Wage Elasticity of Labor Demand Measure

A Wage Elasticity of Labor Demand Measure is a price elasticity of demand measure that applies to labor demand changes with respect to labor wage changes.

• AKA: Price Elasticity of Labor Demand.
• Context:
  • It can produce a Wage Elasticity of Labor Demand Value (which is typically a negative wage elasticity of labor demand).
  • 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]
• Counter-Example(s):
  • a Price Elasticity of Labor Supply Measure.
  • a Cross Wage Elasticity of Labor Demand Measure, [math]\displaystyle{ \frac{\% \Delta E (\text{job} \ a)}{\% \Delta W (\text{job} \ b)} }[/math]
  • a Price Elasticity of Product Demand Measure.
• See: Price Inelastic Product Demand.

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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.)

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