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Chapter 7 Labor and the Economy

Dive into the intricacies of labor economics, from wage determination to the impact of labor unions and legislation on the workforce. Explore how wages are set, the role of unions in improving working conditions, and the effects of minimum wage laws on employment. Discover the dynamics of labor-management relations and the tools available to both parties in negotiations.

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Chapter 7 Labor and the Economy

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  1. Chapter 7Labor and the Economy

  2. Section A: How Wages Are Set • Derived Demand: Demand for factors resulting from Demand for products • Diminishing Returns: decreasing productivity for each new worker. • Why does this happen? • Diminishing Marginal Productivity- • Amount each new worker is adding • Decreasing over time

  3. Marginal physical product- how much is added to Total Product.

  4. Supply and Demand for Labor • Labor force participation (law of supply)

  5. Equilibrium Wage Rate

  6. Real vs. Money Wages • Is it possible to make more money but be able to buy less? • Money Wages • Actual dollar amount • Real Wages • Amount you can buy • Inflation adjusted

  7. Section BLabor Unions in the Economy • Labor Unions • Improve working conditions • Collective action • Result of Industrial Revolution • Types of Unions • Craft union (horizontal) • Industrial union (vertical)

  8. Labor Legislation Clayton Act 1914 Stopped use of Sherman Anti-trust (prevent restraint of trade) against unions Wagner Act 1935 protects rights of unions to organize and bargain.

  9. Taft-Hartley Act Limited unions ability to disrupt economy -Federal employee strikes limited -banned closed-shops (right-to-work laws) -Presidential injunctions

  10. Union Membership • Beginnings • 1900-1930 • 10% • Strongest • 1940-1970 • 20-35% • Weakening 1980-1990 • <20%

  11. Section CLabor-Management Relations • Collective Bargaining • Union Weapons • Slowdowns • Boycotts • Sit-down strikes • Strikes • Picket Lines • Union Labels • Political Action Committees

  12. Management Weapons • Injunctions • Lockouts • Strikebreakers • Relocation

  13. Government Tools • Mediation • Arbitration

  14. Section D: Minimum Wages and Employment • Fair Labor Standards Act- 1938 • First min. wage • Reaction by firms • Accept smaller profit • Increase prices • Pay no more than min. wage • Lay-offs • Delay New Hires • New Tech. (inc. prod.) • Replace low skill with high skill • Close

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