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EARNING

EARNING. Topics: Why businesses hire workers What determines your salary Current issues in the labor market. WHY BUSINESSES HIRE WORKERS. “ Derived demand ” Hire workers because help make product or service and earn profit for the business

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EARNING

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  1. EARNING Topics: Why businesses hire workers What determines your salary Current issues in the labor market

  2. WHY BUSINESSES HIRE WORKERS “Derived demand” Hire workers because help make product or service and earn profit for the business So “labor demand” is derived from product/service demand Labor is an input like machinery, technology, land

  3. BUT WHY DO WORKERS EARN DIFFERENT SALARIES? Tom Brady: $30 million per year

  4. Katie Couric: $15 million per year

  5. School Teacher: $30,000 to $60,000 per year depending on experience and degree

  6. “PRODUCTIVE VALUE” VIEW OF LABOR BUSINESS WILL PAY WORKER UP TO THE REVENUE THE WORKER EARNS FOR THE BUSINESS Tom Brady- more wins are worth millions to the Patriots Katie Couric – more ratings points worth millions to ABC Grade school teacher – difficult to link their work to future earnings of students

  7. “PRODUCTIVE VALUE” OF LABOR SUMMARIZED BY BABE RUTH Reporter: “Babe, you’re being paid more than the President of the United States. How do you justify that?” Babe: “I had a better year than he did.”

  8. WHAT DETERMINES YOUR “PRODUCTIVE VALUE”? EDUCATION EXPERIENCE ATTITUDE DEDICATION TO JOB CONSISTENCY AT WORK WILLINGNESS TO TAKE RISKS ABILITY TO ADAPT SIZE OF MARKET YOU REACH

  9. BIGGEST OBSERVABLE CHARACTERISTIC: EDUCATION LIFETIME SALARY GENERALLY RISES WITH EDUCATIONAL TRAINING

  10. UNEMPLOYMENT RATE ALSO LOWER WITH MORE EDUCATION

  11. ULTIMATELY, SUPPLY AND DEMAND DETERMINE SALARIES SUPPLY: HOW MANY WORKERS WITH CERTAIN SKILLS ARE AVAILABLE FOR THE JOB DEMAND: HOW MANY WORKERS WITH THOSE SKILLS BUSINESSES WANT TO HIRE

  12. FOUR SUPPLY AND DEMAND COMBINATIONS LOW SUPPLY AND HIGH DEMAND – “SUPERSTARS” IN SPORTS, ENTERTAINMENT, BUSINESS – BIG AUDIENCES AND LIMITED NUMBER OF PEOPLE WITH TALENT AND ABILITIES HIGH SUPPLY AND LOW DEMAND – “ANYONE” CAN DO THE JOB, SO LOW PAY

  13. COMPENSATION IS REALLY WHAT COUNTS COMPENSATION: SALARY PLUS VALUE OF BENEFITS * VACATION TIME * SICK TIME * RETIREMENT PACKAGE * HEALTH CARE PACKAGE EXAMPLE: NC TEACHERS ARE NEAR BOTTOM OF STATES ON SALARY; BUT IN MIDDLE OF STATES ON COMPENSATION

  14. ISSUE: THE EMERGING “DUMBELL” LABOR MARKET GROWTH IN DEMAND FOR HIGHLY TALENTED AND HIGHLY EDUCATED WORKERS GROWTH IN DEMAND FOR “PERSONAL SERVICE” JOBS – PARTICULARLY IN HEALTH CARE TECHNOLOGY IS REPLACING “MIDDLE SKILL” JOBS INCREASED INEQUALITY PARTICULARLY DIFFICULT FOR YOUNG MALES WITH LIMITED SKILLS

  15. ISSUE: UNIONS LIMIT SUPPY TO INCREASE SALARY MORE PRODUCTIVE WORKERS? CLOSED SHOP, OPEN SHOP MAKE AREAS UNCOMPETITIVE WITH NON-UNION AREAS? MOVEMENT OF AUTO INDUSTRY TO THE SOUTH

  16. ISSUE: MINIMUM WAGE IF ABOVE PRODUCTIVE VALUE OF WORKER, WILL BUSINESS BE MOTIVATED TO SUBSTITUTE TECHNOLOGY AND EQUIPMENT? BETTER OPTION: EARNED INCOME TAX CREDIT?

  17. ISSUE: TECHNOLOGY AND JOBS LABOR HAS A “LOVE-HATE” RELATIONSHIP WITH TECHNOLOGY * IN SHORT RUN CAN REPLACE JOBS * BUT IN LONG-RUN CAN LOWER PRICES, IMPROVE LIFE, AND CREATE NEW KINDS OF JOBS

  18. ISSUE: INTERNATIONAL TRADE HAS MEANT MANY U.S. JOBS GONE TO FOREIGN COUNTRIES ALSO FOREIGN JOBS TO U.S. (BUT NOT 1 FOR 1) BENEFIT FOR U.S. CONSUMERS – LOWER PRICES RE-TRAINING OF WORKFORCE

  19. ISSUE: IMMIGRATION INCREASES SUPPLY OF WORKERS – LOWER SALARIES FOR WORKERS COMPETING WITH IMMIGRANTS? BUT ALSO MEANS MORE TALENT AND SKILLS ENTER THE ECONOMY LOWER PRICES FOR CONSUMERS?

  20. ISSUE: GENDER DIFFERENCES IN PAY “AVERAGE” SALARY DIFFERENCES MEAN NOTHING – MUST ADJUST FOR DIFFERENCES IN EDUCATION, EXPERIENCE, HOURS WORKED, ETC. FEMALE PAY HAS RISEN CLOSER TO MALE PAY AS EDUCATION AND JOB OPENINGS FOR WOMEN HAVE EXPANDED FEMALES STILL HURT BY TIME-OFF FOR CHILD-BEARING

  21. PERHAPS THE ULTIMATE ISSUE: FAMILY CHOICES “TRADITIONAL FAMILY” ALTERED BY CHANGES IN * HOUSEHOLD TECHNOLOGY * ABILITY TO PLAN FAMILY SIZE * ATTRACTION OF FEMALES TO LABOR FORCE HAS LED TO CRUCIAL FAMILY QUESTIONS * WORK VS. TIME WITH CHILDREN * DIVISION OF HOUSEHOLD TASKS * INCREASED INDEPENDENCE OF BOTH PARTNERS

  22. TWO LAST COMMENTS – WHERE YOU LIVE CAN AFFECT YOUR SALARY A BEAUTIFUL PARADISE WHERE EVERYONE WANTS TO LIVE – BUSINESSES CAN OFFER LOWER SALARY LOWER SALARY IS COMPENSATION FOR GREAT NATURAL AMENITIES OR, HIGH COST-OF-LIVING AREA – WILL HAVE TO OFFER HIGHER SALARY

  23. PRACTICE MAKES PERFECT ESTIMATED THE EVEN INDIVIDUALS WITH TALENT NEED AT LEAST 10,000 HOURS OF PRACTICE TO REACH THEIR PEAK LEVEL OF PERFORMANC

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