Labor Markets

The Ultimate Resource There is a resource that, if used properly, can create wealth and provide opportunity. There is a resource that, if used properly, can create wealth and provide opportunity.

The Resource YOU YOU

What is the U.S. Labor Force? The labor force is the sum of all employed and unemployed adults. The labor force is the sum of all employed and unemployed adults.labor forcelabor force Each individual age 16 or above is categorized as being employed, unemployed, or not in the labor force (retired, a student, or institutionalized). Each individual age 16 or above is categorized as being employed, unemployed, or not in the labor force (retired, a student, or institutionalized).

Labor In competitive markets wages, benefits and other compensation are determined by the interaction of the Supply and Demand of Labor In competitive markets wages, benefits and other compensation are determined by the interaction of the Supply and Demand of Labor

Labor Supply Labor is supplied by people Labor is supplied by people When choosing to work, a person must make a decision regarding the benefits of work (wages) and the costs of work (leisure). When choosing to work, a person must make a decision regarding the benefits of work (wages) and the costs of work (leisure). In order for a person to work, the benefits have to exceed the cost. In order for a person to work, the benefits have to exceed the cost.

Labor Supply As wages and compensation rise, more people are willing to work. As wages and compensation rise, more people are willing to work. Higher wages overcome the opportunity cost of working. Higher wages overcome the opportunity cost of working.

Labor Demand Firms demand labor for what it can produce Firms demand labor for what it can produce When making a hiring decision a firm must consider the costs (wages) and benefits (additional outputs) of hiring an additional worker When making a hiring decision a firm must consider the costs (wages) and benefits (additional outputs) of hiring an additional worker Goal is to maximize profit. What is the extra labor going to cost? Goal is to maximize profit. What is the extra labor going to cost?

Non-Market Forces Illegal job interview questions Illegal job interview questions Race & Gender Race & Gender Disability Disability Religion Religion National origin National origin Age Age Sexual preference Sexual preference

Labor Unions Organization that seeks to increase wages and tries to improve working conditions and benefits for it’s members – establish property rights for labor Organization that seeks to increase wages and tries to improve working conditions and benefits for it’s members – establish property rights for labor Joining together to bring concerns to the attention of the company management Joining together to bring concerns to the attention of the company management

Collective Bargaining First step in reaching a new contract agreement First step in reaching a new contract agreement Union and company representatives meet to negotiate new labor contracts Union and company representatives meet to negotiate new labor contracts Proposals presented to membership and voted on Proposals presented to membership and voted on Deadlock - tensions Deadlock - tensions

Tools Labor Unions Can Use Strike – the ultimate weapon – work stoppage – forces employers to address workers demands Strike – the ultimate weapon – work stoppage – forces employers to address workers demands Picketing – arouse public sympathy Picketing – arouse public sympathy Boycott – refusal by union members to do business with a company involved in a labor dispute – Albertsons – retail clerks Boycott – refusal by union members to do business with a company involved in a labor dispute – Albertsons – retail clerks Mediation – neutral mediator meets with both sides to try to find a solution that both sides will accept – its nonbinding Mediation – neutral mediator meets with both sides to try to find a solution that both sides will accept – its nonbinding Arbitrator – a neutral third party reviews the case and imposes a decision that is legally binding for both sides Arbitrator – a neutral third party reviews the case and imposes a decision that is legally binding for both sides

Management Tactics Lockout – employees are not allowed to come to come to work and are not paid Lockout – employees are not allowed to come to come to work and are not paid Injunction – court order to cease striking or picketing (often used before 1932, rarely used now) Injunction – court order to cease striking or picketing (often used before 1932, rarely used now) Shutdown business Shutdown business Right-to-work laws Right-to-work laws

Right to Work Idaho is a Right-To-Work State Idaho is a Right-To-Work State Measure that bans mandatory union membership Measure that bans mandatory union membership It is the major reason for the decline in union membership in recent decades It is the major reason for the decline in union membership in recent decades Other countries have labor parties in politics and strong memberships in the trades Other countries have labor parties in politics and strong memberships in the trades

Growth of Labor Unions With the Industrial Revolution people were pulled from the farms to work in factories With the Industrial Revolution people were pulled from the farms to work in factories The conditions were appalling The conditions were appalling Depression pushed the movement forward and by the late 1940’s 35 percent of the nation’s non-farm workforce was union Depression pushed the movement forward and by the late 1940’s 35 percent of the nation’s non-farm workforce was union

Protection from the Government Unions were illegal until Taft Hartley Act –1930’s Unions were illegal until Taft Hartley Act –1930’s Unions finally got congressional support during the depression Unions finally got congressional support during the depression

Types of Unions Craft unions (single occupation) - plumbers Craft unions (single occupation) - plumbers Industrial Union (single industry) – garment manufacturing Industrial Union (single industry) – garment manufacturing

Types of Shops Closed shop – hire only union members Closed shop – hire only union members Open shop – illegal to force union membership on any worker Open shop – illegal to force union membership on any worker Union shop – hire nonunion – person has to join in a certain amount of time Union shop – hire nonunion – person has to join in a certain amount of time Agency shop or open shop – don’t have to join Agency shop or open shop – don’t have to join

Activity Collective Bargaining Simulation Collective Bargaining Simulation Count off 1,2,3,4 Count off 1,2,3,4 Pick person to represent you in the bargaining process Pick person to represent you in the bargaining process You do not have all the information that the others do You do not have all the information that the others do 10 minutes to “huddle” 10 minutes to “huddle” Give several compromises for representative to use Give several compromises for representative to use

What is Productivity? What is Productivity? The value of output The value of output

Increase Productivity When workers productivity increase, firms will demand more labor When workers productivity increase, firms will demand more labor Unemployment decreases Unemployment decreases

Worker Productivity Education Education Health Health Infrastructure Infrastructure Productive capital Productive capital Social institutions Social institutions

Differences in Wages The differences in wages across countries can be largely explained by differences in productivity The differences in wages across countries can be largely explained by differences in productivity A worker in a steel factory in Thailand is less productive than a steel worker in Japan A worker in a steel factory in Thailand is less productive than a steel worker in Japan A farmer in Mexico is less productive than a farmer in the U.S. A farmer in Mexico is less productive than a farmer in the U.S.

Differences of Wages The difference in wages within countries can be explained be relative scarcity The difference in wages within countries can be explained be relative scarcity Professional Athlete makes more than teachers Professional Athlete makes more than teachers A doctor makes more than an orderly A doctor makes more than an orderly Teenage web designer makes more than a Ph.D. in English Teenage web designer makes more than a Ph.D. in English

So, How Do I Get Rich? You must make yourself You must make yourself Productive Productive Relative Scarce Relative Scarce You must convince your employer that the value of your marginal product exceeds the wage You must convince your employer that the value of your marginal product exceeds the wage Signaling Signaling

The Job Jungle Activity on Supply and Demand of Labor Activity on Supply and Demand of Labor