Chapter 9 Labor

Section 1 Labor Market Trends

Labor Force Labor Force (def.): all non-military people (employed or unemployed) Economists consider people employed if they are: 16 years of age or older Worked at least one hour for pay in the past week Worked at least 15 hours without pay in a family business Held jobs but did not work due to illnesses, vacations, labor disputes, or bad weather

Labor Force Economists consider people unemployed if they do not meet that criteria and are: Temporarily without work Are not working but have looked for work in the past 4 weeks

Labor Force To be counted as unemployed: 1) A person must have work lined up for the future OR 2) Must be actively searching for a new job. Examples of people NOT part of the labor force are: full time students, stay at home parents, and retirees.

  Labor Force Bureau of Labor Statistics (BLS) tracks developments in the job market http://www.bls.gov/ information, wages, occupational outlook, summaries, incidence of injuries, etc. ***Includes how many people are in the labor force AND how many people are employed and unemployed.

Occupational Trends Early nation: farming 1800s: machinery, textile mills, factories Late 1800s – 1900: manufacturing, corporate empires Mid 1900s: electronics 1970s: Computer Age

Occupational Trends Late 1900s – 2000: Information Age Fewer goods, more services Factory and manufacturing jobs are being done outside of the US where labor costs are lower. Lower skilled workers are demanded less Skilled workers are demanded more

Change in the Labor Force In the 1950’s you needed a high school diploma to secure a forty hour/week job. Most of the time you would stay there until retirement at 65 years old. Now you need a college degree and you will have 4 or 5 jobs before you retire.

Change in the Labor Force Learning Effect: The theory that education increases productivity and results in higher wages. A college graduate earns more than person with a high school diploma. A person with a professional degree (doctor, lawyer) will earn more than a person with a Bachelor’s degree. Screening Effect: A theory which suggests that the completion of a college degree indicates to an employer that a job applicant is intelligent and hard working.

Another Trend… Contingent Employment: Temporary or part time job. Five reasons companies rely more and more on temporary workers: Flexible work schedule (seasonal business) Firing temporary workers is easier than permanent employees Temporary workers usually get paid less Some workers actually prefer flexible schedules Firms do not pay for benefits

Trends in Wages and Benefits Wages for college graduates have increased. Wages for non- college graduates have decreased. Many companies are doing away with paid health insurance due to the high costs. Companies might provide medical coverage but at a high cost to the employee.

Section two Labor & Wages

Labor & Wages Productivity - the value of output Workers are paid according to the value of what they produce. Productivity - the value of output Workers are worth a portion of their productivity. This varies from business to business.

What determines our wages??? ANSWER: Supply and Demand Wages are high for professions where supply is low and demand is high. Wages are low for low skilled jobs because the supply of unskilled workers is high and demand is low with cheaper labor overseas.

Labor & Wages Supply and demand graphs can be used to find the equilibrium wage. Equilibrium Wage: The wage rate that produces neither an excess supply of workers nor an excess demand for workers in the labor market.

Wages & Skill Levels Wages vary according to workers’ skill level and education as well as according to supply and demand.

Wages & Skill Levels Jobs are often categorized into FOUR skill levels: 1) Unskilled Labor No specialized skills, education or training Examples: factory/farm workers 2) Semi- skilled Labor Minimal specialized skills and education Hourly wages Examples: lifeguard, word processors, short order cook

Wages & Skill Levels 3) Skilled Labor 4) Professional Labor Requires specialized abilities and training Usually hourly wages Examples: mechanics, plumbers, bank tellers, chefs, firefighters, carpenters 4) Professional Labor Demands advanced skills and education Usually white collar workers who receive salaries Examples: managers, teachers, bankers, doctors, lawyers

Wages & Skill Levels Another factor which causes earnings to vary is differences in working conditions. These conditions affect the number of workers willing to do a certain job. Level of danger Physical/emotional stress Location weather conditions

Wage Discrimination Women and minorities historically got paid less than white men for the same job. In the 1960’s Congress passed anti- discrimination laws that prevent companies from paying lower wages to employees based on gender or race.

Wage Discrimination The Equal Pay Act of 1963: Required male and female employees in the same workplace performing the same job to 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 and small businesses are exempt from the law) The Civil Rights Act also created the Equal Employment Opportunity Commission (EEOC) to enforce the laws.

Wage Discrimination There is still a gap between men and women’s earnings although it is decreasing. WHY???? Women are encouraged to do “women’s work” Teaching, nursing Human capital Although changing, women have had less advanced training and experience in certain high- paying jobs. Employers assume female employees are not interested in career advancements and will leave for child rearing.

Wage Discrimination Women often find it difficult to receive top level promotions. There is said to be a barrier called a glass ceiling. Glass ceiling: An unofficial, invisible barrier that prevents women and minorities from advancing in businesses dominated by white men. Minorities tend to earn lower wages than whites. This is true because historically whites have had access to more education and work experience.

Other Factors Affecting Wages 1938: Fair Labor Standards Act First law which created nationwide mandatory rules for labor Set minimum wage Required employers to pay overtime for work beyond 40 hrs/wk Safety Laws If work is safer, more workers are willing to take the job – decreasing pay Unions Organization of workers that tries to improve working conditions, wages and benefits for its members.

Section three Organized Labor

Brief History of Unions Early to Mid 1800s: Industrial Revolution brought about the factory worker. 12 – 16 hours/ day 7 days a week Low wages Poor working conditions Child labor

Brief History of Unions Worker discontent grew into organized protests. 1886: Samuel Gompers founded the American Federation of Labor (AFL) Unions used strikes to try to get what they wanted. Strike: An organized work stoppage intended to force an employer to address union demands.

Brief History of Unions Unions grew in number and in membership. Membership peaked in the 1940’s at 35%. It started to decline, however, because of corruption and abuse of power. By 2009, 12.3% of the workforce was unionized.

2009 Statistics http://www.bls.gov/news.release/union2.nr0.htm More public workers than private workers even though there are less public jobs 38.1% were teachers/librarians More African Americans than any other race NY had the highest rate 25% California the least 3.1%

Reasons for the Decline Taft- Harley Act (1947) Right to Work Laws: banned mandatory union membership Less blue collar workers: someone who works in an industrial job and receives wages More white collar workers: someone in a professional or clerical job usually earning a salary. Foreign competition Companies moving overseas More women in the workforce Women are less likely to join a union

Labor & Management A union gains the right to represent workers at a company when a majority of workers vote to accept the union. After that, the company is required by law to bargain with the union.

Labor & Management Collective Bargaining: The process in which the union and the company representatives meet to negotiate a new labor contract. Main Goals of the Union: Better wages and benefits Better working conditions Job security If a member is discharged for reasons the union feels violates the contract, the union will fight for the worker.

Labor & Management When a contract is about to expire the company and union bargain. If no agreement can be reached, a mediator is brought in. Mediation: A settlement technique in which a neutral third party (mediator) meets with each side to try to find a solution that both sides will accept. Not legally binding

Labor & Management If mediation does not work, talks will go into ARBITRATION. Arbitration is a settlement technique in which a third party (arbitrator ) reviews the case and imposes a decision that is legally binding on both sides.