Question

Suppose that the labor market for low skill jobs in California is close to a competitive labor market. Many of low skill labor are from Mexico and Central America. Some politicians are considering restricting immigration from these countries. This would cause

Answer 1

Answer: The demand for Labour will rise while the supply for Labour will fall, this will cause the wage rate to rise

Explanation:

Competitive labour market : This is a market where there is many employers and unorganized employees to the level that a single employers in the market cannot influence the wage rate on their own either by refusing to employ or by refusing to be employed. The employers in the competitive labour market are wage taker. The wage rate in a competitive labour market is determined by the market mechanism of interplay of demand and supply. In the sense that, when the demand for Labour in the market is more than supply wage rate will rise, conversely if the supply for Labour is more than demand wage rate will fall. Then if demand for Labour is equal to supply wage rate will be favourable to both the employers and the employees in the market.

In this case, since some politicians are considering restricting immigration from these countries where the Labour comes from this will result in the shortages in the supply of labour and since demand cannot match up with the supply this will cause the wage rate to rise.