1 Labor and Employment

8/2/2019 1 Labor and Employment

1/84

Click to edit Master subtitle style

Labor andEmployment


2/84

3/5/12

Human resources are the key to economicdevelopment.

What the people consider to be importantgoals in their lives - how they think aboutwork, how creative or skillful they are, how

intelligent and motivated they are - willdetermine whether their country willdevelop or not.


3/84

3/5/12

The other economic resources like landand capital assume their importance onlyinsofar as people make use of them.

Oil is a very important economic resource,

but as long as it remains in the bowels ofthe earth, it just remains dormant.


4/84

3/5/12

It becomes a useful and precious resourceonly when man drills it out, refines it, anddistributes it to the end users.

Machines assume importance only whenthey are intended to function and serve

man's work.


5/84

3/5/12

Thus, the notion that a country's naturalresources are the key to its developmentis fallacious.

Labor is a very important resource. It is soimportant that some noted economists

postulate that labor is the source of theimportant hypotheses and principleseconomists have developed about labor.


6/84

3/5/12

Although not all of them have been testedand accepted, they represent an index ofwhat should be known about labor

problems and labor markets.


7/843/5/12

Labor Problems

Labor problems represent conflicts onsocial reality with social ideals thatnormally rise out of employment.

Unemployment is a classic example. Mostpeople agree what those who want work

and are capable of working should havejobs.


8/843/5/12

A problem would exist if people could notfind the job that they had been preparingfor.

Unemployed people are, thus, consideredpart of the labor problem.


9/843/5/12

When we talk of labor problem, we arereferring here to a working relationshipwhich is considered below the ideal.

Many of our workers sent to the MiddleEast countries are doing well in their jobs.


10/843/5/12

They can, thus, send part of their incometo the Philippines for the support of theirfamilies here.

Contracts between the workers and thecontractors are facilitated by the

government agencies.


11/843/5/12

Now, if some unscrupulous employmentagencies fleece applicants and run awaywith the money intended for application

fees - a labor problem occurs.


12/843/5/12

Those who take part in employmentrelationships must work out mutuallysatisfactory arrangements.

Among the things that have to bedetermined are the part individual workers

have to play: their responsibilities,privileges, opportunities, etc. in return forthe payment given by the employers.


13/843/5/12

The employers, in turn, must clarify theterms of agreement.

A mutually satisfactory arrangementspelled out from the very beginning wouldlessen labor problems.


14/843/5/12

The government and the private sectorshave the capabilities to provideemployment opportunities to members of

the labor force who are looking for work.

If both the government and the private

sectors cannot adequately provide thisneed, then a big labor problem exists.


15/843/5/12

AREAS OF LABOR PROBLEMS

Unemployment and Underemployment An individual suffers economic and social

dislocation if he is unemployed.

A person is considered unemployedif heis at least 15 years old, willing and able to

work, but cannot find work.


16/843/5/12

Unemployment rate in excess of 6 percentof the labor force represents anemergency situation and should be

remedied right away.

There has been some misunderstanding

among researchers and economistsregarding the definition of unemploymentrate.


17/843/5/12

As an example, consider the employmentfigures published by the National Censusand Statistics Office (NCSO).


18/843/5/12

Quite apart from the question ofunderemployment, it would seem unlikelythat in the middle of the recession, the

Philippines posted a figure close to whatmay be considered full employment in theUnited States or the United Kingdom,respectively.


19/843/5/12

The explanation is to be found in thedefinition of "employment": anyone whoworked one hour in the preceding three

months is considered employed.

In 1976, the reference period was

changed from "the fast week" to "the pastquarter".


20/843/5/12

Moreover, employment was expanded toinclude such activities as home gardeningand raising poultry, as long as there was a

harvest.

These changes effectively increased the

numerator of the employment rates.


21/843/5/12

The base of the employment rate, which isthe labor force, was also changed.

Where before the labor included thepopulation 10 years old or over, who wereeither employed or looking for work, the

cutoff age was changed to 15 years, thusreducing the size of the denominator. ,


22/843/5/12

All these changes tend to reduce theunemployment figure.

