of the law degrees and of the medical degrees . These gains in education and experience have reduced the male wage gap over time . However , concerns remain about the extent to which women have not yet assumed a substantial share of the positions at the top of the largest companies or in the . There are factors that can lower women average wages . Women are likely to bear a large share of household responsibilities . A mother of young children is more likely to drop out of the labor force for several years or work on a reduced schedule than is the father . As a result , women in their and are likely , on average , to have less job experience than men . In the United States , childless women with the same education and experience levels as men are typically paid . However , women with families and children are typically paid about to 14 less than other women of similar education and work experience . Meanwhile , married men earn about 10 to 15 more than single men with comparable education and work experience . The different patterns of family responsibilities possibly could be called discrimination , but it is rooted in Americas social patterns of discrimination , which involve the roles that fathers and mothers play in , rather than discrimination by employers in hiring and salary decisions . Visit this website to read more about the persistently low numbers of women in executive roles in business and in the US . Congress . I I THE EARNINGS GAP Blacks experienced blatant labor market discrimination during much of the twentieth century . Until the passage of the Civil Rights Act of 1964 , it was legal in many states to refuse to hire a black worker , regardless of the credentials or experience of that worker . Moreover , blacks were often denied access to educational opportunities , which in turn meant that they had lower levels of qualifications for many jobs . At least one economic study has shown that the 1964 law is partially responsible for the narrowing of the gap in earnings in the late and into the for example , the ratio of total earnings of black male workers to white male workers rose from 62 in 1964 to in 2013 , according to the Bureau of Labor Statistics . However , the earnings gap between black and white workers has not changed as much as the earnings gap between men and women has in the last half century . The remaining racial gap seems related both to continuing differences in education levels and to the presence of discrimination . Table shows that the percentage of blacks who complete a college degree remains substantially lower than

PRINCIPLES or ECONOMICS 609 the percentage of whites who complete college . According to the Census , both whites and blacks have higher levels of educational attainment than Hispanics and lower levels than Asians . The lower average levels of education for black workers surely explain part of the earnings gap . In fact , black women who have the same levels of education and experience as white women receive , on average , about the same level of pay . One study shows that white and black college graduates have identical salaries immediately after college however , the racial wage gap widens over time , an outcome that suggests the possibility of continuing discrimination . Another study conducted a field experiment by responding to job advertisements with fictitious resumes with either very African American ing names or very white sounding names and found out that white names received 50 percent more callbacks for interviews . This is suggestive of discrimination in job opportunities . Further , as the lowing Clear It Up feature explains , there is evidence to support that discrimination in the housing market is connected to employment discrimination . White Hispanic Black Asian Completed four years of high school or more 890 Completed four years of college or more 290 Table . Educational Attainment by Race and Ethnicity in 2012 . Source ) HOW IS DISCRIMINATION IN THE HOUSING MARKET CONNECTED TO EMPLOYMENT DISCRIMINATION ?

In a recent study by the Housing and Urban Development ( HUD ) department , black who ask to look at homes for sale are shown 18 percent fewer homes compared to white . Asians are shown 19 percent fewer ties . Additionally , Hispanics experience more discrimination in renting apartments and undergo stiffer credit checks than white renters . In a 2012 study conducted by the Department of Housing and Urban Development and the nonprofit Urban Institute , Hispanic testers who contacted agents about advertised rental units were given information about 12 cent fewer units available and were shown seven percent fewer units than white renters . The million study , based on research in 28 metropolitan areas , concluded that blatant door slamming forms of discrimination are on the decline but that the discrimination that does exist is harder to detect , and as a result , more difficult to remedy . According to the Chicago Tribune , HUD Secretary Shaun Donovan told reporters , just because it taken on a hidden form does make it any less harmful . You might not be able to move into that community with the good schools . The lower levels of education for black workers can also be a result of it may be market discrimination , rather than direct discrimination by employers in the labor market . For example , if discrimination in ing markets causes black families to live clustered together in certain poorer neighborhoods , then the black children will continue to have lower educational attainment then their white counterparts and , consequently , not be able to obtain the higher paying jobs that require higher levels of education . Another element to consider is that in the past , when blacks were effectively barred from many jobs , getting additional education could have seemed somewhat pointless , because the educational degrees would not pay off . Even though labor market discrimination has been legally abolished , it can take some time to establish a culture and a tradition of valuing education highly . Additionally , a legacy of past may contribute to an attitude that blacks will have a difficult time succeeding in academic subjects . In any case , the impact of social discrimination in labor markets is more complicated than seeking to punish a few bigoted employers . COMPETITIVE MARKETS AND DISCRIMINATION Gary Becker ( 1930 ) who won the Nobel Prize in economics in 1992 , was one of the first to analyze discrimination in economic terms . Becker pointed out that while competitive markets can allow some

