The Role of Labor Dr. T. D. Mitchell Bonneville High School Idaho Falls, Idaho Economics: Concepts and Choices. Holt McDougal, Chapter 9

The Role of Labor  Concept Review  Labor productivity is the value of the goods or services a worker can produce in a set amount of time.  Chapter 9 Key Concept  Labor, the human effort used to produce goods and service, is subject the same forces of demand and supply that govern the rest of the economy.  Why the Concept Matters  The value of your labor depends on the demand for what you do and the supply of other people able to do the same thing. Economics: Concepts and Choices. Holt McDougal, Chapter 9

How are Wages Determined? Section 1 Economics: Concepts and Choices. Holt McDougal, Chapter 9

Labor: Demand and Supply  We have learned about the four factors of production: land, labor, capital, and entrepreneurship.  Each one has a price that must be figured into production costs.  The price for labor is wages, the payments workers receive in return for their work.  Wages, just like the other factors of production, are governed by the forces of supply and demand. Economics: Concepts and Choices. Holt McDougal, Chapter 9

Labor: Demand and Supply  An equilibrium wage is the wage at which the number of workers needed equals the number of workers available.  An equilibrium wage produces neither a surplus nor a shortage of workers. Economics: Concepts and Choices. Holt McDougal, Chapter 9

Demand for Labor  In a competitive market, wages reflect a worker’s productivity.  A business hires workers to help produce goods and services.  A producer’s demand for labor is called derived demand.  A demand for a product or resource because of its contribution to the final product.  Workers with higher productivity tend to earn higher wages.  Demand for labor depends in part on the demand for the product. Economics: Concepts and Choices. Holt McDougal, Chapter 9

Supply of Labor  Worker’s point of view.  Many workers leave jobs to take better paying jobs.  For this reason, the supply curve for labor is upward slopping.  Since wages are the price of labor, they too gravitate toward equilibrium.  High wages produce a greater supply of labor; low wages give workers less incentive to work. Economics: Concepts and Choices. Holt McDougal, Chapter 9

Why Do Wage Rates Differ?  Different jobs have different wage rates, the rates of pay for specific jobs or work performed.  Wages are determined by supply and demand, which in turn are influenced by four key factors:  Human Capital  Working Conditions  Discrimination in the workplace  Government actions Economics: Concepts and Choices. Holt McDougal, Chapter 9

Trends in Today’s Labor Market Section 2 Economics: Concepts and Choices. Holt McDougal, Chapter 9

The Changing Labor Force  U. S. labor force has changed dramatically since the 1950s.  In the 1950s workers stayed with the same company until retirement.  Today, few workers stay with the same company their entire career. Economics: Concepts and Choices. Holt McDougal, Chapter 9

The Changing Labor Force  Civilian labor force, people who are 16 or older who are employed or actively seeking for and available for work.  The civilian labor force excludes people in the military, in prison, or in other institutions. Economics: Concepts and Choices. Holt McDougal, Chapter 9

Changes in the U. S. Labor Force  1955 family  2013 family  Women in workforce has increased.  Opportunities for women in the labor market has expanded.  As job opportunities have improved, wages for women have risen, and many more women have been drawn to the work force.  The U. S. work force has also become better educated.  About 30% of people in the labor force have a college degree.  An additional 30% have some college credits.  With such a high degree of human capital, productivity and wages are also high compared to many other nations. Economics: Concepts and Choices. Holt McDougal, Chapter 9

Economic Sectors  All of the ten fastest-growing occupations are service related  Most of them in the area of medical services. Economics: Concepts and Choices. Holt McDougal, Chapter 9 Primary Sector Directly related to natural resources. Secondary Sector Related to production. Tertiary Sector Service related jobs.

Employment in U. S. by Sector Economics: Concepts and Choices. Holt McDougal, Chapter 9

Technology and Change  Gas station attendants have been replaced by computerized self-serve, credit card operated gas pumps.  ATMs have greatly affected the occupation of bank teller.  Technology changes have eliminated or redefined many other jobs in all three sectors. Economics: Concepts and Choices. Holt McDougal, Chapter 9

Globalization and Jobs  Today’s job market is global.  Technology allows companies to employ people not just around the country, but around the world.  Many companies cut costs by outsourcing.  Most outsourcing in the U. S. goes to other U. S. companies.  Outsourcing has become connected with the practice of moving jobs to foreign countries.  Many companies actually add jobs in the U. S. when they outsource abroad.  The American economy has also benefited from insourcing, the practice of foreign countries establishing operations in the U. S. Economics: Concepts and Choices. Holt McDougal, Chapter 9