For our purposes, however, we consider aperson unemployedif he is at least 15years old, willing and able to work, but

cannot find work.


23/843/5/12

As previously stated, unemployment ratein excess of 6 percent of the labor forcerepresents an emergency situation and

should be remedied right away.

Unemployment is not only considered an

economic problem (loss of job, lack ofincome, inability to feed one's family, etc.)but is also a social problem.


24/843/5/12

Unemployment can lead to petty crimes oroutright hold-ups or robberies.

It can also lead to social dissatisfactions.

The government must, therefore, place the

problem of unemployment among its firstpriorities.


25/843/5/12

Underemploymentis another problem.

An underemployed is an employed personwho works for less than 40 hours perweek, despite the fact that he wants towork for more hours.


26/84

3/5/12

Underemployment exists in some part-time work (for example, jeepney driverswho work in shifts) and in substantially

large agriculturally based jobs.

Underemployment is further subdivided in

two: visible underemployment and invisibleunderemployment.


27/84

3/5/12

Visible underemploymentis defined as thenumber of people working less than 40hours per week and wanting additional

work.

Invisible underemploymentis defined as

the number of people working 40 hours ormore per week and still wanting additionalwork.


28/84

3/5/12

The street cigarette vendors for example,are invisibly underemployed.

They work for more than 8 hours per dayor 40 hours per week yet still wantadditional hours of work to augment their

meager income.


29/84

3/5/12

Inadequate Wages Wages and earnings that fail to provide a

minimum of comfortable living can be

regarded as inadequate.

Inadequate wages can result from the

inability of wages to catch up with theincreases in prices.


30/84

3/5/12

It can also result from the inability of theworker to supply himself with thenecessary skills and intelligences to

perform work needed by enterprises andfirms.


31/84

3/5/12

The concept of subsistence income asthat level affording minimum consumptionof basic necessities has been estimated

for families of given characteristics for thePhilippines.


32/84

3/5/12

This income is also called thepovertythreshold, below which a family isconsidered poor.


33/84

3/5/12

The Department of Labor andEmployment(DOLE) defined poverty asthe condition where a family receives

insufficient income to purchase or meetthe recommended minimum nutrientrequirements and basic needs in clothing,education, medical care, housing, andfuel.


34/84

3/5/12

Quoting the results of a 2002 familyincome and expenditure survey, the DOLEsaid the National Economic and

Development Authority (NEDA) has setthe poverty line for a family of six thatreceives P17,713 a month in the NationalCapital Region(NCR).


35/84

3/5/12

The labor statistics service said that on thebasis of the data gathered, the number offamilies below the poverty line in 2000 is

about 33.7 percent of the total 5.139million families.


36/84

3/5/12

Evidences of inadequate wages can beseen in the deterioration of the purchasingpower of the peso, the existence of slum

areas, and other conditions associatedwith poverty.


37/84

3/5/12

Industrial and Labor ManagementConflict

When workers are on a strike, or when

employers resort to lockouts,inconvenience between the two groupscan follow.


38/84

3/5/12

Prolonged strikes or lockouts could beharmful to both parties.

Work stoppages could result in lessproduction, less sales, and thus, lessincome for both sides.


39/84

3/5/12

Violence, and even death, can occurbecause of strikes.

Has management been faithful to theletters and intent of the Labor Code?

Have they taken the interests of theiremployees to heart, or have they been cnthem?


40/84

3/5/12

A positive answer to this question will go along way in resolving labor-managementconflict; a negative answer will prolong the

conflict.


41/84

3/5/12

Economic Insecurities Threats of interruptions in earnings orin

one's work can be regarded as a serious

problem.

A head of the family would be terribly

insecure if he is not certain that his jobwould last long enough.


42/84

3/5/12

Illness, accidents, retirements, threats iflockouts or strikes can also pose asproblems.


43/84

3/5/12

People have to provide funds foremergencies like illnesses, accidents,threats of lockouts, and strikes.

