Labor Market TrendsChapter 9 Section 1

The Labor Force

• Economics define the labor force as all nonmilitary people who are employed or unemployed.

Employed

• Are 16 years or older and meet at least one of the following requirements:– They worked a least one hour

for pay within the last week

– They worked 15 or more hours without pay in a family business

– The held jobs but did not work due to:• Illness

• Vacations

• Labor disputes

• Bad weather.

Unemployed

• Are 16 years or older and meet the following criteria:

– They do not have a job

– They have actively looked for work in the prior 4 weeks

– They are currently available for work

Temporary Employment

• Contingent employment– Temporary or

part-time employment.– Flexible work

arrangements.– Easy discharge due to the

lack of severance pay for temporary workers.

– Temporary workers are often paid less and receive fewer benefits than their full-time counterparts.

– Some employees prefer temporary arrangements.

How does being unemployed differ from not being part of the labor force?

Total U.S. Population

Total Civilian, noninstitutionalized

U.S. Population

Non-labor Force Total U.S. labor force

EmployedUnemployed

Military institutionalized

Occupational Trends

• The economy of the United States has transformed from a mainly agricultural economy in the 1800s, to an industrial giant in the 1900s.

• The computer chip has revolutionized the economy since its introduction in the late 1900s.

Occupational Trends

• Overall, the United States is shifting from a manufacturing economy to a service economy.

• As service jobs increase, the nation is losing manufacturing jobs.

• Demand for skilled labor is rising, and the supply of skilled workers is increasing to meet the demand.

Describe the changes in the U.S. economy during the period shown on the graph.

Women in the Workforce

• Overall, the number of women in the work force has increased from about 38 percent of all women in 1960 to about 58 percent of all women in 1995.

• More women are:– Getting a college education

– Not getting married

– Not having children

– Working in “Male” jobs

By what percent will the number of women in the workforce have changed between

1960 and 2006?

Trends in Wages and Benefits

• Earnings for college graduates have increased– Earnings for workers without

college degrees have decreased.

• Benefits now make up about 28 percent of total compensation in the economy

• For employers– Rising benefits costs raise the

cost of doing business– Decrease profits. – Turns them to contingent

employment to curb benefits costs.

Why might wages for workers in retail be much lower than those for workers

in construction?

College Education

• Getting a college degree greatly is now more of a necessity rather than a luxury

• The learning effect – Education increases

productivity and results in higher wages.

• The screening effect– The completion of college

indicates to employers that a job applicant is intelligent and hard-working

– There maybe a bias when hiring or not hiring workers

Education and Income• Potential earnings increase with increased

educational attainment.

Disturbing Trends in College Education

• National high School graduation rate is about 86%

– Rochester (MI) Schools 93%

– Rochester (NY)Schools 53.5%

– Detroit Public Schools 79%

• Only 68% of high school students attend college

– Rochester (MI) Schools 95%

– Rochester (NY) Schools 14% or NA

– Detroit Public Schools 41%

– 6 out of 10 enter a 4 year university

– The rest go to a two year community college

• 30% of students drop out in their 1st year of college

– About less than 2/3 of the 68% will finish with a degree

Disturbing Trends in College Education

• Only 68 percent of students who start at college finish

• Bachelors Degree (4 Years)

– 25-30% of the overall population

• Masters Degree (6 Years)

– 9% of the overall population

• Doctorate or professional degree

– 2% of the overall population

The College AthleteDoes going to college equal financial success?

• Statistics describe how a college degree increases the chance of a high paying job.

• There are more than 460,000 college athletes

– Fewer than 2 % will go pro

– Most student-athletes depend on academics to prepare them for life after college

• Popular majors for college athletes are

– Communications

– Social Science

– Undeclared

College Academics vs. Sports

• Describe the type of athlete major universities are recruiting?

• What “extra” help are these athletes getting?

• What are some of the deficiency scores these athletes have?

• Why is it mostly sports like basketball and football which have this problem?

• In your opinion, what could possibly be done about this issue?

Labor and Wages

Supply and Demand in the Labor Market

Labor Demand

• The higher the wage rate, the smaller the quantity of labor demanded by firms and government.

Labor Supply

• As wages increase, the quantity of labor supplied also increases.

Equilibrium Wage

• The wage rate that produces neither an excess supply of workers nor an excess demand for workers in the labor market is called the equilibrium wage.

Explain how the outcome of this scenario affects (a) the cooks, (b) the restaurants.

Cooks are paid less than their productivity ( the value of output).

A new restaurant opens in town, offering higher wages for cooks.

