1. Chapter 7 Labor and the Economy

2. Section A: How Wages Are Set Derived Demand: Demand for factors resulting from Demand for products Diminishing Returns: decreasing productivity for each new worker. –Why does this happen? Diminishing Marginal Productivity- –Amount each new worker is adding –Decreasing over time

3. Marginal physical product- –how much is added to Total Product.

4. Supply and Demand for Labor Labor force participation (law of supply)

5. Equilibrium Wage Rate

6. Real vs. Money Wages Is it possible to make more money but be able to buy less? Money Wages – Actual dollar amount Real Wages –Amount you can buy –Inflation adjusted

7. Section B Labor Unions in the Economy Labor Unions –Improve working conditions –Collective action –Result of Industrial Revolution Types of Unions –Craft union (horizontal) –Industrial union (vertical)

8. Labor Legislation Clayton Act 1914 Stopped use of Sherman Anti-trust (prevent restraint of trade) against unions Wagner Act 1935 protects rights of unions to organize and bargain.

9. Taft-Hartley Act Limited unions ability to disrupt economy -Federal employee strikes limited -banned closed-shops (right-to-work laws) -Presidential injunctions

10. Union Membership Beginnings –1900-1930 10%Strongest –1940-1970 20-35% Weakening 1980-1990 –<20%

11. Section C Labor-Management Relations Collective Bargaining –Union Weapons SlowdownsBoycotts Sit-down strikes Strikes Picket Lines Union Labels Political Action Committees

12. Management Weapons –Injunctions –Lockouts –Strikebreakers –Relocation

13. Government Tools –Mediation –Arbitration

14. Section D: Minimum Wages and Employment Fair Labor Standards Act- 1938 –First min. wage Reaction by firms –Accept smaller profit –Increase prices –Pay no more than min. wage –Lay-offs –Delay New Hires –New Tech. (inc. prod.) –Replace low skill with high skill –Close