Question

The data below show real wage levels at various percentiles of the wage distribution for
material-handling labourers in New Zealand.

Percentile 1975 1995
10th 4.26 2.97
50th 6.02 3.89
90th 10.44 9.07

A. Use the relative demand and supply model to explain the effect of increased immigrants into this labour market on relative wage and employment outcomes

Answer 1

A. Increased immigrants into this labour market will increase supply of labour and shift labour supply curve to the right. As a result relative equilibrium wage will decrease and employment will increase.