The Marginal Product of Labor
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- Опубліковано 10 вер 2024
- In this video on the marginal product of labor, we discuss some commons questions such as: How are wages determined? Why do most Americans earn so much by global standards? What exactly is meant by ‘human capital’? Do labor unions help workers, and if so, by how much? How does discrimination affect labor markets? How is the demand for labor different than the demand for a good? We’ll discuss how to derive the demand for labor based on the marginal product of labor, and use real-world examples - such as the demand for janitors in a fast food restaurant - to illustrate this calculation. We’ll also cover an individual’s labor supply curve vs. market supply of labor.
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my prof explained this for 2 hours but were unable to keep my attention as this does, thank you!
thank you so much sir iam from india you explained in very good way
This Channel is life saviour
It unlocked 🔓 a portion of my brain 🧠, which my uni teachers were unable to unlock, thanks
i study the intermediate microeconomic and its application for Nickolson and Snyder the problems and quizzes are soo hard can u do it please
Thank you sir, that was really helpful understanding. 😊
Are you using marginal product of labor interchangeably with marginal revenue product? In most texts marginal product is quantity and marginal revenue product is $.
Yes, in this video marginal product is a shorthand for marginal revenue product. It is measured in dollars. The equilibrium price of labor, which is the equilibrium wage, is determined by the supply and the demand for labor (it is the intersection of the functions).
The points which make up the firms' demand curve for labor answer the question: "how much would I be willing to pay for yet an additional unit of labor?". The answer, which is measured on the Y axis, must be just below the marginal revenue product of labor.
In the example given in the video, the marginal physical product of labor is measured in number of clean square meters of floor in the restaurant. The marginal revenue product is the mathematical product of that number of square meters, and the market value of a clean square meter.
Hello! Did anyone do the practice questions that accompany this video? I'm really stuck on the last 3 questions. Is there a trick to it?
i don't see any practice question :/
I agree with the point of labour supply being more in India compared to US, however, have a doubt about buying the reason that US economy is more productive. E.g A contact centre which has an onshore and an offshore operation where both the contact centre associate are handling the same calls from US customers and giving the same productivity. Also there is a supply of labour in the US as well for those jobs but they are outsourced to minimise cost of firms, so, it would be suitable to compare on the standard of living in both countries. So I believe it would be inaccurate to state productivity as a characteristic to measure the wage disparity.
Appreciate your inputs on the same.
Thank you for the informative video.
It is true that the value to an American office owner of a call handled in the US is the same as the value to that same owner of a call handled in India by an Indian. In that case the marginal product is the same. Usually, such Offices operate only with offshore cheap labor - we don't usually see an employer paying an Indian worker 200 dollars and an American worker doing the same job, 2000. That employer would only hire Indian workers. For some firms, the marginal product of labor of an Indian worker may be a lot more than 200, while in other cases it may be just that, 200. When the marginal product is 2000 but the wage paid is 200 this is due to the higher supply of labor in India, but also to the lower demand for that labor in India, since the alternatives of that employer must be worse than the job in question. So even in that case, the 200 dollar wage is determined by the productivity of a worker's labor in the market faced by that worker.
I have observed a behaviour of an employer opposite to the one explained by you where the wage discrimination is made even though the marginal product of labour is the same. I presume, it may be in cases where the government regulation mandates an employer to maintain a percentage of its labour force in an onshore office.
It is the productivity of the whole economy that mandates it. When American firms outsource the service they can hire at a lower wage, so they hire more and more to the point that you have so much call center workers that you annoyed the whole country with pointless phone calls. It's cheap to do that. In addition, these workers don't have much of an option other than that low wage. The amount of new demand actually pushes the wage up in that country.
The American workers now will compete in other industries using low-skilled workers, which will make wages go down. Now you learned that international trade pushes for the equalization of factor prices. Wages and capital prices tend to be equalized across nations when you can trade goods. Since most of the economy is on the services sector, which is non-tradable, wages will not equalize across countries, and in developed nations low-skill workers will earn more than their counterparts in the developing world doing the same job.
