Chapter 9: LaborSection 1

1. Describe how trends in the labor force are tracked.

2. Analyze past and present occupational trends.

3. Summarize how the U.S. labor force is changing.

4. Explain trends in the wages and benefits paid to U.S. workers.

Objectives

labor force: all nonmilitary people who are employed or unemployed

outsourcing: the practice of contracting with another company to do a specific job that would otherwise be done by a company’s own workers

offshoring: the movement of some of a company’s operations to another country

learning effect: the theory that education increases efficiency of production and thus results in higher wages

Key Terms

screening effect: the theory that the completion of college indicates to employers that a job applicant is intelligent and hard-working

contingent employment: a temporary and part-time job

guest workers: members of the labor force from another country who are allowed to live and work in the United States only temporarily

Key Terms, cont.

How do economic trends affect workers?Economic trends affect

Employment ratesOutsourcing and offshoringThe demographics of the work forceThe level of education of the work forceWages and benefits

Introduction

Each month the Bureau of Labor Statistics (BLS) assembles information on the labor force—all nonmilitary people who are employed or not employed.

Tracking the Labor Force

A person is considered employed if they are 16 years or older and meet at least one of the following requirements:They worked at least one hour for pay in the

past weekThey worked 15 hours or more without pay in a

family businessThey held jobs but did not work due to illness,

vacations, labor disputes, or bad weather.

The Labor Force

Composition of the U.S. Labor ForcePeople are considered unemployed if they

are either temporarily unemployed or if they are not working but are looking for jobs.What are the parts that form the total U.S.

population?How does being

unemployed differ from not being a part of the labor force?

The job market is constantly changing.The United States, for example, began as an

agricultural society that gave way to heavy industry in the early 1900s.

Electronics came next as a major industry in the 1950s, followed by computers opening new employment opportunities in the 1970s.

Occupational Trends

Checkpoint: What important information can we learn from the Bureau of Labor Statistics (BLS)?The BLS tells us how many people are in the

labor force as well as how many people are employed or unemployed at a given time.

It also provides information on historical trends in the labor force and reports the unemployment rate each month.

The BLS

Occupational Trends, cont.In the past decade, the

United States has shifted from a manufacturing economy to a service economy.Many manufacturing

jobs have gone overseas through outsourcing and offshoring forcing many Americans to find work in other areas.

How many service-producing employees were added in the period shown?

The Changing Labor ForceMany people in today’s workforce seek better

employment opportunities by getting a college degree.

People with advanced degrees can make more money than those with lesser degrees and they are viewed by employers as hard-workers.

Women in the Work ForceThe number of women

in the workforce has drastically changed in the last 50 years.Women were

encouraged to get an education and increase their human capital, which led to more women entering the workforce.

The increase in service sector jobs also added to the increase of women in the workforce.

Which decade shows the largest increase in the percentage of women entering the labor force?

Another trend in the workforce is the increase in temporary workers, or contingent employment.

Reasons for this trend include:The ability of firms to easily adjust their

workforce to changing demand for their output.

Temporary workers are paid less and given fewer benefits.

It’s easier to discharge temporary workers and less costly.

Some workers prefer the flexibility of temporary work

Temporary Workers

Foreign-born workers have also influenced the labor force in recent years.

Guest workers are allowed to work for a company that can show they cannot meet their labor needs with native-born workers.Critics of guest workers say that they hold

down the wages of Americans.Supporters claim immigrant workers do jobs

that Americans are unwilling to do because the wages are low and these companies can charge less for their goods as a result.

Foreign-Born Workers

WagesEconomists also study trends in benefits and

wages.Americans earn higher wages than people in many

other countries but in recent years the trend has been toward slow growth in earnings, as a result of outsourcing and deregulation.What is the

average salary of a worker who is employed in a retail trade or services job?

For many workers, benefits like pensions and health insurance are a significant share of total compensation.This share rose fairly steadily during the 1900s

and early 2000s.Employers are finding that these rising benefits

costs increase the cost of doing business and thus cut into their profits.

If such costs continue to rise, companies may have to find ways to cut benefits, which may prove unpopular with workers.

