Chapter 9. Section 2: Labor & Wages

Transcription

1 Chapter 9 Section 2: Labor & Wages

2 Labor is a commodity that is bought & sold Wages are high in professions where supply is low & demand is high Price of labor depends on conditions in the labor market

3 Supply & Demand for Labor Employment or unemployment in a labor market depends on how closely the demand for workers meets the supply of workers seeking jobs

4 Labor Demand Comes from private firms & government agencies that hire workers to produce goods & services In most markets dozens or hundreds of firms compete with one another to hire workers

5 Demand for labor is Derived Demand There is only a demand for laborers if there is demand for the goods & services those laborers produce.

6 Demand for Pizza? YES Demand for Pizza Cooks? YES No demand for bullfights? NO Then NO demand for matadors!

7 Market for Kites Price $20 0 Qs 7500

8 Market for Kite-Makers Wage $8/hr 0 Qs 75

9 What if: bad weather, abnormally calm winds, oil spill closes all the beaches?? Predict: What happens to price & quantity of kites sold? -to the revenue of the kite company?

10 Price Market for Kites What happens to total revenue in the kite industry? $20 $17 How will this affect the market for kite workers? Qs 7500

11 Wage Market for Kite-Makers How will this affect individual kite workers? $8/hr $7/hr 0 65 Qs 75 Laid off Hrs cut Wage cut Benefits cut No impact What alternatives available? good/bad

12 What if it s a very windy summer, or the national kite festival is scheduled in the area, or a huge, new beach-side resort opens?

13 Price $23 $17 Market for Kites What happens to total revenue in the kite industry? How will this affect the market for kite workers? Qs 8800

14 Wage Market for Kite-Makers How will this affect individual kite workers? $8/hr $7/hr 0 65 Qs 80 rehired overtime Raise Insurance Vacation time No impact What alternatives available? good/bad

15 What if the cost of raw materials (fabric, glue, wood, plastic) to make kites increases?

16 Price Market for Kites Price? Quantity produced and sold? $24 $20 Total revenue in the kite market? Qs 7500 How did this affect the market for kite workers? (Think carefully.)

17 Wage $8/hr $7/hr Market for Kite-Makers 0 65 Qs 75 The SAME way a decrease in demand for kites did; it reduces the demand for kite workers. What other supply factors in the kite market could reduce demand for workers?

18 In a competitive labor market, workers are usually paid according to the value of what they produce Productivity is the value of output The higher the wage rate, the smaller the quantity of labor demanded by firms and government.

19 Labor Supply Comes from people who provide labor in exchange for wages As wages increase, the quantity of labor supplied also increases.

20 Effects of Wage Increases A new restaurant opens in town, offering higher wages for cooks. Other restaurants must raise wages for cooks in order to compete for scarce labor. Restaurants increase the price of meals to cover their increased labor costs. When the price of meals increases, consumer demand decreases. As business decreases, restaurants demand for cooks decreases.

21 Equilibrium Wage Def- The wage rate that produces neither an excess supply of workers nor an excess demand for workers in the labor market The supply of labor & the demand for it combine to determine an equilibrium price May be different in different parts of the country or at different times

22 No pressure to raise or lower the price at equilibrium Depends on supply & demand conditions in your area

23 Wages & Skill Levels Unskilled labor requires no specialized skills, education, or training Usually an hourly wage Dishwashers, messengers, janitors, factory & farm workers

24 Semi-skilled labor requires minimal specialized skills and education. Usually earn an hourly wage fork-lift operator, lifeguards, word processors, short order cooks, & some construction workers

25 Skilled labor requires specialized abilities & training to do tasks Need little supervision, but usually earn an hourly wage Auto mechanics, bank tellers, plumbers, firefighters, chefs, & carpenters

26 Professional labor demands advanced skills & education White collar workers receive a salary Managers, teachers, bankers, doctors, lawyers, actors, professional athletes, & computer programmers