@@IonSterpan I don't think so. Where communication has a cultural element that can (and does) interfere with efficiency, the product is NOT the same. Especially in an industry where the consumer knows little to none of the mechanics or language of the industry. There is a massive disparity between what is culturally acceptable etiquette coupled with sometimes complex operations. But this cultural disparity is not quantifiable and so markets tend to believe it as able to use the same margin as for US workers and pocket the additional profit. But reality says it isn't very long before level and quality of service are correlated with product quality and demand begins to fall. Ask any American company that repatriated its service center why it did so and it will tell you that any perceived increase in profit was negated by lower service levels. They might take the same number of calls and maybe even maintain the same average handle time (an understandable but terrible metric), but only by increasing the number of transfers. Been there, done that in BOTH sides of this equation. Businesses desire to make increasing levels of profit naturally depresses wages, but only because of the desired increase in margin. Eventually, you come to a point of diminishing returns. Even (or maybe especially) in a technologically supported labor market where technology may greatly increase productivity, but only at the expense of increased education required to complete tasks. Why US business is undermining the value of education: business has a profit motive that is crystal clear. When just getting the job "done" becomes more important than doing it right, where time becomes a major factor in production, quality suffers. Period. It's the Humanities that confound the "science" oof economics. Why Humanities degrees are openly disparaged in the business community. It's easy to see the absurdity of the "free market" when you're not blinded by the "principles" driving it. In the end, economics is an imperfect human construct that can be manipulated for the benefit of either side. There is no real balance unless we're willing to compromise.
You seriously believe productivity isn’t a characteristic wage disparities??
1) it’s BEYOND obvious that productivity is a characteristic of wage disparity
2) the data supports this as well
It’s actually more than impressive to believe productivity doesn’t effect wage.
Thanks you sir..
Where's the video on discrimination?
Terrific
Why would a Mcdonald's ever hire eight janitors, each doing only very specific tasks like removing gum or emptying the trash?
According to your graph, from $7 to $8 an hour around eight janitors would be hired in a McDonald's. That's basically the national minimum wage right now. Now, tell me the next time you go into a Mcdonald's if you happen to see eight janitors all doing only one task each. A business owner would tell you that makes no sense and is incredibly inefficient, and they would say to hire one person and pay them the minimum wage, maybe a few dollars more, and then they could do all the random tasks you mention in a day's work, maybe two.
@@gammaraygun6576 You're right it's not a great example. But even going by their breakdown of labor responsibilities, the 7 janitors would add an average of $21.14 each to revenue while only being paid $7.95. Or to put it another way, each employee is generating 2.66 times more revenue than they are being paid. Works out well enough for the employer anyway I guess.
It’s literally a thought experiment. It’s beyond weird you expect the examples to be 1:1 realistic.
@@Milton_Friedmanite I understand your point, but economics is a shit show
I'd work more at $28. Take advantage of the high rate while it lasts!
A great illustration @3:20 of how workers are exploited under the conditions of free-market capitalism: ‘If the market wage = $10, 7 janitors will be hired.’
According to marginal productivity theory of distribution, each factor of production (i.e. labor) would receive a rate of return (i.e. wage) which is exactly equal to their marginal productivity.
However, this video shows that…
The first worker produces $35 of revenue for the firm (MPL/hr = $35) and yet earns only $10 in wages-a difference of $25.
The second worker produces $30 of revenue for the firm (MPL/hr = $30) and yet earns only $10 in wages-a difference of $20.
And so on until the seventh worker. At the end of the hour the capitalist gets $148 in revenue from the workers and only pays $70 in wages. Not a bad rate of profit! For those who can do basic math, $148 is not equal to $70.
Thank you for proving Marx right: unpaid labor is the source of the capitalist’s profits.
No it’s not like that: the first worker generate 35 and costs around 32, 2 workers generate 60 and cost about 56… and so on. Seven workers would generate 77 and only be convenient to hire if their cost is less than 77
@@leopp78 I think that you are misunderstanding the video and some basic economics.
Under a perfectly competitive market structure, both firms and workers are price-takers in the Resource Market-in this case the Labor Market.
Again… ‘If the MARKET WAGE = $10’-meaning each individual janitor ‘takes’ the market wage of $10 i.e…
the first janitor hired ‘takes’ the MARKET WAGE of $10,
the second janitor ‘takes’ the MARKET WAGE of $10,
the third janitor ‘takes’ the MARKET WAGE of $10,
the fourth janitor ‘takes’ the MARKET WAGE of $10
the fifth janitor ‘takes’ the MARKET WAGE of $10
the sixth janitor ‘takes’ the MARKET WAGE of $10
the seventh janitor ‘takes’ the MARKET WAGE of $10
making the cost of labor for the firm at $70 (7 janitors X $10 per hr. = $70)
However, according to the table… (you can review at @1:53)
the first janitor would “add $35 to the firm’s revenues”
the second janitor would “add $30 to the firm’s revenues”
the third janitor would “add $24 to the firm’s revenues”
the fourth janitor would “add $20 to the firm’s revenues”
the fifth janitor would “add $16 to the firm’s revenues”
the sixth janitor would “add $12 to the firm’s revenues”
the seventh janitor would “add $11 to the firm’s revenues”
making the firm’s additional revenue at $148 if they were to hire 7 janitors.
