Question

Demand and Supply in Labor Markets

As the text suggests, the demand and supply model predicts that the new computer and communications technologies will raise the pay of high-skill labor but reduce the pay of low-skill labor. Explain how this works using the four-step process.

Answer 1

Demand and Supply in Labor Markets

Demand and supply in Labour Markets As the text suggests, the demand and supply model predicts that the new computer and communications technologies will raise the pay of high - skill labouzz but reduce the pay of low-skill labour. Explain how this works using the four - step process. Answer Four step process is as follows- Step - Development of new computer and Communication technologies Development of new computer and communication technologies with transform the production Process and will make it more knowledge based while traditional production processes decline.

Step2.- Impact on labour market with production process becoming more knowledge based, film will require workers with requisite skills. Thus, demand for high skill labor will increase on the other hand, decline of traditional production processes will result in decrease in demand for low-skill labor. Step 3: Specific impact on Market for high- skill labor Given the supply of high- skill labon, this increase in demand for high-skill labor due to development of new computer and Communications technology will result in an increase in wage rate and employment in market for high - skilll labor. Thus, pay of high skill labor will rise.

impact on Market for Step 4: specific low - skill labor Given the supply of low-skill labor, this decrease in demand of or low- skilt labor due to development of new computer and communications technology will result in a decrease in wage rate and employment in market for low-skill labor. Thus, pay of low-skill labor will fall.