Suppose an island economy has only two labour markets - fishing (high skill)and farming (low skill).There are 1000 males and 1000 females in the labour force.There is an equal distribution of skilled and non-skilled workers among each sex. FIGURE 14-1
-Refer to Figure 14-1.Suppose the employers in the fishers labour market begin to discriminate against male workers,and we move to a new equilibrium in each market.In the absence of any government intervention in these markets,what forces might we expect to see over time?
1)All female workers will migrate to the fishers labour market due to the higher wage.
2)The discriminatory wage differential will tend to be eliminated by the pursuit of profit.
3)Some firm owners in the fishing labour market will find it profitable to hire high-skill males,thus reducing the wage differential.

Question

Suppose an island economy has only two labour markets - fishing (high skill)and farming (low skill).There are 1000 males and 1000 females in the labour force.There is an equal distribution of skilled and non-skilled workers among each sex.  FIGURE 14-1
-Refer to Figure 14-1.Suppose the employers in the fishers labour market begin to discriminate against male workers,and we move to a new equilibrium in each market.In the absence of any government intervention in these markets,what forces might we expect to see over time?
1)All female workers will migrate to the fishers labour market due to the higher wage.
2)The discriminatory wage differential will tend to be eliminated by the pursuit of profit.
3)Some firm owners in the fishing labour market will find it profitable to hire high-skill males,thus reducing the wage differential.

Quizplus · Accepted Answer

Option 1 is unlikely as there are equally skilled workers of both genders in the farming market and they may not all choose to migrate to the fishing market.

Option 2 is likely as discriminatory practices will create a profit-motivated opportunity for firms to hire male workers at a lower wage which will force market competition to bring the wages of male workers up.

Option 3 is also likely as some firms may choose to hire male workers with high skills and offer them a higher wage to fill the skill gap, which further pressures the discriminatory employers to eliminate the wage differential.

Therefore, the correct answer is option E.

Suppose an Island Economy Has Only Two Labour Markets -