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““In those wretched countries where a In those wretched countries where a man cannot call his tongue his own, man cannot call his tongue his own, he can scarce call anything his own. he can scarce call anything his own. Whoever would overthrow the Whoever would overthrow the liberty of a nation must begin by liberty of a nation must begin by subduing the freeness of speech.”subduing the freeness of speech.”
Ben FranklinBen Franklin
Econ in EuropeEcon in Europe
Marissa and Marissa and MalloryMallory
European CorrespondentsEuropean Correspondents
Controlled Labor Controlled Labor MarketsMarkets
What is the main What is the main theme Dr. S is theme Dr. S is
driving at driving at
in this chapter?in this chapter?
Controlled Labor Controlled Labor MarketsMarkets
Pay or working conditions can be Pay or working conditions can be controlled by law, custom, controlled by law, custom, organizations of employees or organizations of employees or employers, and/or government employers, and/or government officialsofficials
Controlled Labor Controlled Labor MarketsMarkets
Pay or working conditions can be Pay or working conditions can be controlled by law, custom, controlled by law, custom, organizations of employees or organizations of employees or employers, and/or government employers, and/or government officialsofficials
As always, we’re not concerned with As always, we’re not concerned with goals or intent, but with the goals or intent, but with the ____________ to which these ____________ to which these incentives leadincentives lead
Job SecurityJob Security
Many countries such as France, Many countries such as France, Germany and South Africa have very Germany and South Africa have very strict laws that make it difficult and strict laws that make it difficult and costly to fire anyonecostly to fire anyone
Job SecurityJob Security
Many countries such as France, Many countries such as France, Germany and South Africa have very Germany and South Africa have very strict laws that make it difficult and strict laws that make it difficult and costly to fire anyonecostly to fire anyone
Does that lead to lower or higher Does that lead to lower or higher unemployment?unemployment?
Job SecurityJob Security
Many countries such as France, Many countries such as France, Germany and South Africa has very Germany and South Africa has very strict laws that make it difficult and strict laws that make it difficult and costly to fire anyonecostly to fire anyone
Does that lead to lower or higher Does that lead to lower or higher unemployment?unemployment?
Always look for the unintended Always look for the unintended consequences!consequences!
““Firing is such a costly Firing is such a costly headache that many headache that many prefer not to hire in the prefer not to hire in the first place” first place” the Economistthe Economist
Minimum Wage LawsMinimum Wage Laws
Make it illegal to pay less than the Make it illegal to pay less than the minimum specified price for laborminimum specified price for labor
Minimum Wage LawsMinimum Wage Laws
Make it illegal to pay less than the Make it illegal to pay less than the minimum specified price for laborminimum specified price for labor
$7.25/hour nationally; many states $7.25/hour nationally; many states and cities also have such laws. and cities also have such laws. Employees get the higher of the twoEmployees get the higher of the two
Minimum Wage LawsMinimum Wage Laws
Make it illegal to pay less than the Make it illegal to pay less than the minimum specified price for laborminimum specified price for labor
$7.25/hour nationally; many states $7.25/hour nationally; many states and cities also have such laws. and cities also have such laws. Employees get the higher of the twoEmployees get the higher of the two
Net effect? A price artificially raised Net effect? A price artificially raised causes more to be supplied (labor) causes more to be supplied (labor) and less to be demanded (labor)… and less to be demanded (labor)… therefore, more unemploymenttherefore, more unemployment
““...the real minimum wage ...the real minimum wage is always zero regardless is always zero regardless of the laws and that is the of the laws and that is the wage that many workers wage that many workers receive... in the wake of receive... in the wake of minimum wage laws”minimum wage laws”
Which Which demographic demographic group is most group is most
affected by affected by minimum wage minimum wage
laws?laws?
Youth and Youth and minoritiesminorities
33.4% 33.4% unemployment unemployment
for blacks 16-24!for blacks 16-24!
16.1% for whites!16.1% for whites!
Minimum Wage Laws, Minimum Wage Laws, reduxredux
Mandated benefits (sick leave, Mandated benefits (sick leave, family leave, medical benefits, etc.) family leave, medical benefits, etc.) have same resultshave same results
Minimum Wage Laws, Minimum Wage Laws, reduxredux
Mandated benefits (sick leave, Mandated benefits (sick leave, family leave, medical benefits, etc.) family leave, medical benefits, etc.) have same resultshave same results
Family and Medical Leave Act of Family and Medical Leave Act of 1993: mandates 12 weeks of unpaid 1993: mandates 12 weeks of unpaid leave from the job for things like leave from the job for things like birth, family illness, adoptionbirth, family illness, adoption
Minimum Wage Laws, Minimum Wage Laws, reduxredux
Mandated benefits (sick leave, family Mandated benefits (sick leave, family leave, medical benefits, etc.) have same leave, medical benefits, etc.) have same resultsresults
Family and Medical Leave Act of 1993: Family and Medical Leave Act of 1993: mandates 12 weeks of unpaid leave from mandates 12 weeks of unpaid leave from the job for things like birth, family illness, the job for things like birth, family illness, adoptionadoption
At least 15 states have jumped aboard to At least 15 states have jumped aboard to include domestic partners, application to include domestic partners, application to smaller companies, etc.smaller companies, etc.
More Minimum Wage More Minimum Wage LawsLaws
What about Third World wages by What about Third World wages by companies such as Nike, Hanes, companies such as Nike, Hanes, Mattel?Mattel?
More about Minimum More about Minimum WagesWages
What about Third World wages by What about Third World wages by companies such as Nike, Hanes, companies such as Nike, Hanes, Mattel?Mattel?
