CHAPTER 9Labor

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

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

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

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

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

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

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

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

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

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

Wages and Skill Levels

1. Unskilled Labor – requires no specialized skills, education, or training. Workers are paid by the hour. Ex. Dishwashers, and janitors

2. 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

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

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

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

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

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

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

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”

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

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

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%

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

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

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

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