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The Role of Labor Dr. T. D. Mitchell Bonneville High School Idaho Falls, Idaho Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9

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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, 2011. Chapter 9

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How are Wages Determined? Section 1 Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9

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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, 2011. Chapter 9

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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, 2011. Chapter 9

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Demand for Labor In a competitive market, wages reflect a workers productivity. A business hires workers to help produce goods and services. A producers 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, 2011. Chapter 9

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Supply of Labor Workers 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, 2011. Chapter 9

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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, 2011. Chapter 9

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Trends in Todays Labor Market Section 2 Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9

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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, 2011. Chapter 9

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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, 2011. Chapter 9

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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, 2011. Chapter 9

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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, 2011. Chapter 9 Primary Sector Directly related to natural resources. Secondary Sector Related to production. Tertiary Sector Service related jobs.

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Employment in U. S. by Sector Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9

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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, 2011. Chapter 9

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Globalization and Jobs Todays 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, 2011. Chapter 9

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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, 2011. Chapter 9

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Organized Labor in the U. S. Section 3 Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9

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Labors 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, 2011. Chapter 9

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Labors 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, 2011. Chapter 9

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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, 2011. Chapter 9

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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 nations railroads. Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9

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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, 2011. Chapter 9

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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, 2011. Chapter 9 Norris- LaGuardia Act Wagner ActFair Labor Standards Act

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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 1938. Then, Re-united in 1955 as AFL-CIO. AFL succeeded in organizing the United Auto Workers (UAW). Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9

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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, 2011. Chapter 9

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Steady Decline of Labor Movement Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9

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Steady Decline of Labor Movement Economics: Concepts and Choices. Holt McDougal, 2011. 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 2005. 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.

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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, 2011. Chapter 9

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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, 2011. Chapter 9

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A Collective Bargaining Example Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9

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Any questions? Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9