In the long run, hiring more teachers leads to higher costs of production which leads to higher tuition fee. As MRP which is equal to demand rises,demand for teachers increase as well.

Teachers in International Schools in Asia are not purely competitive as 1) There is no set wage that everybody refers to for teachers: it varies according to school with American School in Japan paying one of the highest wages as prices across Japan are tremendously high, 2) Teachers have different experiences, different specialties, some of which get reflected in their wages.

If the wages were to freeze, the teachers looking for higher wages will find their higher paying jobs elsewhere. Thus, SAS’s source of teachers will reduce.

Interesting…

If SAS decided to freeze wages, all the teachers would simply pack up and go where the wages are higher. Since teachers are a scarce resource, firms/schools need to fight for them and attract them with higher wages…thus wages of teachers keep going up, along with tuition fees.

The demand for teachers is a “derived demand” because it is dependent on the level of education that people seek, in the sense that if there aren’t a lot of people going to SAS, then there wouldn’t be over 300 faculty members in our school. Yet, as the years go by and more and more families move to China in hopes of attaining some of that globalization riches, more children are enrolled into international schools. Since SAS is one of the most prestigious schools, it is inevitable that there is an increase in students attending the school, which leads to a larger demand for teachers.

Demand for teachers increase as the tuition levels paid by families increase because the increase in price of the product (the tuition of the school) also raises the productivity of teachers, as MRP is the marginal product of the resource times the price of the product. And because MRP is synonymous with resource demand, the increase in MRP of teachers also means an increase in demand for teachers.

The market for international school teachers in East Asia is not purely competitive because the wage rate does not stay constant for an individual firm (SAS) when it wants to hire more labor. SAS is subject to the upward sloping supply curve, as it has to raise its wages in order to attract more teachers. This also means that the MRC and the wage rate is no longer the same, as in a perfectly competitive market, as the increase in wage rate designed to attract new teachers also means an increase in wage rates for all existing teachers.

If SAS were to freeze further increases in teacher wages for the next five years, then it would lose a large share of the growing demand for international school seats. This is because it would experience difficulties hiring new teachers, as teachers would be attracted to schools with higher wages, and thus without new teachers, it cannot keep up with consumers’ growing demand.

Not all teachers are the same, some are more qualified than others, some have more experience. In a purely competitive market, theoretically, all teachers should be mostly identical in experience and qualifications.

If SAS were to freeze it’s increase in teacher’s wages, then it will begin to experience an increase in demand for teachers, as many of their teachers will be attracted away to schools paying higher wages.

Hiring more teachers increase the cost of production. Thus, tuition level fees go up. This causes the MRP to go up, and since MRP=D, school’s demand for teachers go up as well. As additional teachers bring greater revenue, demand increases. But since the market for teachers (a labor resourouce) is so competitive, SAS must increase the wages of teachers in order to keep their increasing number of teachers and staff. If the wages freeze for the next five years, then SAS will gradually lose teachers to the other international schools.