Chapter 9: Labor Section 1

Chapter 9: Labor Section 1

Key Terms labor force: all nonmilitary people who are employed or unemployed outsourcing: the practice of contracting with another company to do a specific job that would otherwise be done by a company s own workers offshoring: the movement of some of a company s operations to another country learning effect: the theory that education increases efficiency of production and thus results in higher wages

Key Terms, cont. screening effect: the theory that the completion of college indicates to employers that a job applicant is intelligent and hard-working contingent employment: a temporary and part-time job guest workers: members of the labor force from another country who are allowed to live and work in the United States only temporarily

Introduction How do economic trends affect workers? Economic trends affect Employment rates Outsourcing and offshoring The demographics of the work force The level of education of the work force Wages and benefits

Tracking the Labor Force Each month the Bureau of Labor Statistics (BLS) assembles information on the labor force all nonmilitary people who are employed or not employed.

Chapter 9, Section 1 Copyright Pearson Education, Inc. Slide 6

The Labor Force A person is considered employed if they are 16 years or older and meet at least one of the following requirements: They worked at least one hour for pay in the past week They worked 15 hours or more without pay in a family business They held jobs but did not work due to illness, vacations, labor disputes, or bad weather.

Composition of the U.S. Labor Force People are considered unemployed if they are either temporarily unemployed or if they are not working but are looking for jobs.

Occupational Trends The job market is constantly changing. The United States, for example, began as an agricultural society that gave way to heavy industry in the early 1900s. Electronics came next as a major industry in the 1950s, followed by computers opening new employment opportunities in the 1970s.

Occupational Trends, cont. In the past decade, the United States has shifted from a manufacturing economy to a service economy. Many manufacturing jobs have gone overseas through outsourcing and offshoring forcing many Americans to find work in other areas.

The Changing Labor Force Many people in today s workforce seek better employment opportunities by getting a college degree. People with advanced degrees can make more money than those with lesser degrees and they are viewed by employers as hard-workers.

Women in the Work Force The number of women in the workforce has drastically changed in the last 50 years. Women were encouraged to get an education and increase their human capital, which led to more women entering the workforce. The increase in service sector jobs also added to the increase of women in the workforce.

Temporary Workers Another trend in the workforce is the increase in temporary workers, or contingent employment. Reasons for this trend include: The ability of firms to easily adjust their workforce to changing demand for their output. Temporary workers are paid less and given fewer benefits. It s easier to discharge temporary workers and less costly. Some workers prefer the flexibility of temporary work

Foreign-Born Workers Foreign-born workers have also influenced the labor force in recent years. Guest workers are allowed to work for a company that can show they cannot meet their labor needs with native-born workers. Critics of guest workers say that they hold down the wages of Americans. Supporters claim immigrant workers do jobs that Americans are unwilling to do because the wages are low and these companies can charge less for their goods as a result.

Wages Economists also study trends in benefits and wages. Americans earn higher wages than people in many other countries but in recent years the trend has been toward slow growth in earnings, as a result of outsourcing and deregulation.

$ 37,000.00 Retirement 0.1077 $ 3,984.90 FICA 0.062 $ 2,294.00 Medicare 0.0145 $ 536.50 Life Ins 0.0216 $ 799.20 $ 7,614.60 20.58% $ 44,614.60

Benefits For many workers, benefits like pensions and health insurance are a significant share of total compensation. This share rose fairly steadily during the 1900s and early 2000s. Employers are finding that these rising benefits costs increase the cost of doing business and thus cut into their profits. If such costs continue to rise, companies may have to find ways to cut benefits, which may prove unpopular with workers.

Chapter 9: Labor Section 2

Key Terms derived demand: a type of demand that is set by the demand for another good or service productivity of labor: the quantity of output produced by a unit of labor equilibrium wage: the wage rate that is set when the supply of workers meets the demand for workers in the labor market unskilled labor: work that requires no specialized skills, education, or training semi-skilled labor: work that requires minimal specialized skills and education

Key Terms, cont. skilled labor: work that requires specialized skills and training professional labor: work that requires advanced skills and education glass ceiling: an unofficial barrier that sometimes prevents some women and minorities from advancing to the top ranks of organizations dominated by white men labor union: an organization of workers that tries to improve working conditions, wages, and benefits for its members featherbedding: the practice of negotiating labor contracts that keep unnecessary workers on a company s payroll

Introduction Why do some people earn more than others? What people earn for what they do is largely a matter of how many people are willing and able to do the job and how much that job is in demand. Like other goods, labor is a good that is bought and sold.

Labor Demand The demand for labor comes from private firms and government agencies that hire workers to produce goods and services. Demand for labor is called derived demand because it is set by the demand for another good or service. In a competitive labor market, workers are usually paid according to the value of what they produce.

Supply of Labor The supply of labor comes from people willing to work for wages. The higher the wage for a particular job, the larger the quantity of labor supplied. According to the demand curve, if each cook works a 40- hour work week, how many cooks will be hired at $12 an hour and $16 an hour?

Equilibrium Wage What determines the equilibrium wage of labor? The equilibrium wage is the wage rate, or price of labor or services, that is set when the supply of workers meets the demand for workers in the labor market. At equilibrium there is no pressure to raise or lower wages.

