Question

labor economics.

how dose microeconomics from G. Becker address markets ability to deal with discrimination from firms, employees, and customers? what are some of the issues when trying to measure and understand wage differences? how dose Oaxaca address this?

Answer 1

Price discrimination is a pricing strategy that charges different prices from different customers for the same product.

In labor market, discrimination occurs when participants in the marketplace (e.g. employee, employer and customer) take in account factors such as age, sex and race when making economic exchanges.

In the theory of Gary Becker ('The Economics of Discrimination',1971) he argued that labor market competition will eliminate wage discrimination for example blacks are paid less as to compared to equally productive Whites, unprejudiced employers will employee blacks and will earn more profit than who employed Whites.

The factors or issues which influence the determination of wage rate are as follows-

1. Ability to pay

2. Demand and supply

3. Prevailing market rates

4. Cost of living

5. Bargaining of Trade Unions

6. Productivity

7. Government regulations

8. Cost of training

The payment of wage is an important factor influencing firm and employee relations.