1. Chapter 9
Labor

2. LABOR MARKET TRENDS
Section 1

3. Economic Trends & Workers
 Economic trends affect
 Employment rates
 Outsourcing and offshoring
 The demographics of the work force
 The level of education of the work force
 Wages and benefits

4. 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 week
 They worked 15 hours or more without pay in a
family business
 They held jobs but did not work due to illness,
vacations, labor disputes, or bad weather.

5. Composition of the US Labor Force
 People 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?

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

7. The 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.

8. Occupational Trends
 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.

9. 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?

10. The Changing Labor Force
 Many 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.

11. Women in the Work Force
 The 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.

12. Temporary Workers
 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

13. Foreign-born 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.
What do you think?

14. Wages
 Economists 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?

15. Benefits
 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.
Other than these types of benefits, what are other ways
that businesses could attract high quality employees
to work for them?

16. LABOR & WAGES
Section 2

17. Wage Disparities
 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.

18. Labor Demand
 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.

19. Supply of Labor
 The 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.
 According to the demand curve, if each cook works a 40-hour
work week, how many cooks will be hired at $12 an hour and
$16 an hour?

20. Equilibrium Wage
 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.

21. Wage and Skill Level
 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 labor
 Semi-skilled labor
 Skilled labor
 Professional labor
Can you think
of an example
for each skill
level?

22. Wage and Skill Level, cont.
 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.

23. Wage Discrimination
 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 1963
 Civil Rights Act of 1964, which established the Equal
Opportunity Commission (EEOC)

24. Pay Levels for Women
 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 capital
 Overall, women are less educated than men, making them
ineligible for high-paying, male-dominated jobs.

25. Pay Levels for Women, cont.
 Women’s career
paths
 Women are often
perceived by
employers as not
being interested in
advancement.

26. Pay Levels Across Society
 Racial 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. Why do you think Hispanic women
typically earn the lowest median
income?

27. Other Factors
 Minimum 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.

28. Employer Actions & Labor Unions
 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 unions
 Labor 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.

29. ORGANIZED LABOR
Section 3

30. Labor Unions
 What can employees do who feel that they are
paid too little, work too many hours, or work in
unsafe conditions?
 Many workers choose to join labor unions to deal
with such issues.
 In the United States today, one out of every eight
workers belongs to a labor union.
 In the past, though, unions had a stronger influence
on the nation’s economy.

31. Labor Unions, cont.
 Labor unions support the interests of
workers with respect to wages,
benefits, and working conditions.
 They provide workers with the power
of collective bargaining.

32. The Labor Movement
 Labor unions arose largely in response to changes in
working conditions brought about
by the Industrial Revolution in the early to
mid-1800s.
 Working conditions in factories were poor and very dangerous.
 Skilled workers began to form unions to protect their interests
but many were fired for joining.
 In 1886, Samuel Gompers founded the American Federation of
Labor (AFL), which ignited the U.S. labor movement.

33. The Labor Movement, cont.
 Many employers did not respond well to
unions and forced workers to sign yellow-
dog contracts, promising not to join unions.
 In the 1930s, Congress passed measures that
protected unions. Union strength grew, peaking
in the 1940s at about 35 percent of the nation’s
non-farm workforce being members.
What reasons might businesses have for
not supporting unions?

34. The Labor Movement, cont.
 Unions became the dominant force in many
industries, making money in member dues and
controlling the day-to-day operations of many
industries.
 As they grew, some unions began to abuse
their power. As a result, companies in need of
improved efficiency in order to stay competitive
found unions to be an obstacle.

35. The Movement Declines
 In 1947, Congress passed right-to-work laws,
banning mandatory union membership.
 Other reasons for decline include:
 The decline of manufacturing in the United
States, where unions were the strongest
 Rise of women in the workforce
 Movement of industries to the South, which
historically has been less friendly to unions

36. The Movement Declines, cont.
 Another theory for
union decline is that
other institutions now
provide many of the
services that had been
won in the past by
unions.

37. Change in Union Membership

38. Labor and Management
 A union gains the right to represent workers at
a company when a majority of workers in a
particular work unit vote to accept the union.
 Once this happens, the company is required to
bargain with the union to negotiate an
employment contract.
 Contracts get negotiated through collective
bargaining.

39. Collective Bargaining
 The union brings the following goals to the
collective bargaining table:
 Wages and benefits
 The union negotiates for wage rates, overtime rates,
planned raises, and benefits.
 Working conditions
 Safety, comfort, worker responsibilities, and other
workplace issues are written into the final contract.
 Job security
 The contract spells out the conditions under which a worker
may be fired.

40. Strikes
 Sometimes agreements
cannot be reached between
the union and management.
 Unions may ask its
members to vote to approve
a strike, which can cripple a
company.
 Long strike can also be hard
on workers, since they are
not getting paid.

41. Outside Help
 If a strike continues for a long time, the two sides
can call in a third party to help settle the dispute.
 Mediation: a neutral person meets with each side to try to
find a solution that both sides will accept. This decision,
though, is
nonbinding.
 Arbitration: a
neutral third party
listens to both
sides and imposes
a decision, which
is legally binding