610 ERIK DEAN , JUSTIN , MITCH GREEN , BENJAMIN WILSON , AND SEBASTIAN BERGER employers to practice discrimination , it can also provide firms with incentives not to discriminate . Given these incentives , Becker explored the question of why discrimination persists . If a business is located in an area with a large minority population and refuses to sell to minorities , it will cut into its own profits . If some businesses run by bigoted employers refuse to pay women or minorities a wage based on their productivity , then other employers can hire these workers . In a competitive market , if the owners of a business care more about the color of money than about the color of skin , they will have an incentive to make buying , selling , hiring , and tion decisions strictly based on economic factors . The power of markets to offer at least a degree of freedom to oppressed groups should not be estimated . In many countries , cohesive minority groups like Jews and emigrant Chinese have aged to carve out a space for themselves through their economic activities , despite legal and social discrimination against them . Many immigrants , including those who come to the United States , have taken advantage of economic freedom to make new lives for themselves . However , history teaches that market forces alone are unlikely to eliminate discrimination . After all , discrimination against African Americans persisted in the economy during the century between dent Abraham Lincoln Emancipation Proclamation , which freed the slaves in 1863 , and the passage of the Civil Rights Act of has continued since then , too . So why does discrimination persist in competitive markets ?

Gary Becker sought to explain this . Discriminatory impulses can emerge at a number of levels among managers , among ers , and among customers . Consider the situation of a manager who is not personally prejudiced , but who has many workers or customers who are prejudiced . If that manager treats minority groups or women fairly , the manager may find it hurts the morale of prejudiced or drives away customers . In such a situation , a policy of nondiscrimination could reduce the firms profits . After all , a business firm is part of society , and a firm that does not follow the societal norms is likely to suffer . Market forces alone are unlikely to overwhelm strong social attitudes about discrimination . Visit this Website to read more about wage discrimination . El ' PUBLIC POLICIES TO REDUCE DISCRIMINATION A first public policy step against discrimination in the labor market is to make it illegal . For example , the Equal Pay Act of 1963 said that men and women who do equal work at a company must be paid the same . The Civil Rights Act of 1964 prohibits employment discrimination based on race , color , religion , sex , or national origin . The Age Discrimination in Employment Act of 1967 prohibited discrimination on the basis of age against individuals who are 40 years of age or older . The Civil

