Topic 5: Business and Labor

I. Sole Proprietorships The Role of Sole Proprietorships Def: a business owned & managed by a single individual Is a type of business organization Earns all profits/ responsible for all debts More than 70% of business… most popular

I. Sole Proprietorships Advantages of Sole Proprietorships Easy to Start and End… need business license Relatively Few Regulations… zoning laws Sole Receiver of Profit Full Control

I. Sole Proprietorship Disadvantages of Sole Proprietorship Unlimited Personal Liability Limited Access to Resources Lack of Permanence

II. Partnerships Characteristics of Partnerships * Def: a business organization owned by two or more persons who agree on specific division of responsibilities and profits.

II. Partnerships Advantages of Partnerships Ease of Start-up… articles of partnership Financial Impact * ability to raise capital * attract more talented employees * not subject to special taxes (similar to proprietorships) Shared Decision Making Why are partnerships better able to raise capital than sole proprietorships?

II. Partnerships Disadvantages of Partnerships Unlimited Liability Potential for Conflict & Tension Lack of Permanence What does a person give up by changing from being a sole proprietor to being general partner?

II. Partnerships: Franchises A franchise is a contract issued by a local authority that gives a single firm the right to sell its goods within an exclusive market. Advantages: management training/ support; standardized quality; national ad programs; financial assistance. Disadvantages: High franchising fees/royalties; strict operating standards; purchasing restrictions; limited product line

III. Corporations Characteristics of Corporations A legal entity, owned by individual stockholders, each of whom has limited liability for firm’s debts. Stockholders own stock: certificate of ownership in a corporation. Has a legal identity separate from the identities of its owners. Publicly held corporation: has many stockholders who can buy or sell stock open market

III. Corporations Advantages of Incorporation ** Incorporation: forming a corporation Limited Liability Can raise large amount of money through stocks and bonds Stocks are easily transferable Bonds: borrowing money Long Life

III. Corporations Disadvantages of Incorporation Difficulty & Expense of Start Up * Certificate of Incorporation Double Taxation… Dividends Loss of control … control by Board of Directors * Impersonal… workers 4. Regulation… FDA, FTC, SEC

III. Corporations Other Terms Horizontal Mergers: the combo of 2 or more firms competing in the same market w/ the same good or service. Vertical Mergers: two or more firms involved in different stages of producing the same good or service. Conglomerates: a business combo merging more than 3 businesses that produce unrelated goods or services Multinational Corporations: a large corporation that produces and sells its goods and services in more than one country.

III. Corporations: Nonprofits Nonprofits Organizations: functions like a business, but does not operate for the purpose of general profit. Professional Organizations: works to improve the image, working conditions, and skill levels of people in particular organizations. Ex: AMA Business Associations: organized to promote the collective business interests of an area or group of similar businesses. EX: Better Business Bureau Trade Associations: promotes the interest of particular industries. Ex: American Marketing Association

IV. The Labor Force Tracking the Labor Force Unemployment is determined by the Bureau of Labor Statistics of the Dept of Labor Labor Force: all nonmilitary people who are employed or unemployed (Chart page 183) 16 years or older Worked in least one hour for pay in past week Worked 15 hours w/o pay in family business Held jobs but out: illness, vacations.. Not “discouraged workers”: given up looking for a job

Unemployment Rate Labor Force: employed & unemployed (actively looking) Not Counted: active military, institutionalized, retirees, stay at home, discouraged worked

IV. The Labor Force B. Occupational Trends Shifts in what & how our economy produces affects the job market Shifted from a manufacturing economy to a service economy. “Information Age” (2000): increase in computer usage. Also feeling the effects of the international competition Outsourcing Offshoring 5. Increase in college graduates, women, and guest workers

IV. Labor and Wages Law of Supply/Demand applies to labor and wages. Demand for labor comes from private firms and govt agencies; compete for workers Supply of labor comes from people willing to work for wages The equilibrium wage is the wage rate that is set when the supply of workers meets the demand for workers in the labor market.

IV. Labor & Skills Unskilled Labor: requires no specialized skills, education, or training; earns hourly wages. Semi-skilled Labor: requires minimal specialized skills and education; earns hourly wages. Skilled Labor: requires specialized abilities and training; need very little supervision, earns hourly wages. Professional Labor: demands advanced skills and education; “white collar workers”; receive salary.

IV. Labor Laws About Labor Equal Pay Act of 1963 Civil Rights Act of 1964 Equal Employment Opportunity Commission Fair Labor Standards Act (1938) Occupational Safety and Health Administration

IV. Labor Pay Levels for Women Women have been discouraged from entering certain high paying jobs… steered into “Women’s Work” Women have had less education, training, and education… less human capital. Women’s Career Paths “Glass Ceiling”

IV. Labor Labor Unions One of the key goals of unions is to get wage increases for their members Combined bargaining power is sometimes more effective at pressuring employers.

V. Labor Unions Organized Labor Support the interest of workers’ wages, benefits, conditions Provide workers w/ collective bargaining power. Shifts in US economy have had major impact on unions. Ex: loss of manufacturing jobs and increased women in the workplace

V. Labor Unions Terms to Know (HW) Strike Right-to-Work Laws Blue-Collar Workers White-Collar Workers Collective Bargaining Mediation Arbitration