Wage and Skill Levels In addition to varying according to labor supply and demand, wages also vary depending on workers skill levels and education. Jobs are often categorized into four skill levels: Unskilled labor Semi-skilled labor Skilled labor Professional labor

Wage and Skill Levels, cont. Labor supply and demand can create a significant difference in pay scales for workers with various skills. Doctors, for example, who have extensive training and experience enjoy a high demand for their services relative to the supply and, therefore, earn higher wages. High levels of danger or physical or emotional stress can affect the equilibrium wage for a particular job as well.

Wages for High-Risk, Low-Risk Jobs These graphs show how wages compare for similar jobs with different degrees of risk.

Wage Discrimination Some people are paid less not because of their skill level but because of the social group they belong to. This practice is known as wage discrimination. Women and minority groups have both suffered wage discrimination. Congress has passed several anti-discrimination laws to prevent wage discrimination including: Equal Pay Act of 1963 Civil Rights Act of 1964, which established the Equal Opportunity Commission (EEOC)

Pay Levels for Women Despite protections, women still earn less than men as a result of three factors: Women s work Historically women have been encouraged to seek careers in teaching, nursing, and clerical work, which has led to a high supply of workers. Human capital Overall, women are less educated than men, making them ineligible for high-paying, maledominated jobs.

Pay Levels for Women, cont. Women s career paths Women are often perceived by employers as not being interested in advancement.

Pay Levels Across Society Racial discrimination has led to the wage gap for minorities. Non-discrimination laws are designed to give minorities improved access to education and job opportunities so they can close the wage gap.

Other Factors Minimum wage laws and safety laws also affect wages. Minimum wage creates a minimum hourly rate that employers must pay workers. Workers are willing to work for lower wages when jobs are safer.

Employer Actions and Labor Unions Employer actions and labor unions also affect wages. Employer actions A company may try to cut labor costs, which in turn, lowers wages. They often replace human capital with physical capital. Labor unions Labor unions can affect wages by persuading employers to increase their pay. Unions are a much disputed aspect of the labor force in today s world.

Chapter 9: Labor Section 3

Key Terms strike: an organized work stoppage intended to force an employer to address union demands right-to-work law: a measure that bans mandatory union membership blue-collar worker: someone who performs manual labor, often in a manufacturing job, and who earns an hourly wage white-collar worker: someone who works in a professional or clerical job and who usually earns a weekly salary

Key Terms, cont. collective bargaining: the process in which union and company management meet to negotiate a new labor contract mediation: a settlement technique in which a neutral person, the mediator, meets with each side to try to find a solution that both sides will accept arbitration: a settlement technique in which a neutral third party listens to both sides and then imposes a decision that is legally binding for both the company and the union

Labor Unions What can employees do who feel that they are paid too little, work too many hours, or work in unsafe conditions? Many workers choose to join labor unions to deal with such issues. In the United States today, one out of every eight workers belongs to a labor union. In the past, though, unions had a stronger influence on the nation s economy.

The Labor Movement Labor unions arose largely in response to changes in working conditions brought about by the Industrial Revolution in the early to mid-1800s. Working conditions in factories were poor and very dangerous. Skilled workers began to form unions to protect their interests but many were fired for joining. In 1886, Samuel Gompers founded the American Federation of Labor (AFL), which ignited the U.S. labor movement.

The Labor Movement, cont. Many employers did not respond well to unions and forced workers to sign yellowdog contracts, promising not to join unions. In the 1930s, Congress passed measures that protected unions. Union strength grew, peaking in the 1940s at about 35 percent of the nation s non-farm workforce being members. Checkpoint: Why did union membership rise in the 1930s?

The Labor Movement, cont. Unions became the dominant force in many industries, making money in member dues and controlling the day-today operations of many industries. As they grew, some unions began to abuse their power. As a result, companies in need of improved efficiency in order to stay competitive found unions to be an obstacle.

The Movement Declines In 1947, Congress passed right-to-work laws, banning mandatory union membership. Other reasons for decline include: The decline of manufacturing in the United States, where unions were the strongest Rise of women in the workforce Movement of industries to the South, which historically has been less friendly to unions

The Movement Declines, cont. Another theory for union decline is that other institutions now provide many of the services that had been won in the past by unions.

Change in Union Membership

Labor and Management A union gains the right to represent workers at a company when a majority of workers in a particular work unit vote to accept the union. Once this happens, the company is required to bargain with the union to negotiate an employment contract. Contracts get negotiated through collective bargaining.

Collective Bargaining The union brings the following goals to the collective bargaining table: Wages and benefits The union negotiates for wage rates, overtime rates, planned raises, and benefits. Working conditions Safety, comfort, worker responsibilities, and other workplace issues are written into the final contract. Job security The contract spells out the conditions under which a worker may be fired.

Strikes Sometimes agreements cannot be reached between the union and management. In these instances, unions may ask its members to vote to approve a strike, which can cripple a company. A long strike can also be hard on workers, since they are not getting paid.

Outside Help If a strike continues for a long time, the two sides can call in a third party to help settle the dispute. In mediation, a neutral person meets with each side to try to find a solution that both sides will accept. This decision, though, is nonbinding. In arbitration, a neutral third party listens to both sides and imposes a decision, which is legally binding.