PRINCIPLES or ECONOMICS 611 Rights Act of 1991 provides monetary damages in cases of intentional employment discrimination . The Pregnancy Discrimination Act of 1978 was aimed at prohibiting discrimination against women in the workplace who are planning to get pregnant , are pregnant , or are returning after pregnancy . Passing a law , however , is only part of the answer , since discrimination by prejudiced employers may be less important than broader social patterns . These laws against discrimination have reduced the gender wage gap . A study by the Department of Labor in 2007 compared salaries of men and women who have similar educational achievement , work experience , and occupation and found that the gender wage gap is only . In the case of the earnings gap between blacks and whites ( and also between Hispanics and whites ) probably the single largest step that could be taken at this point in history to close the earnings gap would be to reduce the gap in educational achievement . Part of the answer to this issue involves finding ways to improve the performance of schools , which is a highly controversial topic in itself . In addition , the education gap is unlikely to close unless black and Hispanic families and peer groups strengthen their culture of support for educational achievement . Affirmative action is the name given to active efforts by government or businesses that give special rights to minorities in hiring and promotion to make up for past discrimination . Affirmative action , in its limited and not especially controversial form , means making an effort to reach out to a broader range of minority candidates for jobs . In its more aggressive and controversial form , affirmative action required government and companies to hire a specific number or percentage of minority employees . However , the Supreme Court has ruled against state affirmative action laws . Today , affirmative action policies are applied only to federal contractors who have lost a discrimination suit . This type of redress is enforced by the federal Equal Employment Opportunity Commission ( AN IN DIVERSE WORKFORCE Racial and ethnic diversity is on the rise in the population and work force . As Figure shows , while the white Americans composed 78 of the population in 2012 , the Bureau of the Census projects that whites will be 69 of the population by 2060 . The proportion of citizens who are of Hispanic background is predicted to rise substantially . Moreover , in addition to expected changes in the population , diversity is being increased in the workforce as the women who entered the workforce in the and are now moving up the promotion ladders within their . is not economics , but it still can be clarifying to speculate about the future . Optimists argue that the growing proportions of minority workers will knock over remaining discriminatory barriers . The economy will benefit as an increasing proportion of workers from traditionally groups have a greater opportunity to fulfill their potential . worry that the social tensions between men and women and between ethnic groups will rise and that workers will be less productive as a result . policy , at its best , seeks to help society move toward the more optimistic outcome . KEY CONCEPTS AND SUMMARY Discrimination occurs in a labor market when workers with the same economic characteristics , such

612 ERIK DEAN , JUSTIN , MITCH GREEN , BENJAMIN WILSON , AND SEBASTIAN BERGER 78 70 69 63 . 60 as 50 43 40 A 31 30 I 2012 ' 1315 ' 2060 10 5182 12 ' 2464 on I , I I . or ?

44 Race Figure . Projected Changes in America Racial and Ethnic Diversity . This figure shows projected changes in the ethnic makeup of the population by 2060 . Note that stands for Native Hawaiian and Other Pacific Islander . stands for American Indian and Alaska Native . Source US Department of Commerce as education , experience , and skill , are paid different amounts because of race , gender , religion , age , or disability status . In the United States , female workers on average earn less than male workers , and black workers on average earn less than white workers . There is controversy over the extent to which these earnings gaps can be explained by discrimination or by differences in factors like education and job experience . Free markets can allow discrimination to occur but the threat of a loss of sales or a loss of productive workers can also create incentives for a firm not to discriminate . A range of public policies can be used to reduce earnings gaps between men and women or between white and other ethnic groups requiring equal pay for equal work , and attaining more equal educational comes . SELF CHECK QUESTIONS . Explain in each of the following situations how market forces might give a business an incentive to act in a less discriminatory fashion . a . A local delivery business run by a bigoted white owner notices that many of its local customers are black . An assembly line has traditionally only hired men , but it is having a hard time hiring sufficiently qualified workers . A biased owner of a firm that provides home health care services would like to pay lower wages to Hispanic workers than to other employees .

PRINCIPLES OF ECONOMICS 613 . Does the earnings gap between the average wages of females and the average wages of males prove labor market discrimination ?

Why or why not ?

REVIEW QUESTIONS . Describe how the earnings gap between men and women has evolved in recent decades . Describe how the earnings gap between blacks and whites has evolved in recent decades . Does a gap between the average earnings of men and women , or between whites and blacks , prove that employers are discriminating in the labor market ?

Explain . Will a free market tend to encourage or discourage discrimination ?

Explain . What policies , when used together with laws , might help to reduce the earnings gap between men and women or between white and black workers ?

Describe how affirmative action is applied in the labor market . CRITICAL THINKING QUESTIONS . If it is not profitable to discriminate , why does discrimination persist ?

If a company has discriminated against minorities in the past , should it be required to give priority to minority applicants today ?

Why or why not ?

