Chapter 5

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Chapter 5

Frictions in the Labor Market

Copyright © 2009 Pearson Education, Inc. 5- 2

Figure 5.1: The Supply of Labor to Firm A: Worker Mobility Costs Increase the Slope

of the Labor Supply Curve Facing Individual Employers


Table 5.1: Labor Supply Schedule for a Hypothetical Firm Operating in a

Monopsonistic Market


Figure 5.2: A Graph of the Firm-Level Data in Table 5.1


Figure 5.3: Profit-Maximizing Employment and Wage Levels in a Firm Facing a

Monopsonistic Labor Market


Figure 5.4: The Monopsonistic Firm’s Short-Run Response to a Leftward Shift in Labor

Supply: Employment Falls and Wage Increase


Figure 5.5: Minimum-Wage Effects under Monopsonistic Conditions: Both Wages and Employment Can Increase in the Short Run


Table 5.2: Hours Devoted by Firms to Training a New Worker during First Three

Months on Job, 1992


Table 5.3: Employee Benefits as a Percentage of Total Compensation, 2006

(Average Hourly Cost in Parentheses)


Figure 5.6: The Predicted Relationship between MEM/MEH and Overtime Hours


Figure 5.7: Productivity and Wage Growth, First Two Years on Job, by Occupation and

Initial Hours of Employer Training

Chapter 5

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