Labor Markets

“Labor Markets in Florida and Washington State” shows the labor market in Florida. The equilibrium wage is $12.50, and the equilibrium level of employment is 1,200 million hours. This is roughly calibrated to the actual experience in Florida, where total employment in 2004 was just under 7.5 million individuals. Part (b) of Figure 5.5 “Labor Markets in Florida and Washington State” shows Washington State, where the equilibrium wage is $16.07, and employment is 400 million hours. We expect that the higher wages in Washington State would attract people to move from Florida to Washington State. Workers would migrate from Florida to Washington State, causing the labor supply curve to shift leftward in Florida and rightward in Washington State. As a consequence, wages would increase in Florida and decrease in Washington State. Figure 5.6 “Migration from Florida to Washington State” shows what would happen if the only thing people cared about was wages: migration would stop only when wages were equal in both states. Employment would be lower in Florida and higher in Washington State.

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