Changes in the Way People Work  Telecommuting  Working from home.  Contingent employment  Alternatives to permanent employment.  Independent contractors  Changing careers more often. Economics: Concepts and Choices. Holt McDougal, Chapter 9

Organized Labor in the U. S. Section 3 Economics: Concepts and Choices. Holt McDougal, Chapter 9

Labor’s Rise to Power  Organized labor helped shape the modern workplace.  Most of the benefits workers take for granted today did not exist 200 years ago.  Eight-hour days  Five-day workweek  Vacations  Sick leave  A big change from the workers of the 1800s. Economics: Concepts and Choices. Holt McDougal, Chapter 9

Labor’s Rise to Power  To improve their bargaining power factory workers began to join together and act as a group.  A labor union is an organization of workers who collectively seek better condition.  Unions attempt to negotiate with businesses to achieve their goals.  When businesses resisted, union looked for ways gain negotiating power.  Strikes Economics: Concepts and Choices. Holt McDougal, Chapter 9

Union History in the U. S.  Local craft unions were the main sort of worker association in early U. S. history.  Local unions began to join together, by the 1830s, into federations.  In 1869, the Knights of Labor. Organized by industry, not by trade or skill level.  Nationwide union  Adopted political goals Economics: Concepts and Choices. Holt McDougal, Chapter 9

Union History in the U. S.  During the explosion of industrialism in the late 1800s, employers strongly resisted the efforts of workers to organize.  Many protests became violent.  1886, one killed and several injuries at the McCormick Harvester Company in Chicago.  1892, ten workers killed in Homestead, PA.  1894, Pullman Palace Car Company helped close many of the nation’s railroads. Economics: Concepts and Choices. Holt McDougal, Chapter 9

A New Model for Unions  Most people were repulsed by the violence and controversial political agenda of the unions.  Samuel Gompers, American Federation of Labor, focused on skilled labor.  The AFL focused on economic power instead of through legislation.  1.7 million members  Women began to organize. Economics: Concepts and Choices. Holt McDougal, Chapter 9

Unions Gain Power  1930s, union membership declined as many people lost their jobs.  Yet, unions gained power through a series of reforms in the New Deal. Economics: Concepts and Choices. Holt McDougal, Chapter 9 Norris- LaGuardia Act Wagner ActFair Labor Standards Act

Unions Gain Power  During the 1930s, the Congress of Industrial Organizations (CIO) organized unions for industrial workers.  Originally part of the American Federation of Labor (AFL).  Favored craft unions.  The two unions broke apart in Then, Re-united in 1955 as AFL-CIO.  AFL succeeded in organizing the United Auto Workers (UAW). Economics: Concepts and Choices. Holt McDougal, Chapter 9

Backlash Against Unions After WW2  The end of WW2 ushered in a period of anti-union legislation.  1947, over the veto of President Truman, the Taft-Hartley Act was passed to amend the Wagner Act.  Fear of communism led to further restrictions on unions.  Landrum-Griffin Act Economics: Concepts and Choices. Holt McDougal, Chapter 9

Steady Decline of Labor Movement Economics: Concepts and Choices. Holt McDougal, Chapter 9

Steady Decline of Labor Movement Economics: Concepts and Choices. Holt McDougal, Chapter 9  For 30 years following WW2, labor unions represented 30 percent of the U. S. workforce.  Since the mid-1970s memberships in unions has declined steadily.  Falling to 12.5 percent in  The decline can be traced to causes: Loss of Reputation Prolonged strikes Featherbedding Changes in the Labor Force Manufacturing jobs have declined Increase in service jobs; as well as contract employees Right-To-Work Laws Legislation that tries to limit union influence. Laws against requiring workers to join unions.

Union Negotiating Methods  Unions continue to use collective bargaining to wield power.  Unions negotiate for job security, and fringe benefits, like health insurance. They bargain against pay cuts, and reductions in benefits.  Strikes or work stoppages have been severely cut down, because management is willing to replace workers or close down plants permanently. Economics: Concepts and Choices. Holt McDougal, Chapter 9

Collective Bargaining  The vast majority of union contracts are settled without strikes or stoppages.  Some negotiations require additional interventions:  Mediator  Binding arbitration  Injunction Economics: Concepts and Choices. Holt McDougal, Chapter 9

A Collective Bargaining Example Economics: Concepts and Choices. Holt McDougal, Chapter 9

Any questions? Economics: Concepts and Choices. Holt McDougal, Chapter 9