Profit is calculated by finding the difference between a firm’s costs and revenues-it is the reason the firm would not hire the eighth janitor, as it would cost the firm $10 per hr. and yet that janitor would only add $8 to the firm’s revenues.
Again, Marx’s position was that the source of a firm’s profit was the result of unpaid labor. Workers produced a ‘surplus’ in addition to what they earn from their market wage. Therefore, under the conditions of free-market capitalism workers are exploited and this video illustrates it very well.
@@criteconomics782 maybe the “janitors” should make a co-op and cut out the middle man
Wages aren’t determined by a hypothetical revenue they’re determined by how many people are competing for the job. Why should a company hire someone that demands 20 an hour when someone else only needs 10 an hour. Market wages determine allocation of workers, not some cashless society where everybody makes the same wage in food or whatever. Sure let’s give education so the supply of janitors decreases and more fields can take more valuable people and increase productivity. But a socialist economy which is according to everyone’s needs through whatever their means is ridiculous. The amount of neurosurgeons would drop by like 80%. Sorry but inequality exists cause some jobs take more valuable skills than others. I do agree a poverty floor should be provided so people don’t get stuck in the never ending poverty cycle. But come on we’re gonna need them to have some initiative and better themselves if they want more things. I know thi probably triggers you cause socialists are obsessed with comparing themselves with others, and feel entitled to the same shit as a doctor despite getting a worthless degree they didn’t do any research on.
@Charles I’m impressed by your complete ignorance regarding economic theory from all perspectives-capitalism and Marxism alike.
Your position is that wages are “determined by how many people are competing for the job.” In other words, only supply (of labor) determines the price (the wage). You are the first in my experience to be ignorant enough to argue that demand plays no role in determining the price of labor (and I have been teaching economics for nearly 15 years.)
However, you also state that, “Market wages determine allocation of workers.” The ‘Market’ by definition is a ‘place’ where the total of all the BUYERS (DEMAND) AND SELLERS (SUPPLY) exchange goods/services for money. In short, you can’t have a market without demand.
I understand why you did not directly respond to my comment: you clearly lack the understanding of basic free-market economics as promoted by pro-capitalist sites like Marginal Revolution University. Instead, you make a series of contradictory claims, which at best comes off as incoherent rambling.
Please educate yourself--it's embarrassing.
If you simply wrote your comment while intoxicated-please accept apologies.
this is Godsent omg
good
why does it sound so racist? ive been feeling it lately watching these lectures
even his choice of names omg
@@Aninha-uh4ls is that sarcasm or nah? cause im fucking done with economics
@@jerometorno1555 Not at all, I agree with you fully. When i heard the hispanic names, i had to scroll to comments to see if anyone else had picked up.
@@Aninha-uh4ls expect more in later videos although i cant deny that it got some good contents cheers!
WTF is your TikTok brain on about????
so it has noithing to do with the central banks and army.... ECO is NUTS
May Allah guide u right path Ameen.
This is NOT how most real firms allocate tasks or set wages. They neither know nor care what a given worker's marginal product is - an all but meaningless quantity in mass-production with rational division of labour. Also, what they're after is not so much revenue as profit i.e. revenue minus costs. If labour becomes cheaper, a firm won't necessarily hire any more since profit may increase by more than the revenue generated by additional hires.
+Ozricist That's why they decide to hire the extra people on the margin, because that's what necessarily determines if they're going to get more profit versus just being at over capacity and spinning their wheels.
+Greoric M What is? Nothing in my post implies any such thing (quite the contrary). What are you talking about?
+Grahamhg Yep, and empirically false. Over 90% of real firms report rising to flat marginal labor productivity and falling to flat marginal costs. Without rising MC/falling MLP, marginalism cannot explain production, prices or wages. Basically nothing. Pure propaganda.
in principle u are right. Everything u said is pretty much how the real world works. If you have all positions filled up and the wage level drops then you arent going to hire more people lol. This is just theory that is never used.
Ozricist Read it again maybe? You're suggesting firms don't hire (or fire) based on the value of labor on the margin. They do.
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You have mistake. If wage is $30, two genitors will be hired. You said one.
no because that will make it 60 (30x2) which goes over the marginal product of labor which is 35
At the beginning he mentioned that labour will be hired when MPL is greater than the market wages, so if wage is 30, they should choose the number where MPL is more than 30 which is 35 for 1 labour.
This a racist clip😂
Actual TikTok brain rot ^