Not clear that overall Third World Not clear that overall Third World countries benefit when artificially countries benefit when artificially high wages are put in place… better high wages are put in place… better for those employed, not for those for those employed, not for those looking in without jobslooking in without jobs
Labor UnionsLabor Unions
A A trade uniontrade union or or labor unionlabor union is an is an organization of workers who have organization of workers who have banded together to achieve common banded together to achieve common goals in key areas such as wages, goals in key areas such as wages, hours, and working conditions. The hours, and working conditions. The trade union, through its leadership, trade union, through its leadership, bargains with the employer on bargains with the employer on behalf of union members and behalf of union members and negotiates contracts with employers. negotiates contracts with employers.
Labor UnionsLabor Unions
Key Point: where unions have driven Key Point: where unions have driven wages higher than the free-market wages higher than the free-market level (i.e., UAW and the Big Three), level (i.e., UAW and the Big Three), it reduces employment in that it reduces employment in that industry and can make the unionized industry and can make the unionized companies less competitivecompanies less competitive
Labor UnionsLabor Unions
Key Point: where unions have driven Key Point: where unions have driven wages higher than the free-market wages higher than the free-market level (i.e., UAW and the Big Three), level (i.e., UAW and the Big Three), it reduces employment in that it reduces employment in that industry and can make the unionized industry and can make the unionized companies less competitivecompanies less competitive
Because people are SRTHAU, Because people are SRTHAU, society as a whole suffers because society as a whole suffers because less total wealth is producedless total wealth is produced
Decline of Unions in U.S.Decline of Unions in U.S.
In the mid 1900s, about 50% of all In the mid 1900s, about 50% of all workers belonged to unionsworkers belonged to unions
Decline of Unions in U.S.Decline of Unions in U.S.
In the mid 1900s, about 50% of all In the mid 1900s, about 50% of all workers belonged to unionsworkers belonged to unions
According to Bureau of Labor According to Bureau of Labor Statistics, in 2007 only 12.1% Statistics, in 2007 only 12.1% belonged to unionsbelonged to unions
Decline of Unions in U.S.Decline of Unions in U.S.
In the mid 1900s, about 50% of all In the mid 1900s, about 50% of all workers belonged to unionsworkers belonged to unions
According to Bureau of Labor According to Bureau of Labor Statistics, in 2007 only 12.1% Statistics, in 2007 only 12.1% belonged to unionsbelonged to unions
In 2009, just 7.2% of private sector In 2009, just 7.2% of private sector employees belonged to unionsemployees belonged to unions
Decline of Unions in U.S.Decline of Unions in U.S.
In the mid 1900s, about 50% of all In the mid 1900s, about 50% of all workers belonged to unionsworkers belonged to unions
According to Bureau of Labor According to Bureau of Labor Statistics, in 2007 only 12.1% Statistics, in 2007 only 12.1% belonged to unionsbelonged to unions
In 2009, just 7.2% of private sector In 2009, just 7.2% of private sector employees belonged to unionsemployees belonged to unions
But where are unions booming??But where are unions booming??
37.4% percent of 37.4% percent of government government
workers are now workers are now unionized.unionized.
Why?Why?
National National Education Education
Association Association (NEA)(NEA)2.7 million 2.7 million
membersmembers
In fact, top three are In fact, top three are public sector workerspublic sector workers
NEANEA Service Employees International Union Service Employees International Union
(SEIU)(SEIU) American Federation of State, County American Federation of State, County
and Municipal Workersand Municipal Workers International Brotherhood of TeamstersInternational Brotherhood of Teamsters United Food and Commercial Workers United Food and Commercial Workers
International UnionInternational Union American Federation of TeachersAmerican Federation of Teachers
Working ConditionsWorking Conditions
Gov and unions regulate working Gov and unions regulate working conditions such as hours/week, conditions such as hours/week, safety rules, vacations, sick days, safety rules, vacations, sick days, medical benefits, even whether you medical benefits, even whether you can unplug a coffee makercan unplug a coffee maker
Working ConditionsWorking Conditions
Gov and unions regulate working Gov and unions regulate working conditions such as hours/week, conditions such as hours/week, safety rules, vacations, sick days, safety rules, vacations, sick days, medical benefits, even whether you medical benefits, even whether you can unplug a coffee makercan unplug a coffee maker
Result: better working conditions Result: better working conditions and more restrictive conditions and more restrictive conditions mean less employmentmean less employment
Working ConditionsWorking Conditions
Child labor lawsChild labor laws: unions want to : unions want to keep young out of the workplace as keep young out of the workplace as long as possible. “Child labor laws long as possible. “Child labor laws passed to protect children from passed to protect children from dangerous factories now keep dangerous factories now keep strapping teenagers out of air strapping teenagers out of air conditioned offices”conditioned offices”
Working ConditionsWorking Conditions
Child labor lawsChild labor laws: unions want to keep : unions want to keep young out of the workplace as long as young out of the workplace as long as possible. “Child labor laws passed to possible. “Child labor laws passed to protect children from dangerous protect children from dangerous factories now keep strapping teenagers factories now keep strapping teenagers out of air conditioned offices”out of air conditioned offices”
Hours of workHours of work: French laws: 35/hours : French laws: 35/hours week, plus 25 days paid vacation… week, plus 25 days paid vacation… severe impact on society as a wholesevere impact on society as a whole
Assignment for Dec. 7Assignment for Dec. 7
Read and study Chapter 11 of Basic Read and study Chapter 11 of Basic Economics: “An Overview”Economics: “An Overview”
Review all materials from Chapters Review all materials from Chapters 9-119-11
There There will be a testwill be a test (combo of (combo of narrative and multiple choice) on narrative and multiple choice) on this sectionthis section