Labor and Wages Chapter 8, Section 3

Categories of Labor  Unskilled Labor: work primarily with their hands because they lack training and skills and earn lowest wages  digging ditches, picking fruit, mopping floors  Semiskilled Labor: workers with mechanical abilities and skills to operate machines that require minimum training  Lawn mowers, electric floor polishers, dishwashers

Categories of Labor (Continued)  Skilled Labor: workers who can operate complex equipment with little supervision  Carpenters, typists, tool and die makers, computer technicians, chefs and computer programmers  Professional Labor: workers with the highest level of knowledge-based education and managerial skills  Doctors, lawyers, and corporate executives

Noncompeting Labor Grades  Broad categories of labor that do not directly compete with one another  Workers can move into a higher category by attaining additional skills and training

Barriers to Moving from One Labor Grade to Another  Cost  Individuals may not have the money to pay for additional training  Opportunity  Individuals may live in an area where additional training and education are not available  Initiative  Individuals never acquire additional training or education because they are not willing to put forth the extra effort

Wage Determination  Wage Rate – standard amount of pay given for work performed  Different from one occupation to another  3 Theories of Wage Determination 1.Traditional Theory Wage Determination 2.Theory of Negotiated Wages 3.Signaling Theory

Traditional Theory of Wage Determination (pg. 207, Figure 8.5)  Supply and demand for a worker’s skills and services determine the wage or salary  High supply + low demand = low wages (Figure 8.5A)  Low supply + high demand = high wages (Figure 8.5B)  Equilibrium wage rate: no surplus or shortage of labor

Traditional Theory of Wage Determination Pg. 208, Figure 8.6

Theory of Negotiated Wages (pg. 208, Figure 8.6)  Organized labor’s bargaining strength is a factor that helps determine wages  Applies to all occupations except “managerial and professional”  Seniority – the length of time a person has been on the job

Signaling Theory  Employers are willing to pay more for people with certificates, diplomas, degrees, and other indicators or “signals” of superior ability  Says nothing about what a person needs to perform the actual job

Regional Wage Differences  Labor mobility- the ability and willingness of workers to relocate in markets where wages are higher  Cost of living (Southern States v. Alaska)  Draw of location (Colorado v. New York)