If workers are not secure in their jobs, or iftheir wages are just enough to meet bare

subsistence, provision for emergenciesjust mentioned could simply not be met.


44/84

3/5/12

SUBSISTENCE THEORY OF WAGES During the Industrial Revolution,

economists became much concerned

about wages and the conditions thatinfluenced wage levels.


45/84

3/5/12

They recognized that payments for theservices of labor was a major cost ofproduction.

They tried to explain the forces thatdetermine the prices paid for human

services.


46/84

3/5/12

They developed tentative explanation andtheories which are now generallydescribed as classical theories.

The most prominent of the classicaleconomists wereAdam Smith, David

Ricardo, Thomas Malthius, and JohnStuart Mill.


47/84

3/5/12

Their most important thoughts werecontained in the books they wrote.

Adam Smith published his The Wealth ofnations in 1976.


48/84

3/5/12

Thomas Malthus wrote the first edition ofhis "Essay on Population in 1789.

David Ricardo has his "Principles ofPolitical Economy and Taxation in 1817.


49/84

3/5/12

John Stuart Mills "Principles of PoliticalEconomy was published in 1848.


50/84

3/5/12

These economists developed the classicalschool of thought and advanced someexplanations of the wage-setting process.

One of these explanations is contained inthe theory called the "Subsistence

Theory", which is an explanation of thelong term trends in the prices of labor.


51/84

3/5/12

Factors Affecting the Theory

During this period, the handicraft systemwas declining in importance as a source ofemployment giving way to factories.

Farmers were leaving their farms andwere seeking employment in the cities.


52/84

3/5/12

Power sources were being developed andused in production.

The process ofurbanization was takingplace.


53/84

3/5/12

The process of producing and marketingof goods took place in the cities creating asocial problem: how to find dwelling places

for the influx of workers.


54/84

3/5/12

1. The Laissez-Faire Theory

Political and economic thinking during thisperiod was influenced by the Iaissez-fairedoctrine.

His doctrine can be summed up by theslogan "Don't interfere, the world will take

care of itself'. (Laissez-faire is a Frenchphrase which means "don't interfere").


55/84

3/5/12

This theory states that individuals ought tobe free to act in their own self interest.

They must be allowed to move aboutwithout interference, choose their ownbusiness and occupation, gain wealth, do

whatever they like with their profits andproperty.


56/84

3/5/12

The state should neither hinder not helpthem, If ever the state comes into thepicture, it must only he to give police

protection and provide the necessaryinfrastructure to carryon business.


57/84

3/5/12

Since this system gives cognizance to thenatural law of individual inputs, it wouldinevitably work out well.

Smith was the leading exponent of thisthinking.


58/84

3/5/12

Adam Smith states that when a man goesin business, "he intends only his own gain,and he is in this, as in many other cases,

led by an invisible handto promote an endwhich is not part of his intention ...


59/84

3/5/12

By pursuing his own interest, he frequentlypromotes that of society more effectivelythat when he really intends to promote it.


60/84

3/5/12

2. Thomas Malthus

Thomas Robert Malthus' population theorywas an important and integral part of theclassical liberal economic and social

doctrines.

His analysis contributed an explanation of

the long-term changes in the aggregatesupply of labor and the wagesaccompanying it.


61/84

3/5/12

The Malthusian Theoryis essentially asimple one. Unchecked breeding of mancauses population to grow by geometrical

progression (i.e. 1,2,4,8, 16,32, etc.) whilethe food supply cannot grow so rapidly,only ail arithmetical rate of increase (i.e.,1, 2, 3, 4, 5, 6, etc.).


62/84

3/5/12

Malthus concluded that on the basis ofhistorical evidence, populations have aninherent tendency tomultiply rapidly, that

is, to double each 25 years.

Means of subsistence on the other hand,

as illustrated by gains of production inseveral nations, appeared to be increasingmuch more slowly.


63/84

3/5/12

Given this situation, something wouldhave to hold the population growth incheck.

Malthus believed that there were twogeneral kinds of checks that limited

population growth: preventive checks andpositive checks.


64/84

3/5/12

Preventive checks reduce the birth rate,whilepositive checks increase the deathrate.