REFERENCES Anderson , Deborah , Melissa Binder , and Kate . The Motherhood Wage Penalty Revisited Experience , Heterogeneity , Work Effort , and Industrial and Labor Relations Review . no . 2003 ) Turner , Austin , Rob Santos , Diane Levy , Doug , Claudia , Rob , and The Urban Institute . Housing Discrimination Against Racial and Ethnic Minorities US . Department of Housing and Urban Development . Last . Austin , The Unfinished March An Economic Policy Institute . Last 18 , Bertrand , Marianne , and . Are Emily and Greg More Employable Than and Jamal ?

A Field Experiment on Labor Market American Economic Review . no . 2004 ) Francine , and Laurence . The Gender Pay Gap Have Women Gone as Far as They Can ?

Academy Perspectives . no . 2007 ) 614 ERIK DEAN , JUSTIN , MITCH GREEN , BENJAMIN WILSON , AND SEBASTIAN BERGER Card , David , and Alan . Trends in Relative Earnings Revisited ( Paper 310 ) Princeton and the National Bureau of Economic Research . December . Donovan , Theresa . jurist . Federal Judge Rejects Class Status in Discrimination Last modified August , Harris , Elizabeth A . Labor Panel Finds Illegal Punishments at The New York Times , ber 18 , Natalia , and Yang Liu . Federal Reserve Bank of Louis The Regional Economist . Gender Wage Gap May Be Much Smaller Than Most Last modified October ?

Mary Ellen . HUD Finds Housing Discrimination Hidden But Chicago Tribune Business , June 12 , Thomas Luke . United States Department of Labor Bureau of Labor Statistics . Recent Graduates in the Labor Force Data from the Current Population Monthly Labor Review ( February , 2013 ) 20 . Bureau of Labor Statistics Reports . 2014 . Women in the Labor Force A ( Report 1052 ) Accessed April 13 , Equal Employment Opportunity Commission , to Pay More than Million to tle Sex Discrimination Last modified March , United States Census Bureau . 2014 . Table . Educational Attainment of the Population 18 Years and Over , by Age , Sex , Race , and Hispanic Origin Accessed April 13 , United States Department of Labor Bureau of Labor Statistics . News Release Usual Weekly ings of Wage and Salary Workers ( Third Quarter 2013 ) November , Warner , Judith . 2014 . Fact Sheet The Women Leadership Gap Women Leadership by the Center for American Progress . Accessed March 16 , Catherine , and Lois Joy . The Relative Earnings of Black College Graduates , In Race and Economic Opportunity in the Century , edited by Marlene Kim . New York ,

PRINCIPLES OF ECONOMICS 615 affirmative action active efforts by government or businesses that give special rights to minorities in hiring , promotion , or access to education to make up for past discrimination discrimination actions based on the belief that members of a certain group or groups are in some way inferior solely because of a factor such as race , gender , or religion SOLUTIONS Answers to Questions a . Firms have a profit incentive to sell to everyone , regardless of race , ethnicity , religion , or gender . A business that needs to hire workers to expand may also find that if it draws only from its accustomed pool of , White lacks the Workers it needs to expand production . Such a business would have an incentive to hire more women and minorities . A discriminatory business that is its Workers may find those Workers leaving for jobs with another employer who offers better pay . This market pressure could cause the discriminatory business to behave better . No . The earnings gap does not prove discrimination because it does not compare the Wages of men and Women in the same job who have the same amounts of education , experience , and productivity .

IMMIGRATION LEARNING OBJECTIVES By the end of this section , you will be able to Analyze historical patterns of immigration Explain economic effects of immigration Evaluate notable proposals for immigration reform ost Americans would be outraged if a law prevented them from moving to another city or another state . However , when the conversation turns to crossing national borders and are about other people arriving in the United States , laws preventing such movement often seem more reasonable . Some of the tensions over immigration stem from worries over how it might affect a country culture , including differences in language , and patterns of family , authority , or der relationships . Economics does not have much to say about such cultural issues . Some of the about immigration do , however , have to do with its effects on wages and income levels , and how it affects government taxes and spending . On those topics , economists have insights and research to offer . HISTORICAL PATTERNS OF IMMIGRATION Supporters and opponents of immigration look at the same data and see different patterns . Those who express concern about immigration levels to the United States point to graphics like Figure which shows total of immigrants decade by decade through the twentieth century . Clearly , the level of immigration has been high and rising in recent years , reaching and exceeding the towering levels of the early twentieth century . However , those who are less worried about immigration point out that the high immigration levels of the early twentieth century happened when total population was much lower . Since the population roughly tripled during the twentieth century , the seemingly high els in immigration in the and 20003 look relatively smaller when they are divided by the lation . Where have the immigrants come from ?

