Equilibrium Wage?

Question

Since the September 11th attack there has been an increase in the demand for security personnel: police, air marshals, airport security, etc. How do you think the higher demand has affected the equilibrium wage? In which direction do you think the labor supply and demand shifted? Explain your reasoning.

Answer 1

Most of the jobs created are not highly skilled so workers would come from the general labor pool. Since we were in recession there was high unemployment and the wages for general labor did not rise until last year. For those jobs that required extensive training and/or experience the wages should have increased. However the government often reduced law enforcement efforts in other areas to free up people to work on security, so even trained personal would not experience that high of a demand.

Answer 2

People trained in economics would believe that increasing the demand will lead to a higher price

The textbook answer is that there is a demand for labor which slopes down and a supply of labor which slopes upward. An increase in the demand curve shifts the demand curve out which then makes the intersection at a higher wage.

The demand for labor slopes down because each extra person adds a little less value, given the plant size and other technologies. The supply of labor is positively sloped since the more you pay someone, the more they are willing to work.

I think the problem I have with the text book answer is that I don't believe the supply curve is sloped up, because I believe people have to work at any job they can find, especially if they lack specific skills other people don't have. Also, people choose to work 40 hours or maybe 20 and that's it. The idea that a person works more because you pay him more is nonsense. Also, demand for labor does not slope downward: firms don't hire workers one at a time but all at once dependent on the technology of the place. Security guards are hired proportionate to the size of the building, screeners dependent on the machines and so on. So, I would imagine there wasn't much change in the wage.

Answer 3

How do you think the higher demand has affected the equilibrium wage?

In the immediate aftermath of 9/11, and following the effort to increase security, I imagine that skilled workers with clean records became somewhat difficult to find. Recession was already heavy with the dot-com burst, which may have pushed individual workers down the scale and made the bottom end of the worker pool heavier than it could have been, but I still believe that qualified and clean workers would have run out quickly. As a result, the equilibirum wage would have been artifically higher to begin with. Another factor contributing to this artificial wage height would have been the need for immediate action, coupled with readily available funding, which would also cause organizations to offer more to quickly fill the need.

In which direction do you think the labor supply and demand shifted?


With high demand intersecting a diminishing supply, the wage would have started high. As supply of workers increased and demand decreased, the intersect/wages shifted lower. As the initial reaction period wore slowly off, and as the realization of the class of worker became more apparent, laborers probably became abundant

Answer 4

Dude, you must not know anything about supply and demand. Read your textbook and know it. This question is absurdly easy. The demand for aforesaid security personal shifted to the right. Thus, the equilibrium wage increases. The labor supply is not affected by said increase in demand, because, well, it's an increase in demand! LOL I think whoever asked you such a question thinks you're an idiot.