Hello, dear friend, you can consult us at any time if you have any questions, add WeChat: daixieit

IRE1126H – 20211

Economics of Labour & Human Resources

Final Exam

PART A (Answer two questions).

1. One of the main causes of the rapid spread of COVID-19 in Long Term Care homes in Ontario in 2020 was an HR policy to hire part-time workers (who worked in several LTC homes) rather than full-time employees who worked in only one home. “Many homes are reluctant to increase their complement of full-time staff because it means additional wage and benefit entitlements, noted Matt Cathmoir, head of strategic research at SEIU Healthcare.” (Toronto Star, March 18, 2021, p. A4)

(i) Using a discriminating monopsony model diagram, explain why a profit-maximizing employer might pay part-time employees a lower hourly wage than full-time employees, even though they are equally productive. Indicate any assumptions you are making in the analysis. In the context of this model, explain the predicted impact on part-time and full-time employment and wages of legislation that would require equal pay for equal work for part-timers and full-timers. Also indicate the impact of such legislation on the profitability of for-profit LTC homes. Give an intuitive (“common sense”) explanation of your results in addition to your explanation using a diagram.

(ii) Explain (using diagrams) how an airline with some degree of monopoly power could increase profits by dividing the product market into business and recreational travel segments and charging business travelers higher prices that are more than difference in the costs of providing the two services. Carefully outline the assumptions you are making in the analysis of this model.  

2. “On average, public sector jobs pay more than private sector positions, but that’s not a fair comparison…because public sector jobs typically call for more education and a higher set of skills.” (Toronto Star, Feb 22, 2020, p.A9).

(i) Outline the methodological issues in measuring the earnings gap between public sector and private sector employees (particularly separating the gap into a part due to differences in productive attributes and a part that is a pure public sector premium). Include a discussion of the difference between the intercept shift dummy method and the Oaxaca decomposition method, using diagrams where appropriate to clarify your explanation. In your diagram, analyze the case in which “public sector jobs typically call for more education” than private sector jobs and also pay more, on average, than private sector jobs. Review the empirical evidence on the public sector wage premium.

(ii)  Explain the determinants of the elasticity of the long-run demand for labour (as specified by Marshall and Hicks) and discuss whether the demand for labour is predicted to be more inelastic in the public sector or the private sector. What does the empirical evidence suggest concerning the magnitude of the elasticity of demand for labour in the public and private sectors? Outline the implications of the elasticity of demand for labour for union power in the public and private sectors.  Does the evidence indicate a higher union-nonunion wage differential in the public or private sector? Considering the difference in union density in the public and private sectors, explain whether unions raise the average wage (combined union and nonunion) more in the public or private sectors.

3. “On October 1, 2020, the Employment Standards Act was amended to increase Ontario’s minimum wage rates. The new general minimum wage in Ontario is $14.25 per hour. This is an increase of 25 cents per hour from the old minimum wage, which was in place until September 30, 2020.” (Dutton Employment Law website, March 2021)

(i) Discuss the predicted employment effects of the introduction of a minimum wage in a competitive labour market model and a labour market in which the employer has some degree of monopsony power, using both diagrams and “common-sense” (i.e., intuitive) explanations of your results. Explain the different assumptions that underlay these two models and indicate which you think is more prevalent in the labour market.

(ii)  Review the empirical evidence on the employment impacts of minimum wages in Ontario (or Canada), including the 28% increase in the Ontario minimum wage from $8.00 to $10.25 per hour over the 2007 to 2010 period. In light of this evidence, discuss the likely impacts of the approximately 2% increase in the Ontario minimum wage from $14.00 to $14.25 per hour on October 1, 2020.

PART B (Answer Question 4).

4.        “The Ontario government is moving to make tuition free for students in financial need…. Beginning in the 2017-18 school year, the government proposes to redirect 100 per cent of funding from existing grants, including the Ontario Student Assistance program (OSAP), into a new funding structure called the Ontario Student Grant (OSG)…. The result is that students from families earning less than $50,000 annually will now receive more in grants and non-repayable loans than the cost of their tuition – roughly $6,200 for those pursuing university degrees.” (Torontoist, Feb 25, 2016).  

(i) Briefly explain and compare the human capital model and the signalling model of university education and, in the context of these models, discuss the arguments for and against government subsidy of university education. 

(ii) Explain the impact on accessibility of the rapid rise in fees at the University of Toronto Law School over the past few years, and in light of this experience, comment on the effectiveness and equity of the Ontario government’s former Ontario Student Grant program that made “tuition free for students in financial need.”