Immigrants from Europe were more than 90 of the total in the first decade of the twentieth century , but less than 20 of the total by the end of the century . By the , about half of immigration came from the rest of the Americas , especially Mexico , and about a quarter came from various countries in Asia .

PRINCIPLES OF ECONOMICS 617 202 699 357 I I I 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 Thousands of Immigrants to to to to to to to to to to to 1909 1919 1929 1939 1949 1959 1969 1979 1989 1999 2008 Time Period Figure . Immigration Since 1900 . The number of immigrants in each decade declined between 1900 and the 19405 , but has risen sharply in recent decades . Source Department of Homeland Security , Yearbook of Immigration Statistics 201 , Table ) ECONOMIC EFFECTS OF IMMIGRATION A surge of immigration can affect the economy in a number of different ways . In this section , we will consider how immigrants might benefit the rest of the economy , how they might affect Wage levels , and how they might affect government spending at the federal and local level . To understand the economic consequences of immigration , consider the following scenario . Imagine that the immigrants entering the United States matched the existing population in age range , education , skill levels , family size , occupations , and so on . How would immigration of this type affect the rest of the economy ?

Immigrants themselves would be much better off , because their of living would be higher in the United States . Immigrants would contribute to both increased production and increased consumption . Given enough time for adjustment , the range of jobs formed , income earned , taxes paid , and public services needed would not be much affected by this kind of immigration . It would be as if the population simply increased a little . Now , consider the reality of recent immigration to the United States . Immigrants are not identical to the rest of the population . About of immigrants over the age of 25 lack a high school diploma . As a result , many of the recent immigrants end up in jobs like restaurant and hotel work , lawn care , and janitorial work . This kind of immigration represents a shift to the right in the supply of unskilled labor for a number of jobs , which will lead to lower wages for these jobs . The and households that purchase the services of these unskilled Workers will benefit from these lower wages . However , workers who must compete with grants for jobs will tend to suffer from immigration . The difficult policy questions about immigration are not so much about the overall gains to the rest of the economy , which seem to be real but small in the context of the economy , as they are about the disruptive effects of immigration in specific labor markets . One disruptive effect , as just noted , is that

613 ERIK DEAN , JUSTIN , MITCH GREEN , BENJAMIN WILSON , AND SEBASTIAN BERGER immigration weighted toward workers tends to reduce wages for domestic ers . A study by Michael found that for each 10 rise in the number of employed immigrants with no more than a high school diploma in the labor market , high school students reduced their annual number of hours worked by . The effects on wages of workers are not haps in the range of decline of about . These effects are likely kept low , in part , because of the legal floor of federal and state minimum wage laws . In addition , immigrants are also thought to tribute to increased demand for local goods and services which can stimulate the local low skilled labor market . It is also possible that employers , in face of abundant workers may choose production processes which are more labor intensive than otherwise would have been . These various factors would explain the small negative wage effect observed among the native workers as a result of immigration . Another potential disruptive effect is the impact on the budgets of state and local government . Many of the costs imposed by immigrants are costs that arise in programs , like the cost of public schooling and of welfare benefits . However , many of the taxes that immigrants pay are federal taxes like income taxes and Social Security taxes . Many immigrants do not own property ( such as homes and cars ) so they do not pay property taxes , which are one of the main sources of state and local tax revenue . Though they do pay sales taxes , which are state and local , and the landlords of property they rent pay property taxes . According to the nonprofit Rand Corporation , the effects of immigration on taxes are generally positive at the federal level , but they are negative at the state and local levels in places where there are many immigrants . Visit this website to obtain more context regarding immigration . PROPOSALS FOR IMMIGRATION REFORM The Congressional Jordan Commission of the 19903 proposed reducing overall levels of immigration and refocusing immigration policy to give priority to immigrants with a higher level of skills . In the labor market , focusing on immigrants would help prevent any negative effects on the wages of workers . For government budgets , workers find jobs more quickly , earn higher wages , and pay more in taxes . Several other countries , notably Canada and Australia , have immigration systems where those with high levels of education or job skills have a much better chance of obtaining permission to immigrate . For the United States , high tech companies regularly ask for a more lenient immigration policy to admit a greater quantity of highly skilled workers . In addition , a current immigration issue deals with the DREAM Act legislation not yet passed by Congress , which would offer a path to citizenship for illegal grants brought to the United States before the age of 16 . However , some state legislatures , such as California , have passed their own Dream Acts .

