Take a guess… What is the average income (in this country) for the following professions: – Janitors $24,000 – Teachers $56,000 – Surgeon $231,000

Labor and Wages Different Types of Labor and What Determines Wages

1.Unskilled Labor – Little to no education or training required – Digging ditches, picking fruit, and mopping floors 2.Semi-skilled Labor – Requires small amounts of training – Operate basic equipment like cash registers or cooking equipment Categories of Labor

3.Skilled Labor – Typically hold some kind of certification (possibly degrees from trade schools) – Represent higher training/education – Carpenters, typists, tool and die makers, computer technicians, and chefs 4.Professional Labor – Typically college graduates – Have invested the most in their own training/education – Doctors, scientists, lawyers, professors, and corporate executives Categories of Labor

Real World Example With a neighbor next to you, come up with one example for each type of laborer that you would find working in a school. Unskilled Semi-skilled Skilled Professional

Theories of Wage Determination What determines how much people make? – Several theories; we will look at 3 Market Theory Theory of Negotiated Wages Signaling Theory

– The higher level of training/education OR – The higher the skill of labor required = HIGHER THE AVERAGE WAGE Examples? Follows the laws of supply and demand to determine wages: – High demand for labor + low supply = high wages – Low demand for labor + high supply = low wages Market Theory

Bargaining by strong unions = higher wages – Statistics show that workers in unions typically earn more than similar workers that are NOT in unions – Seniority - More years worked = higher wages than others who perform similar tasks Theory of Negotiated Wages

Employers are willing to pay more for people with certificates, diplomas, degrees and other indicators or “signals” of superior ability – Signals don’t even need to relate to the labor you perform Ex. A bank may pay a college graduate with a degree in history more than a high school graduate who did very well in business and economics classes Signaling Theory

Regardless of how wages are determined, they are effected by what part of the country you live in: – Cost of Living Lower cost of living = lower wages – Labor Mobility (or lack thereof) The harder it is to attract people to a place to work, the higher the wages they will offer Ex: Alaska and North Dakota Regional Wage Differences

Quick Review 1.What separates the 4 different types of laborers? 2.According to the market theory, what 2 things determine wages? 3.According to the theory of negotiated wages, what causes certain jobs to have higher wages? 4.According to the signaling theory, what causes certain jobs to have higher wages? 5.How does the region you live in affect your wages? Amount of training/education/skills they have Amount of skill and education/training Power of unions Possessing a degree/certification/diploma Cost of living and ability to attract people/labor