DUAL Economics Module 4: Income & Labor Economics

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  • Apply supply and demand as well as marginal analysis concepts to the labor market
  • Discuss how wages are determined by the market (and how to get paid more)
  • Explore counter-intuitive aspects of the labor market

Reading For This Module:

From “Introducing Economics through a Collection of Free Articles by Economists”:

  • Human Capital by Gary Becker
  • In Defense of “Sweatshops” by Benjamin Powell

Opening Vignettes:

 - Dilbert by Scott Adams




It seems obvious that your employer sets your wage, and that they pay whatever benefits (like healthcare or dental) that are in your contract. But, one thing economics teaches us is that sometimes markets are not so simple. In this module, we explore how markets (not just your employer) set wages, and how they relate to education (or human capital). We also explore a number of counter-intuitive aspects of the labor market that are not obvious until you look at them through the lenses of economics.


Dr. Wentland Lecture: Personal Finance, The Economics of Labor (Part 1)(23:40)

This video covers a brief overview of the economics of the labor market…..watch for what economics can teach us about how employers (and employees) determine wages in a market economy.

Dr. Wentland Lecture: Personal Finance, The Economics of Labor (Part 2)(15:51)

Marginal University Supplemental Lectures:

Human Capital and Signaling (7:12)

This short lecture reviews and builds on a number of topics discussed in Dr. Wentland’s lecture. What is the relationship between human capital (or education) and salaries? And, could some of this just be signaling?

Why do less fun jobs pay so well? Part 1

Why do less fun jobs pay so well? Part 2

Top 3 Ways Sweatshops Help The Poor Escape Poverty (video)(05:13)

Long term levels of high unemployment will drive people to accept low-wage positions that exploit workers.  Think about how some of the concepts in Dr. Wentland’s lecture apply to situations like these.

 This video debates sweatshops.  Sweatshops should all be shut down because of the terrible working conditions and unfair treatment of workers, right? But what about the people who choose to work in these conditions? If we look at sweatshops from the perspective of the world’s poor, we may find that we should not be trying to close their doors after all.

Professor Matt Zwolinski explains three reasons sweatshops may actually be worth keeping: sweatshop jobs may be better than the alternatives, closing sweatshops just reduces job options for the poor, and it is better to do something to end global poverty than to do nothing. From the perspective of the world’s poor, which looks better: an American company that outsources to sweatshops and provides jobs in developing countries, or an American company that hires only U.S. workers?



Wages and other benefits are the result of a market process like any other prices in the economy. Both buyers (employers) and sellers (employees) play a critical role. In this module, we see that human capital and worker productivity plays a critical role in determining how much you are paid (in equilibrium). We also learn that economics can point out some important factors to consider when it comes to sweatshops, unions, and other labor issues. 


Practice Quiz

Open practice quiz



Take the quiz for this module on Canvas.

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