PRINCIPLES OF ECONOMICS 619 If the United States decided to reduce immigration substantially , the economic losses would likely be small relative to the overall economy . If the United States decided to increase immigration , the economy certainly is large enough to afford some additional assistance to workers or to local governments that might be adversely affected by immigration . Whether tion levels are increased , decreased , or left the same , the quality of the debate over immigration policy would be improved by an explicit recognition of who receives economic benefits from immigration and who bears its costs . COLLECTIVE BARGAINING IN WISCONSIN Should we end collective bargaining rights for government employees ?

In an effort to reduce the budget deficit , a Wisconsin law prohibited most public employees from collectively bargaining on anything except wages . in Wisconsin argued that public safety is so important that public safety workers should be exempted from this . They could not risk firefighters and police going on strike . All firms and employees know that pensions and benefits are and there was a billion budget deficit in Wisconsin that Governor Walker and legislators wanted to decrease . A lingering question is should the unions have been more willing to shoulder a greater burden of the cost of those benefits ?

That question suggests that it is the cost , not necessarily the role of the union itself , which is the problem . After all , unions were founded to reduce the disadvantage that single employees face when bargaining with employers . Because so many government employees are union members , collective bargaining is even more important for them . Ultimately , the benefit of unions is in the impact they have on economic productivity and output . The more productive the union workers become as a result of collective bargaining , the better off the economy will be . The repercussions of the Wisconsin law have yet to be realized . As a result of this bill , wage increases higher than the rate of for Wisconsin public sector employees must be voted upon . Imagine if you are working for the government , and are able to find a job in the private sector . What will you do ?

If you decide to leave because your options are better elsewhere , then the government must replace you . How will the government find workers to replace you ?

For some sectors of the government , reduced numbers of workers may mean greater efficiency . For other sectors , though , reduced numbers of government workers may mean reduced services . KEY CONCEPTS AND SUMMARY The recent level of immigration is at a historically high level if measured in absolute numbers , but not if measured as a share of population . The overall gains to the economy from immigration are real but relatively small . However , immigration also causes effects like slightly lower wages for workers and budget problems for certain state and local governments . QUESTIONS If immigration is reduced , what is the impact on the wage for labor ?

Explain . REVIEW QUESTIONS . Have levels of immigration to the United States been relatively high or low in recent years ?

Explain . How would you expect immigration by primarily workers to affect American workers ?

520 ERIK DEAN , JUSTIN , MITCH GREEN , BENJAMIN WILSON , AND SEBASTIAN BERGER A What factors can explain the relatively small effect of immigration on the wages of Workers ?

CRITICAL THINKING QUESTIONS If the United States allows a greater quantity of highly skilled Workers , What will be the impact on the average wages of highly skilled employees ?

A If all countries eliminated all barriers to immigration , would global economic growth increase ?

Why or why not ?

REFERENCES , Michael The Fiscal Impacts of Immigrants A California Case In The Immigration Debate Studies on the Economic , Demographic , and Fiscal Effects of Immigration , edited by James Smith and Barry . Washington , National Academy Press , 1998 , Smith , James Immigration Rand Corporation Rand Review . Department of Homeland Security Office of Immigration Statistics . 2011 Yearbook of September . SOLUTIONS Answers to Questions If a large share of immigrants have relatively low skills , then reducing the number of immigrants would shift the supply curve of labor back to the left , which would tend to raise the equilibrium wage for labor .