27 Jobs with high accident & fatality rates pay relatively high wages

28 Wage Discrimination Occurs when people with the same job, same skills & education, same job performance, & same seniority level receive unequal pay Women & minorities Men needed the money to support their families & women work to have extra cash Assumed women would leave to have kids Minorities reflects racial & ethnic prejudices

29 Laws Against Wage Discrimination Equal Pay Act of Required that males & females in the same workplace, performing the same job, receive the same pay Title VII of the Civil Rights Act of 1964 prohibited job discrimination on the basis of race, sex, color, religion, or nationality Religious institutions & small businesses are exempt

30 Civil Rights Act created the Employee Equal Opportunity Commission (EEOC) to enforce the law Handles complaints of job discrimination & if necessary takes companies to court to force them to comply with the law

31 Pay Levels for Women Despite these protections, American women today earn about 75 percent of what men earn. Women s work - encouraged to pursue careers in lower paying fields Teachers, nurses, clerical work Labor supply is high, so wages are low

32 Human capital overall have less education, training, & experience Makes fewer women eligible for higher paying jobs Women s career paths- female employees are not interested in career advancement In some companies, men dominate high managerial positions & women find it difficult to receive top level positions Glass ceiling

33 Increased Demand: Rosie the Riveter: Increased demand in WWII pulled women into the factory work force at higher wages than they could make in traditional women s occupations.

34 Pay Levels for Minorities As the figure to the right shows, racial minorities tend to earn lower pay than white men.

35 Income differences between minority workers & white workers are caused partly by productivity differences Nondiscrimination laws are designed to help minority workers get more access to job opportunities where they can improve their skills & build their experience Overtime these workers will be able to compete equally in the labor market & contribute more to the productive capacity of America

36 From BLS Table 6: The fastest-growing occupations, Network systems and data communications analysts Personal and home care aides Health care aides Computer software engineers Veterinary technologists and technicians Personal finance advisors Make-up artists, theatrical and performance Medical assistants Veterinarians Substance abuse and behavioral disorder counselors Gaming surveillance officers and investigators Physical therapist assistants

37 From BLS Table 8: The 30 occupations with largest employment declines, Store clerks and order fillers Cashiers, except gaming Packers and packagers, hand File clerks Farmers and ranchers Order clerks Cutting, punching, and press machine setters, operators, and tenders, metal and plastic Telemarketers Inspectors, sorters, testers, samplers, and weighers First line supervisors of production Computer operators Photographic processing machine operators

38 10 Industries w/ Largest wage & Salary Employment Declines, Industry % Change Gasoline stations Printing & related support activities Motor vehicle parts manufacturing Department stores Cut & sew apparel manufacturing Wired telecommunications carriers Crop production (primary job) Federal gov t (excluding postal serv.) Office supplies, stationary & gift stores Computer & peripheral equipment manufacturing -33.5

39 Other Factors Affecting Wages Minimum wage laws 1938 Congress passed the Fair Labor Standard Act Created a minimum wage Required employers to pay overtime for work beyond 40 hours a week

40 Safety Laws Laws requiring certain minimum levels of workplace safety may effect wages Workers are willing to work for less if the job is safer

41 Employees respond to wage levels Replace human capital with physical capital (machines) ATM s, assembly lines Build production plants in other parts of the world where labor is cheaper

42 Unions An organization of workers that tries to improve working conditions, wages, and benefits for its members. Goals of unions is to get wage increases for their members Negotiate wage levels as a group

43 Do tend to earn higher wages than nonunion $792 compared to $600 a week Depress the wages of nonunion workers Unions press employers to raise their members wages When wages go up, the quantity of labor demanded goes down- # of union jobs decreases

44 As union jobs are cut, more workers are forced to seek nonunion jobs An increase in the supply of available nonunion workers causes the wage rate for nonunion jobs to fall Featherbedding- negotiating labor contracts that keep unnecessary workers on the company payroll Higher prices for union made goods can cut sales & consumer purchasing power