Benefits

Section 1 assessment pg. 225 -#’s 3-8

Homework

Chapter 9: LaborSection 2

1. Analyze how supply and demand in the labor market affect wage levels.

2. Describe how skill levels and education affect wage levels.

3. Explain how laws against wage discrimination affect wage levels.

4. Identify other factors affecting wage levels, such as minimum wage and workplace safety laws.

Objectives

derived demand: a type of demand that is set by the demand for another good or service

productivity of labor: the quantity of output produced by a unit of labor

equilibrium wage: the wage rate that is set when the supply of workers meets the demand for workers in the labor market

unskilled labor: work that requires no specialized skills, education, or training

semi-skilled labor: work that requires minimal specialized skills and education

Key Terms

skilled labor: work that requires specialized skills and training

professional labor: work that requires advanced skills and education

glass ceiling: an unofficial barrier that sometimes prevents some women and minorities from advancing to the top ranks of organizations dominated by white men

labor union: an organization of workers that tries to improve working conditions, wages, and benefits for its members

featherbedding: the practice of negotiating labor contracts that keep unnecessary workers on a company’s payroll

Key Terms, cont.

Why do some people earn more than others?

What people earn for what they do is largely a matter of how many people are willing and able to do the job and how much that job is in demand.

Like other goods, labor is a good that is bought and sold.

Introduction

The demand for labor comes from private firms and government agencies that hire workers to produce goods and services.

Demand for labor is called derived demand because it is set by the demand for another good or service.

In a competitive labor market, workers are usually paid according to the value of what they produce.

Labor Demand

Supply of LaborThe supply of labor comes from people willing to

work for wages.The higher the wage for a particular job, the

larger the quantity of labor supplied. -why is the supply curve positively sloped?

Equilibrium WageCheckpoint: What

determines the equilibrium wage of labor?The equilibrium wage

is the wage rate, or price of labor or services, that is set when the supply of workers meets the demand for workers in the labor market.

At equilibrium there is no pressure to raise or lower wages.

In addition to varying according to labor supply and demand, wages also vary depending on workers’ skill levels and education.

Jobs are often categorized into four skill levels:Unskilled laborSemi-skilled labor Skilled laborProfessional labor

Wage and Skill Levels

Labor supply and demand can create a significant difference in pay scales for workers with various skills.Doctors, for example, who have extensive

training and experience enjoy a high demand for their services relative to the supply and, therefore, earn higher wages.

High levels of danger or physical or emotional stress can affect the equilibrium wage for a particular job as well.

Wage and Skill Levels, cont.

Wages for High-Risk, Low-Risk JobsThese graphs show how wages compare

for similar jobs with different degrees of risk.Write a sentence that compares the demand

curves for the two graphs.Write a sentence that compares the two supply

curves.

Some people are paid less not because of their skill level but because of the social group they belong to. This practice is known as wage discrimination.Women and minority groups have both suffered

wage discrimination.Congress has passed several anti-

discrimination laws to prevent wage discrimination including:Equal Pay Act of 1963Civil Rights Act of 1964, which established the

Equal Opportunity Commission (EEOC)

Wage Discrimination

Despite protections, women still earn less than men as a result of three factors:Women’s work

Historically women have been encouraged to seek careers in teaching, nursing, and clerical work, which has led to a high supply of workers.

Human capitalOverall, women are less educated than men,

making them ineligible for high-paying, male-dominated jobs.

Pay Levels for Women

Pay Levels for Women, cont.Women’s career

pathsWomen are often

perceived by employers as not being interested in advancement.

Pay Levels Across SocietyRacial discrimination

has led to the wage gap for minorities.

Non-discrimination laws are designed to give minorities improved access to education and job opportunities so they can close the wage gap.Checkpoint: What

groups have been hurt by wage discrimination?

Other FactorsMinimum wage

laws and safety laws also affect wages.Minimum wage

creates a minimum hourly rate that employers must pay workers.

Workers are willing to work for lower wages when jobs are safer.

Employer actions and labor unions also affect wages.Employer actions

A company may try to cut labor costs, which in turn, lowers wages. They often replace human capital with physical capital.

Labor unionsLabor unions can affect wages by persuading

employers to increase their pay. Unions are a much disputed aspect of the labor force in today’s world.

Employer Actions and Labor Unions