Question

QUESTION 2 Suppose there are two types of restaurant workers--high-skill chefs and low-skill servers. There are 1000 males and 1000 females in the labour force, and each group has an identical distribution between high-skill and low-skill workers. The two diagrams below show an initial outcome in each labour market. Assume there is no discrimination based on gender. Well Wapet p Hour Quantity of Law Q (4) Chefs a) Explain why wages paged to Chefs (left graph) are higher than wages paid to Servers (right graph)? b) Suppose that employers begin to discriminate against female workers and hire only males as chels, forcing the female chefs to become servers. Show in the diagram what happens in each labour market, and the corresponding wages.

Answer 1

Answer

a) The wages paid to chefs are higher than wages paid to servers. The chefs are high-skilled worker than the servers. The higher the skill, the higher will be the marginal productivity of labor. The wage is paid to the worker/labor according to the marginal productivity of labor. Moreover the skill is earned through education and hard work and a person must bear the cost to acquire it. Thus the minimum wage at which a high-skilled worker is willing to work or supply his/her labor is always greater than the minimum wage, a low-skilled worker is willing to work. In the figure also we see that the minimum wage at which the chefs are willing to supply their labor service is $10 per hour, whereas the minimum wage at which the servers are willing to supply their labor service is less than $10 per hour. From the employers side, to run a successful business, the employers always look for skilled labor but the supply of high skilled labor is not as high as the low-skilled labor. Thus in the high-skilled labor market, we see that the supply of labor is not sufficient to fulfill the demand for labor. Thus, the wages paid to the high-skilled chefs are always greater than the low-skilled servers.

(2015) Wage is per Hour) 100) 1000 Quantity of Labour Quantity of Labour Chefs (6) Sants

From the figure, we see that the minimum wage, the chefs are willing to supply their labor service is $10 per hour, and the minimum wage the servers are willing to supply their labor is less than $10 per hour, shown as red point on the vertical axis of the right graph..

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b) The employers begin to discriminate against female workers and hires only males as chefs, forcing the female chefs to become servers.

This type of discrimination will decrease number of chefs as all the female chefs will loss their job as chef. As a result, the supply of chefs will decrease, and the supply curve of chefs will shift leftward, which in turn will increase the wage rate of the chefs.

On the other hand, as the female chefs will start to work as servers, the supply of servers will increase, which in turn will shift the supply curve of servers rightward. This will decrease the wage rate of servers.

This event is illustrated in the following figure;

(100 Wapes per Hour g) 1000 Quantity of Labour Quantity of Labour Chefs (6) Series

On the left hand side of the above figure, we see that the supply curve of chefs shifts leftward to S_N, which increases the equilibrium wage rate of chefs from $22.5 per hour to $W₁ per hour. On the right hand side, we see that the supply curve of servers has shifted rightward to S_M, which decreases the equilibrium wage rate of servers from $15.0 per hour to $W₂ per hour.

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