Labor Econ the Theory of Essay

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The intersection determines the amount of investment in education / productivity factors by all individuals and institutions.

The major criticisms to the Neoclassical model come from the assumption competition holds, namely that individuals act to maximize profit in all scenarios; factor mobility is unlimited; marginal returns to labor don't increase with wage rates, and other simplifications which rarely hold true in the workforce. Nor are all workers the same to the firm (discrimination), and workers' productivity and labor supply decisions change at different wage levels. Then we have to consider frictional unemployment; information asymmetry; product substitution; any number of real constraints that complicate the pure "Marginal Demand for Labor" theory (Kaufman & Hotchkiss, 2000, p. 31).

The main counter to the Neoclassicals arose in the early-mid-20th century Institutional school after Veblen, Commons and Mitchell, ironically at the University of Wisconsin 1920-30. Institutionalist focus on real evidence counters the Neoclassical theory where institution effects went ignored (New School n.d.). The more sociological approach recognizes 'market failures' of discrimination, collective bargaining and incorporation. Evidence surrounds us today in the form of monopolistic energy provision, embedded in every price on every shelf including wages, for example. One criticism on an Institutional line would be the persistence of poverty.

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If poverty is unwanted, either we allow poverty to persist, it is necessary for Neoclassical models to hold, or the model is flawed. The Institutional thread leads eventually via the London School to the modern "Post-Keynesian," "Behavioral," "Environmental," and other heterodox schools.

Comparing share of population to share of workforce for groups with a particular characteristic reveals discrimination if a group is underrepresented in a firm or industry. or, we identify where a category is overrepresented in the total labor market relative to other workers. If productivity is the same between groups, lower wages must be explained somehow. The heterodox perspective recognizes potential effects within the market, and before workers apply for a job. Some workers are less competitive than others before they apply, education being a common reason, which depends on access outside the workplace. Market discrimination enters the realm of individual aversion to classes of workers by the employer or other workers, usually over ethnicity, religion or gender, but any reason can provide empirical evidence if wage differentials persist.

Prejudice is real, and it results in lower wages for minorities (Kaufman & Hotchkiss 2000, p. 469). In the aggregate, equally.....

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