Question

Demand and Supply in Labor Markets 8585 unread replies.8585 replies. As the text suggests, the demand and supply model predicts that the new computer and communications technologies will raise the pay of high-skill labor but reduce the pay of low-skill labor. Explain how this works using the four-step process

Answer 1

U skilled Labor market i low skilled Labor market wage w Rate Wage 7.- 4 Laber X º i High labor Skill Labor * market: and communications Introduction of new computer technologies for will high increase skilled labor. demand The initial equilibrium in the high skilled labor market occurs at baint E. Increase in demand for high skilled by prone t o shift the demand curve rightwards to blol leading to now equilibrium at point Eg where wages paid to high skilled labor has increased to owe. aj love skilled Labor market: with the introduction of new technology, the demand curve for low skilled labor will shift leftwards to old' and at new equilibrium point Eq, the wage rate of how skilled workers has decreased to owg . technologies This new communication computer and will labor but will raise skilled the raise pay high of the pay skill labor reduce the pay off low-shith