1. Chapter 9: Labor Section 1

2. Objectives Describe how trends in the labor force are tracked.
Analyze past and present occupational trends.
Summarize how the U.S. labor force is changing.
Explain trends in the wages and benefits paid to U.S. workers.

3. Key Terms
labor force: all nonmilitary people who are employed or unemployed
outsourcing: the practice of contracting with another company to do a specific job that would otherwise be done by a company’s own workers
offshoring: the movement of some of a company’s operations to another country
learning effect: the theory that education increases efficiency of production and thus results in higher wages

4. Key Terms, cont.
screening effect: the theory that the completion of college indicates to employers that a job applicant is intelligent and hard-working
contingent employment: a temporary and part-time job
guest workers: members of the labor force from another country who are allowed to live and work in the United States only temporarily

5. Introduction How do economic trends affect workers?
Employment rates
Outsourcing and offshoring
The demographics of the work force
The level of education of the work force
Wages and benefits

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 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.

8. Composition of the U.S. 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?
Answers: 1. Military, Institutionalized, Labor Force, Non-labor. 2. Being outside the labor force means that people have given up looking for a job. It also includes full-time students, parents who raise kids at home, and retirees.

9. 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.

10. The BLS
Checkpoint: What important information can we learn from the Bureau of Labor Statistics (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.
Checkpoint Answer: how many people are in the labor force, how many people are employed and unemployed, and information on historical trends in the labor force

11. 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?
Answers: About 90,000

12. 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.

13. 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.
Answers: the 1970s
Which decade shows the largest increase in the percentage of women entering the labor force?

14. 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

15. 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.

16. 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?
Answers: $ per week.

17. 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.

18. Homework
Section 1 assessment pg #’s 3-8

19. Chapter 9: Labor Section 2

20. Objectives
Analyze how supply and demand in the labor market affect wage levels.
Describe how skill levels and education affect wage levels.
Explain how laws against wage discrimination affect wage levels.
Identify other factors affecting wage levels, such as minimum wage and workplace safety laws.

21. Key Terms
derived demand: a type of demand that is set by the demand for another good or service
productivity of labor: the quantity of output produced by a unit of labor
equilibrium wage: the wage rate that is set when the supply of workers meets the demand for workers in the labor market
unskilled labor: work that requires no specialized skills, education, or training
semi-skilled labor: work that requires minimal specialized skills and education

22. Key Terms, cont.
skilled labor: work that requires specialized skills and training
professional labor: work that requires advanced skills and education
glass ceiling: an unofficial barrier that sometimes prevents some women and minorities from advancing to the top ranks of organizations dominated by white men
labor union: an organization of workers that tries to improve working conditions, wages, and benefits for its members
featherbedding: the practice of negotiating labor contracts that keep unnecessary workers on a company’s payroll

23. Introduction 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.

24. 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.

25. 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.
-why is the supply curve positively sloped?
Answers: The higher the wage the larger the supply of available labor. If your not making very much money you are not going to want to work as many hours. If you are making 25$ an hour you will want to work as many hours as your employer will possibly let you.

26. Equilibrium Wage
Checkpoint: What determines the equilibrium wage of labor?
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.
Checkpoint Answer: The equilibrium wage is determined by where the supply of workers meets the demand for workers in the labor market.

27. Wage and Skill Levels
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

28. Wage and Skill Levels, 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.

29. Wages for High-Risk, Low-Risk Jobs
These graphs show how wages compare for similar jobs with different degrees of risk.
Write a sentence that compares the demand curves for the two graphs.
Write a sentence that compares the two supply curves.
Answers: 1. Demand is higher for workers in high-risk jobs than in low-risk jobs because there are fewer people willing to do high risk jobs. 2. The supply of labor is higher in low-risk jobs than it is in high-risk jobs because fewer people want to work in high-risk jobs.

30. 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)

31. 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.

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

33. 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.
Checkpoint: What groups have been hurt by wage discrimination?
Checkpoint Answer: Women and minorities

34. 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.

35. Employer Actions and 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.