Question

Labor markets are an important concept to understand in terms of how wages are determined. Identify one demand and supply factor that can impact wages in markets. Explain one of the main reasons why the large wage gap exists in the United States and provide one solution of this wage gap.

Answer 1

A.Demand factor that impacts wages in the market:

Changes in price of good produced:

Increase in price of goods produced will result in increase in demand for the labor( Marginal Revenue product of Labor rises ) , as a result wage rate increase. Whereas decrease in price of goods , shall result in decrease in demand for the labor( Marginal Revenue product of Labor falls ), therefore wage rate decreases.

B.Supply factor that impacts the wages in the market :

Changes in wage rate in competing market:

If the wage rate in competing market increases, therefore more workers will move into the market which provides a higher wage rate, this will lead to a fall in supply of labor in the current market . As a result wage rate increase. Whereas , if the competing market wage rate decreases, it leads to increase in supply of labor in the current market , therefore wage rate decreases.

One of the major wage gap in United States is the Gender wage gap.

Gender wage gap exists even now, men are paid higher than women . Some of the most significant reasons why the women face such a wage gap is because they are penalized  for becoming mothers, women’s lack of negotiating skills and they face bias from employers side.

One of the major contributors to this cause is that when compared with men and childless women, new moms are often perceived to have lower competence and commitment, and they face higher professional expectations and a lower chance of hiring and promotion. When they take a time- off during pregnancy , their wage rate falls . This is known as Motherhood penalty . To resolve such an issue good quality Day cares should be available at a subsidized rates.