Labor and WagesLabor and Wages

Chapter 8, Section 3Chapter 8, Section 3

Categories of LaborCategories of Labor

Unskilled LaborUnskilled Labor: work primarily with their : work primarily with their hands because they lack training and skills and hands because they lack training and skills and earn lowest wagesearn lowest wages digging ditches, picking fruit, mopping floorsdigging ditches, picking fruit, mopping floors

Semiskilled LaborSemiskilled Labor: workers with mechanical : workers with mechanical abilities and skills to operate machines that abilities and skills to operate machines that require minimum trainingrequire minimum training Lawn mowers, electric floor polishers, dishwashers Lawn mowers, electric floor polishers, dishwashers

Categories of LaborCategories of Labor(Continued)(Continued)

Skilled LaborSkilled Labor: workers who can operate : workers who can operate complex equipment with little supervisioncomplex equipment with little supervision Carpenters, typists, tool and die makers, computer Carpenters, typists, tool and die makers, computer

technicians, chefs and computer programmerstechnicians, chefs and computer programmers

Professional LaborProfessional Labor: workers with the highest : workers with the highest level of knowledge-based education and level of knowledge-based education and managerial skillsmanagerial skills Doctors, lawyers, and corporate executivesDoctors, lawyers, and corporate executives

Noncompeting Noncompeting Labor GradesLabor Grades

Broad categories of labor that do not Broad categories of labor that do not directly compete with one anotherdirectly compete with one another

Workers can move into a higher category Workers can move into a higher category by attaining additional skills and trainingby attaining additional skills and training

Barriers to Moving from One Barriers to Moving from One Labor Grade to AnotherLabor Grade to Another

CostCost Individuals may not have the money to pay for Individuals may not have the money to pay for

additional trainingadditional training

OpportunityOpportunity Individuals may live in an area where additional Individuals may live in an area where additional

training and education are not availabletraining and education are not available

InitiativeInitiative Individuals never acquire additional training or Individuals never acquire additional training or

education because they are not willing to put forth education because they are not willing to put forth the extra effortthe extra effort

Wage DeterminationWage Determination

Wage RateWage Rate – standard amount of pay – standard amount of pay given for work performedgiven for work performed

Different from one occupation to anotherDifferent from one occupation to another

3 Theories of Wage Determination3 Theories of Wage Determination1.1. Traditional Theory Wage DeterminationTraditional Theory Wage Determination2.2. Theory of Negotiated WagesTheory of Negotiated Wages3.3. Signaling TheorySignaling Theory

Traditional Theory ofTraditional Theory ofWage DeterminationWage Determination(pg. 207, Figure 8.5)(pg. 207, Figure 8.5)

Supply and demand for a worker’s skills and Supply and demand for a worker’s skills and services determine the wage or salaryservices determine the wage or salary High supply + low demand = low wages (Figure High supply + low demand = low wages (Figure

8.5A)8.5A) Low supply + high demand = high wages (Figure Low supply + high demand = high wages (Figure

8.5B)8.5B)

Equilibrium wage rateEquilibrium wage rate: no surplus or shortage : no surplus or shortage of laborof labor

Traditional Theory ofTraditional Theory ofWage DeterminationWage Determination

Pg. 208, Figure 8.6Pg. 208, Figure 8.6

Theory of Theory of Negotiated WagesNegotiated Wages

(pg. 208, Figure 8.6)(pg. 208, Figure 8.6) Organized labor’s bargaining strength is Organized labor’s bargaining strength is

a factor that helps determine wagesa factor that helps determine wages

Applies to all occupations except Applies to all occupations except “managerial and professional”“managerial and professional”

SenioritySeniority – the length of time a person – the length of time a person has been on the jobhas been on the job

Signaling TheorySignaling Theory

Employers are willing to pay more for Employers are willing to pay more for people with certificates, diplomas, people with certificates, diplomas, degrees, and other indicators or “signals” degrees, and other indicators or “signals” of superior abilityof superior ability

Says nothing about what a person needs Says nothing about what a person needs to perform the actual jobto perform the actual job

Regional Wage Regional Wage DifferencesDifferences

Labor mobilityLabor mobility- the ability and - the ability and willingness of workers to relocate in willingness of workers to relocate in markets where wages are highermarkets where wages are higher

Cost of living (Southern States v. Alaska)Cost of living (Southern States v. Alaska)

Draw of location (Colorado v. New York)Draw of location (Colorado v. New York)