9 .1 DEMAND SUPPLY OF RESOURCES9.2 WAGE DETERMINATION

9.3 LABOR UNIONS

Chapter 9Labor Markets

9.1 Demand and Supply of Resources

Objectives1. Determine the shape of a resource demand

curve and a resource supply curve.

2. Identify what can shift a labor demand curve.

3. Identify what can shift a labor supply curve

9.1 Demand and Supply of Resources

Product Market- Is the market for goods and services, households are demanders and firms are suppliers.

Subway- You (the consumer) have a demand for a roast beef sub. The supplier (Subway aka “Firm”) is the one who provides for the consumer.

Market Demand for Resources

Derived Demand- The demand for a resource that arises from the demand for the product that resource produces.

EX- The need for construction workers go up in the wake of a natural disaster. If a hurricane destroys a town, the town is going to need people to rebuild. In order to rebuild, they need people to work.

Market Demand for Resources

Productivity- The value of output produced by a resources. The more productive, the more a firm is willing to pay for it.

EX- Diamond Cutter- A person who can cut a diamond and doing it efficiently and quickly is going to be very valuable to the company buying the raw diamonds.

Substitutes?

Substitutes in Production- A firm may do things differently to get the job done. A contractor may have carpenters make things then to by them prefabricated.

Also, the lower the cost of an item, the more an employer can employ people to make more. This will increase profits because of more production.

Market Supply of Resources

Firms have to be willing and able to create products that make a profit.

Equilibrium Wage- The wage at which the quantity of labor firms want to hire exactly matches the quantity workers want to supply.

EX- If you have 5 cash registers, you do not need to hire 7 people to work them at a given time.

Prices of other resources

Resources Complements- One resource works with the other in production; a decrease in the price of one increases the demand for the other.

EX- If the cost of lumber goes down, then the demand for lumber will go up. Also, the demand for carpenters will go up as well.

Why do we work?

To earn a wage- We don’t work for free, so we must work to get paid.

Personal Reward- Some jobs are rewarding to do AND you get paid to do them.

Some people will work a certain job because of hours needed or environment.

Some people will work jobs because they simply like them and it fits their taste.

9.2 Wage Determination

Objectives:1. Explain why wages differ across labor

markets.

2. Describe minimum wage legislation, and discuss its impact on employment and nonwage compensation.

Why wages differ?

Wages are determined by regional area. New York and California pay higher than Alabama and Mississippi. Cost of living is higher in NY and CA and less expensive in AL and MS.

Wages are determined by the job that is being performed. A gas station attendant does not need the same training that a manager of Best Buy.

A college degree will also determine what your wage could be. Someone with a Masters degree will make more than someone with a BA degree.

Differences in Ability

Someone who is very smart may make the same amount as someone who is very athletic.

A baseball player who is not as intelligent as a business owner may make more money. In baseball, an all-star player may make 10 times more than his teammate because he is a better player.

Job Discrimination

Peoples wages may be effected by discrimination. Women are usually paid less than men for doing the same job as the men.

Hispanics, African-Americans and Women are sometimes put at a disadvantage because of lack of training and lack of educational opportunities. Some schools discriminate against other races and genders and do not allow minorities in certain schools.

Minimum Wage Law

Minimum Wage Law- Establishes a minimum amount that an employer can pay a worker for an hour of labor.

Georgia minimum wage is $7.25 an hour. If someone works as a server and makes tips, minimum wage is $2.13 per hour plus tips.

Effects of Minimum Wage

May employ less skilled workers to do the job in order to save money.

Substitutes part-time workers for full-time workers in order to save money on full-time employees.

Adjusting some nonwage features of the job to reduce employer costs or increase worker productivity.

Nonwage Features

An employer may give benefits to a worker to compensate for a wage, such as:

Better hours for college and high school students.

On the job training for employees.College tuition paid for by employer.Healthcare, meals and lodging.Paying people for not taking a vacation.

9.3 Labor Unions

Objectives:

Describe the history and tools of the US labor unions.

Analyze how labor unions try to increase wages.

Discuss recent trends in union membership.

Organized Labor

Labor Union- A group of workers who join together to seek higher pay and better working conditions by negotiating a labor contract with their employers.

Examples of unions- Teachers unions, American Federation of Labor (AFL), Industrial unions, Craft unions.

Do we have the right to work?

Right to work law- State law that says a worker at a union company does not have to join the union or pay union dues to hold a job there.

You can still work and get the benefits of the union without being a member of the union. It is frowned on by the union members, but not much they can do.

Collective Bargaining

Collective Bargaining- The process by which representatives of the union and the employers negotiate wages, employee benefits and working conditions.

Mediator- An impartial observer brought in when labor negotiations break down, to suggest how to resolve differences.

Binding Arbitration- When labor negotiations break down and the public interest is involved. A 3rd party usually settles the 2 sides and both are obligated to accept. Usually not good for either side.

THE STRIKE!

The major source of power a union has is the ability to strike. A strike is when the union has its workers stop working. When workers stop, the business loses productivity then business then loses money. Also, the people who are striking lose wages due to not working.

Some of the things that unions strive for are: Increase demand for union products, restrict supply of nonunion-made products, increase productivity of union labor and Featherbedding. Featherbedding is union efforts to force employers to hire more workers than demanded for the task.

Questions?

What are the potential costs and benefits for striking union members?

Why are unions successful in negotiating wages with companies?

Why is union membership lower is states that are a “right to work state”?