Employer Concentration and Wage Determination
Explain how a significant decrease in the number of competing employers within a particular labor market would influence the position of the price-setting curve. Detail the intermediate steps involving firms' wage-setting behavior and the ultimate effect on the real wage.
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Ch.1 The supply side of the macroeconomy: Unemployment and real wages - The Economy 2.0 Macroeconomics @ CORE Econ
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Labor Market Dynamics in a Company Town
Imagine an economy where new regulations are introduced that make it significantly more difficult for employees to change employers. Assuming all other economic factors remain the same, what is the direct consequence of this change on the firms' price-setting behavior and the resulting real wage?
In an isolated town with only one major employer, the price-setting curve would be positioned higher than in a large city with many competing employers, assuming all other factors like labor productivity and product market competition are identical.
Employer Concentration and Wage Determination