65/84

3/5/12

Among the primary preventive checkswere moral restraint and birth control.

Moral restraint was the means by whichthe higher income groups could limit theirfamily size.


66/84

3/5/12

For the lower income groups, birth controlwas the preventive check. But thesechecks were considered by Malthus as

inadequate.


67/84

3/5/12

War, famine, misery, plague were thepositive checks. These checks becameinevitable because the preventive checks

did not succeed in limiting the numbers ofthe lower-class of people.


68/84

3/5/12

If all of these were not enough, thegrowing population would press upon theinadequate food supply until starvation -

the ultimate and unavoidable check,succeeded in holding the populationgrowth .


69/84

3/5/12

However, before starvation set in, Malthusadvised that steps must be taken to helpthe positive checks do their work. His

statement follows:


70/84

3/5/12

"It is evident truth that, whatever may bethe rate of increase in the means ofsubsistence, the increase in population

must be limited by it, at least after the foodhas once been divided into the smallestshares that will support life. All the childrenborn, beyond what would be required to

keep up the population to this level, mustnecessarily perish, unless room be madefor them by the deaths of grown persons


71/84

3/5/12

... To act consistently therefore, we shouldfacilitate, instead of foolishly and vainlyendeavouring to impede, the operation of

nature in producing this mortality; and ifwe fear the too frequent visitation of theharried form of famine, we shouldsedulously encourage the other forms of

destruction, which we compel nature touse.


72/84

3/5/12

Instead of recommending cleanliness tothe poor, we should encourage contraryhabits. In our towns, we should make the

streets narrower, crowd more people intothe houses, and court the return of theplague. In the country, we should build ourvillages near stagnant pools, and

particularly encourage settlements in allharshly and unwhole some situations.


73/84

3/5/12

But above all, we should degeneratespecific remedies for destroying diseases;and those kind, but much mistaken men,who have thought they were doing aservice to mankind by projecting schemesfor the total extirpation of particulardisorders. If by these and similar means

the annual mortality were increased ...everyone of us might probably marry atthe age of puberty, and yet few beabsolutely starved.


74/84

3/5/12

In Malthus' opinion, the masses of menwere incapable of exercising moralrestraint, which was one of the most

important means to remedy the populationproblem.

They were, therefore, destined to liveperpetually at a bare survival level.


75/84

3/5/12

Given this situation real wages could notrise much above the level of subsistencebecause an increase in well- being could

lead to a larger supply of workers.

Large supply of workers would depress

wages.


76/84

3/5/12

When wages fall below subsistence, thesurplus would be eliminated by death.

Thus, wage tends to rise only on the levelof subsistence

This concept has been known as the "ironlaw of wages.

3 D id Ri d


77/84

3/5/12

3. David Ricardo

David Ricardo took over and systematizedMalthus's iron law of wages.

Wages, he concluded, tended to equal thecost of reproducing it.


78/84


79/84

3/5/12

Ricardo went even further. He maintainedthat the cost of subsistence would dependmainly on the price of food and other farm

products.

High crop prices necessitated higher

wages.


80/84

3/5/12

Higher prices of crops, in turn, were due torent which rose as the nation becamemore populated and the best land was

exhausted.


81/84

3/5/12

Now, in charging higher prices forsubsistence, landlords were not exploitinglabor, but the employer who has to pay

higher wages.


82/84

3/5/12

The employer could not charge any morefor his product because he had to pay thehigher wage, since the price he received

were determined in competitive andincrease in labor supply, wages wouldsettle not far from the level necessary tomaintain a minimum of subsistence.

THE KEYNESIAN THEORY


83/84

3/5/12

THE KEYNESIAN THEORY

In the depression of the 1930's democraticnations were concerned about theproblem of inflation.

'Workers were unwilling to accept furthercuts in their wages because their earnings

were already cut down by unemploymentand part-time work.


84/84

Popular demands called for governmentalintervention in the domestic as well as inthe international market.

1 Labor and Employment

Documents

Transcript of 1 Labor and Employment