1. Topic 5: Business and Labor

2. 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

3. 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

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

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

6. 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?

7. 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?

8. 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

9. 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

10. 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

11. 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

12. 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.

13. 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

14. 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

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

16. 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

17. 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.

18. 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.

19. 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

20. 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”

21. 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.

22. 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

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