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The Marginal Product of Labor

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In this video on the marginal product of labor, we discuss some commons questions such as: How are wages determined? Why do most Americans earn so much by global standards? What exactly is meant by ‘human capital’? Do labor unions help workers, and if so, by how much? How does discrimination affect labor markets? How is the demand for labor different than the demand for a good? We’ll discuss how to derive the demand for labor based on the marginal product of labor, and use real-world examples — such as the demand for janitors in a fast food restaurant — to illustrate this calculation. We’ll also cover an individual’s labor supply curve vs. market supply of labor. Microeconomics Course: http://bit.ly/20VablY Ask a question about the video: http://bit.ly/1T7fDDC Next video: http://bit.ly/21Zs6u9 Help us caption & translate this video! http://amara.org/v/GZRc/
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Text Comments (30)
Ibrohim Mirsaidov (2 months ago)
美しく燃える森 (9 months ago)
but if you think about it if w= worker c=capital and t=all the work completed (w+c=t) then at first it makes sense to say that each part on the left should get it's correct amount allocated. but if you think about this would imply that capital by some voodoo magic also produces like labor. It doesnt. think about it if you had capital but no labor nothing gets made. so capital has no marginal productivity of its own, it instead relies on labor to create its marginal productivity value. as soon as you add labor to the equation, suddenly capital's mpv can be "determined". labor is what creates all value. economics is a religion more than anything. https://theanarchistlibrary.org/library/the-anarchist-faq-editorial-collective-an-anarchist-faq-04-17 i highly recommend this.
Dragan Ostojić (1 year ago)
You have mistake. If wage is $30, two genitors will be hired. You said one.
lyricox (9 months ago)
At the beginning he mentioned that labour will be hired when MPL is greater than the market wages, so if wage is 30, they should choose the number where MPL is more than 30 which is 35 for 1 labour.
Tony Jays (1 year ago)
no because that will make it 60 (30x2) which goes over the marginal product of labor which is 35
Zeeshan Areef (1 year ago)
I agree with the point of labour supply being more in India compared to US, however, have a doubt about buying the reason that US economy is more productive. E.g A contact centre which has an onshore and an offshore operation where both the contact centre associate are handling the same calls from US customers and giving the same productivity. Also there is a supply of labour in the US as well for those jobs but they are outsourced to minimise cost of firms, so, it would be suitable to compare on the standard of living in both countries. So I believe it would be inaccurate to state productivity as a characteristic to measure the wage disparity. Appreciate your inputs on the same. Thank you for the informative video.
Guilherme Z (1 month ago)
It is the productivity of the whole economy that mandates it. When American firms outsource the service they can hire at a lower wage, so they hire more and more to the point that you have so much call center workers that you annoyed the whole country with pointless phone calls. It's cheap to do that. In addition, these workers don't have much of an option other than that low wage. The amount of new demand actually pushes the wage up in that country. The American workers now will compete in other industries using low-skilled workers, which will make wages go down. Now you learned that international trade pushes for the equalization of factor prices. Wages and capital prices tend to be equalized across nations when you can trade goods. Since most of the economy is on the services sector, which is non-tradable, wages will not equalize across countries, and in developed nations low-skill workers will earn more than their counterparts in the developing world doing the same job.
Zeeshan Areef (1 year ago)
I have observed a behaviour of an employer opposite to the one explained by you where the wage discrimination is made even though the marginal product of labour is the same. I presume, it may be in cases where the government regulation mandates an employer to maintain a percentage of its labour force in an onshore office.
Ion Sterpan (1 year ago)
It is true that the value to an American office owner of a call handled in the US is the same as the value to that same owner of a call handled in India by an Indian. In that case the marginal product is the same. Usually, such Offices operate only with offshore cheap labor - we don't usually see an employer paying an Indian worker 200 dollars and an American worker doing the same job, 2000. That employer would only hire Indian workers. For some firms, the marginal product of labor of an Indian worker may be a lot more than 200, while in other cases it may be just that, 200. When the marginal product is 2000 but the wage paid is 200 this is due to the higher supply of labor in India, but also to the lower demand for that labor in India, since the alternatives of that employer must be worse than the job in question. So even in that case, the 200 dollar wage is determined by the productivity of a worker's labor in the market faced by that worker.
evelyn harshbarger (1 year ago)
Are you using marginal product of labor interchangeably with marginal revenue product? In most texts marginal product is quantity and marginal revenue product is $.
Ion Sterpan (1 year ago)
Yes, in this video marginal product is a shorthand for marginal revenue product. It is measured in dollars. The equilibrium price of labor, which is the equilibrium wage, is determined by the supply and the demand for labor (it is the intersection of the functions). The points which make up the firms' demand curve for labor answer the question: "how much would I be willing to pay for yet an additional unit of labor?". The answer, which is measured on the Y axis, must be just below the marginal revenue product of labor. In the example given in the video, the marginal physical product of labor is measured in number of clean square meters of floor in the restaurant. The marginal revenue product is the mathematical product of that number of square meters, and the market value of a clean square meter.
raghav vijay (1 year ago)
thank you so much sir iam from india you explained in very good way
chaitanya sharma (2 years ago)
Hey man wtf? India is growing and it is getting better. I hope you respect that.
Michel Salazar (6 months ago)
India is a wonderful country, but where the hell did he disrespect india, for god's sake? India is objectively less developed than the USA, and the fact that it is growing doesn't really change this fact, not in the present at least. I fail to see why people took that personally.
maya silver (2 years ago)
i study the intermediate microeconomic and its application for Nickolson and Snyder the problems and quizzes are soo hard can u do it please
Ozricist (3 years ago)
This is NOT how most real firms allocate tasks or set wages. They neither know nor care what a given worker's marginal product is - an all but meaningless quantity in mass-production with rational division of labour. Also, what they're after is not so much revenue as profit i.e. revenue minus costs. If labour becomes cheaper, a firm won't necessarily hire any more since profit may increase by more than the revenue generated by additional hires.
Lou Henderson (2 months ago)
+Greoric M Watching this from the future, and I can't help responding to the top comment here. I came here specifically because of the empirical observation that wages no longer track productivity growth (GDP per capita) in the developed world. What's the explanation, then?
Blazer433 (8 months ago)
ceteris paribus
Buddy Guy (1 year ago)
+ Grahamhg If they just wanted to lower labour costs as much as possible, they wouldn't hire anyone, so we can tell that's not their goal.
Greoric M (2 years ago)
+I am Graham, king of the Britons! The claim that wages aren't set by VMP. Do you have literature to support that claim? By the way, you'd need more than one study because that's extravagantly audacious. By the way, Marx is probably the worst source to appreciate. Who the hell takes the labor theory of value serious anymore?
Greoric M (2 years ago)
+I am Graham, king of the Britons! That's a pretty radical claim to make on a very well understood concept. Source?

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