Other restaurants raise wages for cooks to compete for scarce labor.

Cooks are paid closer to their productivity (the value of output).

Explain why a stable wage means stable restaurant prices.

Wages and Skill Levels

• Wages vary according to workers’ skill levels and education. Jobs are often categorized into the following four groups:

– Unskilled

– Semi-skilled

– Skilled

– Professional

Unskilled Labor

• Unskilled labor requires:

– No specialized skills

– Education

– Training.

• Examples:

– Waiters

– Messengers

– Janitors

Semi-skilled Labor

• Semi-skilled labor requires:

– Minimal specialized skills and education.

• Example:

– Fork-lift operator

Skilled Labor

• Skilled labor requires:

– Specialized skills and training.

• Examples:

– Auto mechanics

– Plumbers

Professional Labor

• Professional labor demands:

– Advanced skills and education.

• Examples:

– Lawyers

– Doctors

– Teachers

Give reasons to explain why the supply of doctors is low and the supply of

construction workers is high?

Wage Discrimination

• The Equal Pay Act of 1963– Declared that male and female

employees in the same workplace performing the same job had to receive the same pay.

• Title VII of the Civil Rights Act of 1964– Forbids job discrimination on the

basis of: • Race• Sex• Color• Religion• nationality.

• Pay Levels for Minorities• As the figure to the right shows,

racial minorities tend to earn lower pay than white men.

Pay for Women

• Despite these protections

– American women today earn about 75 percent of what men earn.

• Reasons women don’t get hired include:

– Pregnancy

– Working part-time

– Distracting to men

– Lack of cultural respect

• Racial ethnicity

2006 Basketball PlayersNBA vs. WNBA

Shaq

$20 Million

Sue Bird

$87,000

2006 Golf PlayersPGA vs. LPGA

Tiger Woods

$11.9 Million

Annika Sorenstam

$2.5 Million

2006 Tennis PlayersATP vs. WTA

Roger Federer

$8.3 Million

Maria Sharapova

$3.8 Million

2006 Football PlayersNFL vs. WPFL

Michael Vick

$23.1 Million

Stacy Agee

$100 Per Game

According to the graph, which group has the lowest earnings?

Organized LaborChapter 9 Section 3

Occupational Trends

• A labor union is an organization of workers that tries to improve:– working conditions

– Wages

– benefits for its members

• Less than 14 percent of U.S. workers belong to a labor union.– This number keeps

dropping

Why Unions Grew

• The union movement took shape over the course of more than a century.

• The 1935 National Labor Relations Act, also known as the Wagner Act:– Gave workers the right to

organize

– Required companies to bargain in good faith with unions.

What is the trend in union membership today?

Why Unions are Declining

• Several factors have led to declines in union membership since the 1950s:

– “Right to Work” Laws

– Economic Trends

– Fulfillment of Union Goals

“Right to Work” Laws

• The Taft-Harlety Act (1947) allowed states to pass right-to-work laws.

• These laws ban mandatory union membership at the workplace.

Economic Trends

• Unions have traditionally been strongest in the manufacturing sector– Blue-collar workers

• Blue-collar jobs have been declining in number– The American economy

becomes more service-oriented.

– Globalization

– More women in the workforce

Fulfillment of Union Goals

• Union membership has decreased simply because their goals have been fulfilled by other organizations.

• The government has set standards for workplace safety– More benefits being

provided by both private and government sources

Unions and Negotiations

• Collective bargaining is the process in which union and company representatives meet to negotiate a new labor contract.

– Wages and Benefits

– Working Conditions

– Job Security

Wages and Benefits

• The Union negotiates on behalf of all members for

– Wage rate

– Overtime rates

– Planned raises

– Benefits

Working Conditions

• Working conditions include

– Safety

– Comfort

– Worker responsibilities

– Other workplace issues

• These are all negotiated and written into the final contract

Job Security

• One of the union’s primary goals is to secure its members’ jobs.

• The contract spells out the conditions under which a worker may be fired.

Labor Strike

• If no agreement is met between the union and the company– The union may ask its

members to vote on a strike.

• A strike– An organized work

stoppage intended to force an employer to address union demands.

– Strikes can be harmful to both the union and the firm.

Labor Mediation

• To avoid the economic losses of a strike, a third party is sometimes called in to settle the dispute.

• Mediation

– A settlement technique in which a neutral mediator meets with each side to try and find an acceptable solution that both sides will accept.

Labor Arbitration

• If mediation fails, talks may go into arbitration

• Arbitration

– A settlement technique in which a third party reviews the case and imposes a decision that is legally binding for both sides.