Wage Elasticity of Labor Demand Measure
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A Wage Elasticity of Labor Demand Measure is a demand elasticity measure that can be used to create labor market analysises (that support employment policy decision tasks).
- AKA: Price Elasticity of Labor Demand, Labor Demand Wage Elasticity, Own-Wage Elasticity of Labor Demand.
- Context:
- It can typically produce Wage Elasticity Values through wage elasticity calculation methods.
- It can typically measure Labor Demand Responsiveness to wage rate changes.
- It can typically inform Minimum Wage Policy via wage elasticity employment impact analysis.
- It can typically guide Collective Bargaining Strategy through wage elasticity negotiation parameters.
- It can typically predict Employment Level Changes using wage elasticity demand models.
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- It can often determine Tax Incidence Distribution through wage elasticity payroll tax analysis.
- It can often assess Immigration Impacts via wage elasticity labor supply shock evaluation.
- It can often influence Overtime Premium Policy through wage elasticity hours substitution effects.
- It can often calibrate General Equilibrium Models using wage elasticity parameter inputs.
- ...
- It can range from being a Highly Elastic Labor Demand to being a Highly Inelastic Labor Demand, depending on its wage elasticity absolute value.
- It can range from being a Short-Run Wage Elasticity to being a Long-Run Wage Elasticity, depending on its wage elasticity adjustment period.
- It can range from being a Conditional Wage Elasticity to being an Unconditional Wage Elasticity, depending on its wage elasticity output constraint.
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- It can be expressed as [math]\displaystyle{ E_d = \frac{\mbox{% change in level_of_employment}}{\mbox{% change in wage_rate}} = \frac{\% \Delta E}{\% \Delta W} = \frac{\Delta E_d/E_d}{\Delta W/W} }[/math]
- It can produce Negative Wage Elasticity Values in competitive labor markets.
- It can exhibit Positive Wage Elasticity Values in monopsony labor markets.
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- Examples:
- Skill-Level Wage Elasticities, such as:
- Industry-Specific Wage Elasticities, such as:
- Manufacturing Wage Elasticity for wage elasticity capital substitution potential.
- Service Sector Wage Elasticity for wage elasticity labor intensity characteristic.
- Technology Sector Wage Elasticity for wage elasticity skill complementarity effect.
- Construction Wage Elasticity for wage elasticity project-based employment.
- Time-Horizon Wage Elasticities, such as:
- Immediate Wage Elasticity (less than 1 year) with wage elasticity limited adjustment capacity.
- Medium-Term Wage Elasticity (1-5 years) with wage elasticity partial factor substitution.
- Long-Term Wage Elasticity (over 5 years) with wage elasticity full technology adoption.
- Regional Wage Elasticities, such as:
- ...
- Counter-Examples:
- Price Elasticity of Labor Supply, which measures labor supply response to wage change rather than labor demand response.
- Cross-Wage Elasticity of Labor Demand, which measures labor demand response to other occupation wage change rather than own wage change.
- Income Elasticity of Labor Supply, which measures work hour response to non-labor income change rather than wage rate change.
- Output Elasticity of Labor, which measures production response to labor quantity change rather than labor response to wage change.
- See: Capital and Labor Substitution Elasticity, Price Elasticity of Demand, Marginal Revenue Productivity Theory, Labor Market Equilibrium, Hicks-Marshall Laws of Derived Demand, Monopsony Power.
References
2013
- http://elearning.la.psu.edu/econ/315/lesson-4/elasticity-of-labor-demand
- QUOTE: In the realm of labor economics, we are interested in how responsive an employer's demand for labor is to the price (wage) of labor. More specifically, we look for the relative change in employment level for a relative change in the wage:
Elasticity of labor demand is equal to the percent change in employment divided by the percent change in wage.Notice that because demand curves are downward-sloping, this calculation will always be negative. If the wage goes up, employment will go down (all else constant.) If the wage goes down, employment will go up (all else constant.)
- QUOTE: In the realm of labor economics, we are interested in how responsive an employer's demand for labor is to the price (wage) of labor. More specifically, we look for the relative change in employment level for a relative change in the wage: