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.
◦ 1 only
◦ 2 only
◦ 3 only
◦ 1 and 2
◦ 2 and 3
New Island in Pakistan
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