1. One of the reasons provided for the shift in employment has been the difference in productivity gains between the manufacturing and services sectors. If productivity rose more in the manufacturing sector than in the service sector, what effect would this have on employment in the manufacturing sector?

2. Suppose that the supply curve for schoolteachers is L_s = 20 000 + 350W and the demand curve for teachers is L_D = 100 000 – 150W, where L = the number of teachers and W = the daily wage.

a. Plot the supply and demand curves.

b. What are the equilibrium wage and employment level in this market?

c. Now suppose that at any given wage 20 000 more workers are willing to work as schoolteachers. Plot the new supply curve and find the new wage and employment level. Why doesn’t employment grow by 20 000?

3. The Canadian government has decided to increase the skill of the Canadian labour force by increasing the number of economic (skilled worker) class immigrants admitted to Canada. Immigrants in targeted occupations will be given preference in the admissions process. Commercial airline pilots are members of one such targeted occupation.

a. This policy change will make it easier for commercial airline pilots to immigrate to Canada. Assume the labour market for commercial airline pilots in Canada is perfectly competitive (there are a large number of potential employers of airline pilots, and airline pilots are not covered by a union agreement). Who gains and who loses from this policy change, and why?

b. Now assume that all airline pilots in Canada are members of a union. The union contract specifies that airline pilots cannot be paid a wage less than W_u. The contract will not be renegotiated for another 2 years. How does this change you answer to part a?

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