Chapter 9

1. Labor Chapter 9

2. Tracking the Labor Force • Employment and Unemployment • Economists define labor force as all non-military people who are employed and unemployed • People who are employed are 16 years or older and meet one of the following requirements • They worked at least one hour for pay in the past week • They worked 15 or more hours without pay in a family business, such as farm or family owned store • They held jobs but did not work due to illness, vacations, labor disputes, or bad weather • Unemployed workers are temporarily out of work and are searching for a job • Full-time students, retirees , and stay at home parents are not counted

3. Tracking the Labor Force • The Labor Market Today • The labor force has increase from 59.2% in 1950 to 66% in 2005 • About 141.7 million people were employed in 2005 • 76 million were men • 66 million were women • The Bureau of Labor Statistics also monitors the monthly unemployment rate

4. Occupational Trends • A Changing Economy • Three people who shaped the U.S. after the Industrial Revolution • John D. Rockefeller – Standard Oil • Andrew Carnegie – steel business • Henry Ford – Ford Motor Company • Mid-twentieth century radio and TV boomed • In the 1970’s the personal computer • Fewer Goods, More Services • U.S. has shifted from a manufacturing economy to a service economy • Financial services, banking, education, and online services

5. Occupational Trends • Effects of International Competition • 17.7 million people in 1990 worked in manufacturing industries and dropped to 14.2 million in 2005 • Many jobs were outsourced, or when companies contract with another company to do specific job that would other wise be done by company’s own workers • The movement of some company’s operations, or resources of production, to another country is known as offshoring • American companies build factories and hire workers in countries were labor and other costs are cheaper

6. The Changing Labor Force • College Graduates • To get jobs, people must have human capital which takes money, time, and effort • Economist have two ways to explain the connection between educational advancement and education • The theory that education increases efficiency of production and thus results in higher wages is called the learning effect • Screening effect theory suggests that the completion of college signals to employers that a job applicant is intelligent and hard working

7. The Changing Labor Force • Women at Work • In 1960 38% of women were in the workforce, compared to the 62% projected for 2010 • More women are pursuing high educations, more jobs in the service sector (less physical strength needed) • Temporary Workers • More companies are replacing full-time workers with temporary and part-time jobs called contingent workers • These are “temps” from temp agencies and contract workers • The Impact of Foreign-Born Workers • Guest workers are allowed to live in the U.S. only temporarily • The company must prove that native-born workers can’t meet the labor needed and it won’t lower wages

8. Wages and Benefits Trends • Real Wages Down • Average weekly wages have risen from $241 in 1980 to $590 in 2007 • If you hold the dollar value constant and that takes away the effects of inflation, wages have declined $222 • Three reasons for this: • Greater competition from foreign companies has decreased the demand for workers • Deregulation has forced firms to cut wages as competition has intensified • The use of temporary workers

9. Wages and Benefits Trend • Cost of Benefits • Benefits makes up 30% of workers compensation and large costs for employers • Health insurance is extremely expensive • Social Security and Medicare rates are rising and costing more for employers • Offshoring and outsourcing are helping to cut costs

10. Supply and Demand for Labor • Labor Demand • The demand for labor comes from private firms and gov’t agencies that hire workers to produce goods and services • Derived labor is a type of demand that is set by the demand for another good or service • The demand for cooks in a market depends on the demand for restaurant meals • Productivity of labor is the quantity of output produced by a unit of labor • You get paid close to the value of your productivity • The slope of demand for labor reflects higher the price of labor, the smaller quantity of labor demanded

11. Supply and Demand for Labor • Labor Supply • The supply of labor comes from people willing to work for wages • The supply curve shows the higher the wage, the larger the quantity of labor supplied • Equilibrium Wage • Equilibrium wage is the wage rate , or price of labor services, that is set when the supply of workers meets the demand for workers in the labor market • When the supply curve intersects the demand curve • At equilibrium, there is nor pressure to raise or lower wages

12. Wages and Skill Levels • Unskilled Labor – requires no specialized skills, education, or training. Workers are paid by the hour. Ex. Dishwashers, and janitors • Semi-Skilled Labor – requires minimal specialized skills and education, such as the operation of certain types of equipment. Ex. Short-order cooks, construction and factory workers

13. Wages and Skill Levels 3. Skilled Labor- requires specialized abilities and training to do tasks such as operating complicated equipment. Ex. Auto mechanics, bank tellers, firefighters, and chefs 4. Professional Labor – demands advanced skills and education. Usually paid a salary. Ex. Managers, teachers, doctors, professional athletes

