Assuming that (1) labor supply is perfectly inelastic (vertical), and (2) immigrants and skilled labor are complements, an increase in unskilled immigrant labor ___________ the real wages of unskilled labor and __________the real wages of skilled labor.

Question

Quizplus · Accepted Answer

Given that the labor supply is perfectly inelastic, an increase in unskilled immigrant labor would increase the supply of labor without changing the wage rate directly due to the inelastic supply curve. However, since immigrants and skilled labor are complements, the increase in unskilled labor would increase the demand for skilled labor, thereby increasing the real wages of skilled labor. The increase in unskilled labor supply, however, would likely put downward pressure on the wages of unskilled labor due to increased competition for jobs, assuming demand for unskilled labor does not increase proportionately.

Assuming That (1) Labor Supply Is Perfectly Inelastic (Vertical), and (2)