MAY/JUNE 2013
SECTION A
1(a). Critically discuss Becker’s taste for discrimination model as a possible
theory to explain labour market discrimination. Draw two diagrams and refer to
these diagrams in your discussion.
According to Becker, discrimination due to employees preferring a certain group of
workers to the other eg white to blacks.
-employer believes hiring blacks has additional costs and the cost of hiring a black
worker is called a disability cost. This cost is called discrimination co-efficient.
According to graph 1 wage rate of white is WW and wage rate of black is WB + D
Starting at 1.00 a non-discriminative employer pays B + W the same wage. From B- C
the employer applies discrimination and only hires more B workers if the discrimination
co-efficient increases but once at point C the employer no-longer hires blacks and is
now racist.
But this has an effect on profitability as expressed by graph 2. On graph 2 profits are
plotted against discrimination co-efficient.
2
,-at AB employer maximizes profit because he pays no premium to whites but moving
towards C the discrimination co-efficient increases and the profits will decline
As the employer reaches point C he becomes racist and profits will drop because of
hiring whites only and its very expensive.
However the tests for discrimination module is inadequate in explaining discrimination
as it only focuses on discrimination co-efficient. In the real world, statistiscal
discrimination is evident, market imperfections also result discrimination, dual labours
must also explain discrimination as well as legislation.
Statistical discrimination- perception that a certain class of workers will disadvantage
the employer.
Market imperfections- employer pays different wages according to productive race
groups
Crowding model- white employer prefers white staff resulting in black workers being
crowded into less attractive occupations.
Transaction cost model - black people have their own culture hence the cost of
restructuring the workplace to accommodate this is seen as substantial.
Legislation- job reservation, reserved jobs for whites only.
(b). name four points of criticism against the human capital theory.
-financial status/family status
-dual labour market theory (educational level)
-measurement
-radical approach
(c). Name 5 factors that determine the outcome of collective bargaining
-unemployed position
-demand conditions (profitability + productivity)
-monopolistic education
3
,-export orientation
-ERLS capacity to deal with strike
2(a). question 2a is based on the following diagram
GRAPH
(i). Label the vertical and horizontal axes
Vertical axis; wage / income
Horizontal axis; leisure time
(ii). Name and define 13
Indifferent curve 3- curve
All combination of income +leisure that yields max satisfaction.
(iii). Name and define line w2
Budget constraint- showing amount of his spent on leisure of income you have
(iv). What does point U5 indicate?
Utility maximization- pt where IC touches BL or is tangent to the budget line
(v). Name the curve that can be derived from the above diagram and explain what
causes the shape of the movement from U1 to U5
Backward bending utility curve
The shape is caused by the ffg
-as the wage increases one tend to work more hours substituting the hours of leisure
they can enjoy.
4
, -over time as one earns more they are able to afford more and spend time of leisure eg
movies. This decreases hours of work causing a decline in the hours of work.
b). Advantages
-Young inexperienced people get into the labor market through atypical employment.
This assists in addressing youth unemployment.
-Reduces labour costs as benefits are not provided in this type of employment.
-Allows more flexibility in the utilization of labour especially due to fluctuating levels in
labour
-More freedom and flexibility of workers eg parents with kids will prefer this to spend
time with kids
Disadvantages
-Wages are normally lower for those on atypical compared to other workers
-conditions of employment are less protected
-training- little incentive-
-no social security as they are not normally registered to get retirement funds
The employer loses people as there is no stability
SECTION B
1-4 11-3 21-3
2-4 12-2 22-2
3-2 13-1 23-2
4-1 14-2 24-1
5-2 15-3 25-5
6-3 16-1 26-3
7-5 17-4 27-3
8-4 18-2 28-5
9-1 19-5 29-5
10-5 20-2 30-4
5
SECTION A
1(a). Critically discuss Becker’s taste for discrimination model as a possible
theory to explain labour market discrimination. Draw two diagrams and refer to
these diagrams in your discussion.
According to Becker, discrimination due to employees preferring a certain group of
workers to the other eg white to blacks.
-employer believes hiring blacks has additional costs and the cost of hiring a black
worker is called a disability cost. This cost is called discrimination co-efficient.
According to graph 1 wage rate of white is WW and wage rate of black is WB + D
Starting at 1.00 a non-discriminative employer pays B + W the same wage. From B- C
the employer applies discrimination and only hires more B workers if the discrimination
co-efficient increases but once at point C the employer no-longer hires blacks and is
now racist.
But this has an effect on profitability as expressed by graph 2. On graph 2 profits are
plotted against discrimination co-efficient.
2
,-at AB employer maximizes profit because he pays no premium to whites but moving
towards C the discrimination co-efficient increases and the profits will decline
As the employer reaches point C he becomes racist and profits will drop because of
hiring whites only and its very expensive.
However the tests for discrimination module is inadequate in explaining discrimination
as it only focuses on discrimination co-efficient. In the real world, statistiscal
discrimination is evident, market imperfections also result discrimination, dual labours
must also explain discrimination as well as legislation.
Statistical discrimination- perception that a certain class of workers will disadvantage
the employer.
Market imperfections- employer pays different wages according to productive race
groups
Crowding model- white employer prefers white staff resulting in black workers being
crowded into less attractive occupations.
Transaction cost model - black people have their own culture hence the cost of
restructuring the workplace to accommodate this is seen as substantial.
Legislation- job reservation, reserved jobs for whites only.
(b). name four points of criticism against the human capital theory.
-financial status/family status
-dual labour market theory (educational level)
-measurement
-radical approach
(c). Name 5 factors that determine the outcome of collective bargaining
-unemployed position
-demand conditions (profitability + productivity)
-monopolistic education
3
,-export orientation
-ERLS capacity to deal with strike
2(a). question 2a is based on the following diagram
GRAPH
(i). Label the vertical and horizontal axes
Vertical axis; wage / income
Horizontal axis; leisure time
(ii). Name and define 13
Indifferent curve 3- curve
All combination of income +leisure that yields max satisfaction.
(iii). Name and define line w2
Budget constraint- showing amount of his spent on leisure of income you have
(iv). What does point U5 indicate?
Utility maximization- pt where IC touches BL or is tangent to the budget line
(v). Name the curve that can be derived from the above diagram and explain what
causes the shape of the movement from U1 to U5
Backward bending utility curve
The shape is caused by the ffg
-as the wage increases one tend to work more hours substituting the hours of leisure
they can enjoy.
4
, -over time as one earns more they are able to afford more and spend time of leisure eg
movies. This decreases hours of work causing a decline in the hours of work.
b). Advantages
-Young inexperienced people get into the labor market through atypical employment.
This assists in addressing youth unemployment.
-Reduces labour costs as benefits are not provided in this type of employment.
-Allows more flexibility in the utilization of labour especially due to fluctuating levels in
labour
-More freedom and flexibility of workers eg parents with kids will prefer this to spend
time with kids
Disadvantages
-Wages are normally lower for those on atypical compared to other workers
-conditions of employment are less protected
-training- little incentive-
-no social security as they are not normally registered to get retirement funds
The employer loses people as there is no stability
SECTION B
1-4 11-3 21-3
2-4 12-2 22-2
3-2 13-1 23-2
4-1 14-2 24-1
5-2 15-3 25-5
6-3 16-1 26-3
7-5 17-4 27-3
8-4 18-2 28-5
9-1 19-5 29-5
10-5 20-2 30-4
5