14. Wage Discrimination • Women have faced discrimination in wages and gotten below the equilibrium wage • Many people thought that men needed to be paid more because they are supporting a family and women are just making extra cash • Laws Against Wage Discrimination • Equal Pay Act of 1963 required that male and female employees in the same workplace performing the same job receive the same pay • Civil Rights Act of 1964 in Title VII prohibited job discrimination based on sex, color, religion, or nationality • Equal Employment Commission enforced Title VII

15. Wage Discrimination • Pay Levels for Women • “Women’s Work” - were encouraged to pursue careers in teaching, nursing, and clerical work • Human Capital – overall women have had less education, training, and experience then men • Women’s Career Paths – many employers assume that females are not interested in careers • Glass ceiling is an unofficial barrier that sometimes prevents women and minorities from advancing to the top ranks of organizations dominated by white men • White traditionally had more access to more education and work experience

16. Other Factors Affecting Wages • Minimum Wage Laws • Fair and Standard Labor Act of 1938 created a minimum wage and overtime after 40 hrs. • Minimum wage has forced employers to pay more than the equilibrium wage for unskilled labor • Safety Laws • Occupational Safety and Health Administration established standards for safer working conditions • If a law or policy increases safety at work, it may also decrease wages because workers are willing to work for lower wages when jobs are safer

17. Other Factors Affecting Wages • Employers Respond to Wage Levels • Employers may try to cut cost by replacing human capital with physical capital • Labor Unions • Labor unions are an organization of workers that tries to improve working conditions, wages, and benefits for its members • Key goal is getting wage increases • Some unions have engaged in featherbedding, negotiating contracts that keep unnecessary workers on the company payroll

18. Labor and Labor Unions • Economics and You • The origins of Labor Day is traced back to 1882 when labor leader Peter McGuire suggested a day celebrating the American worker • 10,000 workers marched in NYC in a parade sponsored by the Knights of Labor • Congress in 1894 made Labor Day a federal holiday • Labor and Labor Unions • Many Americans workers have tried gaining control over their wages by forming labor unions • Also to help against unsafe working conditions

19. The Labor Movement • Workers in the 1800’s • Labor unions arose in response to working conditions of the Industrial Revolution • Manufacturing introduced factory work to Americans • Many workers were working 12-16 hrs – 7days a week • Children as young as 5 worked on dangerous machines that many people lost limbs and fingers • One factory boss stated “I regard people just as I regard my machinery. So long as they can do my work for what I choose to pay them, I keep them, getting out of them all I can”

20. The Labor Movement • Unions Take Hold • Workers began forming unions to protect their interests • Strikes are organized stoppage intended to force employers to address union demands • Employers fired strikers and replaced them • Courts found unions to be illegal • Samuel Gompers started the American Federation of Labor with three main goals • High wages • Shorter hours • Safer work environments

21. The Labor Movement • Employer Resistance • Companies would recognize and fire union organizers • Forced workers to sign yellow-dog contracts promising not to join unions • Courts used injunctions to force strikers back to work • Some companies hired their own militia to harass union organizers • Congressional Protections • After the Great Depression Congress passed a number of laws favoring unions • 1940’s 35% of the nations workforce belonged to unions

22. Decline of the Labor Movement • “Right-to-Work” Laws • Taft-Hartley Act of 1947 was passed to curb union power and allowed states to pass right-to-work laws • These were measures to ban mandatory union membership • These are the southern states today • Today union membership is down to 8%

23. Decline in the Labor Movement • Loss of Traditional Strongholds • Unions were strongest with blue-collar workers or people who perform manual labor often in manufacturing jobs • Unions were weakest in white-collar workers, or someone who is in a professional or clerical job • The exception is in the public sector like teachers and people who work for the government • Foreign competition has hurt industries in the U.S. especially in the automotive, steel, and textile business • Rising number of women in the workforce because women traditionally don’t join unions • Relocation to the south

24. Labor and Management • Collective Bargaining • This is the process in which union and company management meet to negotiate a new labor contract • Things discussed in collective bargaining: • Wages – wages, overtime rates, planned raises, and benefits • Working Conditions – safety, comfort, worker responsibilities, and any other workplace issues • Job Security – secure its members jobs, so the contract spells out under which a worker can be fired. The union will handle any grievances or formal complaints

25. Labor and Management • Strikes • Strikes can be used when agreements are at a deadlock • The union will vote to approve a strike since most companies can not produce their goods without their union labor • Long strikes can be devastating since workers aren’t getting paid • Many unions will use union dues to help their members out financially during a strike

26. Labor and Management • Outside Help Reaching Settlements • Sometimes a third party is needed to reach an agreement • Mediation is when a neutral person, a mediator, meets with each side to find a solution they will both accept • Arbitration is when a third party listens to both sides and then imposes a decision • Since both the company and union decided to go to arbitration, the decision is legally binding