What economic principle justifies the high salaries of some professional athletes? Suppose the manager of a baseball team wants to hire a new pitcher for $4 million per year. Under what circumstances would it make sense for the team to do so?
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Today many people could be surprised by the fact that sportsmen playing football, hockey, basketball, or some other popular kind of sport get millions for their job when therapists, firemen, teachers, etc. are provided with much lower wages. Individuals admit this unfair distribution of funds and do not understand the fact that they are the main contributors to the existence and further evolution of this very pattern.
The fact is that the extremely high salaries of professional sportsmen are possible due to the economic principle of supply and demand (“The labor market,” n.d.). First of all, there are not so many good athletes that could help a team to win by their own forces. That is why the most skilled ones could ask for the extremely high salary as they know that coaches and team managers have no choice in case they want to win. Moreover, the above-mentioned sports are very popular nowadays. Millions of people watch basketball or baseball games. It results in giant incomes for the industry that comes from sponsors who want to advertise their goods, TV channels which buy broadcasting rights, etc. In this regard, the existing high demand for games and talented sportsmen preconditions the enormous size of their salaries.
Besides, in case a manager of a baseball team wants to hire a new pitcher for $4 million per year, it could be justified by several reasons. First of all, it should be an eligible investment. It means that it should be really an outstanding player who could not be replaced by any other member of a team. Moreover, all modern players are celebrities who sell different goods. For this reason. he should be able to attract sponsors. Only under these conditions, his transfer could be justified. The sum spent to buy him will be compensated by contracts with sponsors and other incomes preconditioned by the increased popularity of a team where a baseball star plays.
Assume that the government of the state of New Jersey has determined that a large number of injuries and deaths have occurred as a result of accidents involving the installation and repairs of electrical equipment at private residences. In reaction to this problem the state assembly decides to pass a law which requires that all certified electricians pass a tougher state licensing examination. Analyze the impact that this law is likely to have on the market for electricians and explain why safety may not necessarily improve.
In case the given law is accepted, the pool of certified, licensed electricians in the state will obviously decrease. There are several reasons that will precondition the given alteration of the pool. First of all, an additional licensing examination will result in the need for the additional time, effort, and money. It could corrupt the attractiveness of the given sphere and electricians might prefer to avoid passing this examination. Moreover, the more complex procedure will also result in the appearance of a number of illegal workers who will perform their functions without an appropriate license; however, they will be able to satisfy peoples need for this sort of specialists as the demand for electricians still remains high.
Finally, considering the fact that the law is current only at the territory of the state of New Jersey, workers could also prefer to move to other states where regulations are more comfortable and acceptable. In this regard, we could state that the above-mentioned law will obviously precondition the appearance of the labor shortage and people will suffer from the lack of electricians. As for safety issue, it will also hardly improve.
The fact is the majority of electricians will refuse to pass the exam which means that their knowledge will remain at the same level. Moreover, these who do it will become overworked because of the increased demand for electricians. It will result in the decreased level of attention and increased threat to their security and health. For this reason, it is possible to predict the fact that the given law will hardly improve the situation in the sphere. On the contrary, it will result in the appearance of a set of problems that will deteriorate the overall situation and demand new actions and solutions.
If the market price of the good or service that a firm produces increases, what happen to the demand of labor? Explain.
The increase in the price for a certain good or service means that at the moment there is the high level of demand for it. The increased demand indicates peoples desire to possess the good and enjoy benefits of its exploring. Moreover, it also means that firms working in the sphere that is focused on manufacturing of the good will obtain higher incomes for a certain period of time. Higher incomes mean improved salaries for workers who contribute to the improved functioning of a firm and its good results.
The given alteration in demand and tendency in the market will obviously result in the appearance of a number of individuals wanting to work in the given sphere because of the high salaries and the stable level of income. At the same time, employees who have already been working for a company during a certain period of time will try to preserve their places. This process will precondition the increased level of rivalry in the given sphere because of the great popularity of the product and increased market price. Furthermore, numerous employees who want to work for companies will create the manpower oversupply.
The new workers will try to acquire new vacancies when the old ones to preserve their own. That is why the appearance of new companies to satisfy existing high demand could be expected. New business ventures will need a number of employees. For this reason, it is possible to predict the increased demand of labor in the given sphere. Altogether, in case a certain product is popular at the moment, this tendency will always be associated with the alteration of the demand of labor and appearance of new vacancies (“The labor market,” n.d.).
Several cities across the United States have passed legislation to raise the living wage. How would this policy affect firms? Make an argument for or against living wages in your city. Be sure to cite your references.
Living wage is a minimum income that is needed for a person to survive and satisfy some of his/her needs. It is established by the government on the basis of some important factors peculiar to a certain state (Boaz, 2009). In theory, it is the amount of money that could be used to have an appropriate quality of life and avoid poverty. Additionally, the introduction of a certain living wage means that companies are not allowed to pay their workers’ salaries that are lower than this very living wage. For this reason, any alteration of this element will obviously impact firms that work in the state. In case the living wage is raised, they should also respond to this policy and raise salaries because they are not allowed to pay less (Filion, 2009).
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Even if the wages are higher, a firm should raise them to remain competitive as workers will obviously know the alteration in the policy and will count on the appropriate increase in their incomes. Altogether, the given policy could be considered rather efficient as it serves as a regulatory tool that helps people to obtain good salaries and enjoy the improved quality of life. Moreover, the tendency towards the gradual increase of prices for the most necessary prices and goods also preconditions the great demand for the appropriate living wage.
Boaz, D. (2009). Reporting the minimum wage. Web.
Filion, K. (2009). Minimum wage issue guide. Web.
The labor market. (n.d.). Web.