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Labor Market
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Labor Unions:

An organization of workers that tries to improve working conditions, wages,
and benefits for its members.
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One of the unions’ main tools is a strike.
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An organized work stoppage intended to force an employer to address union
demands.
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Types of Unions: Industrial (many jobs) and Craft (single occupation)
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Collective bargaining:
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The process in which union and company representatives meet to negotiate a new
labor contract.
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Union contracts generally last 2 to 5 years and can cover hundreds of issues.
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If an agreement is not able to be reached by these representatives, mediation or
arbitration may be needed.
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Labor related Legislation:
1932: Norris-La Guardia Act
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1935: National Labor Relations Act (Wagner Act)
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Gave workers the right to organize and required companies to bargain in good
faith with unions. It also creates the National Labor Relations Board to oversee
union elections and ensure that union members were treated fairly.
1938: Fair Labor Standards Act
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Made it more difficult for employers to obtain injunctions against union activity
and outlawed yellow-dog contracts.
Created the minimum wage, outlawed child labor in many workplaces, and
required firms to pay overtime for work beyond 40 hours a week. The act was the
nation’s first nationwide, mandatory federal regulation of wages and hours.
1947: Taft-Hartley Act
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An effort to curb union power. Allowed states to pass right-to-work laws
(measures that ban mandatory union membership).
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Unions in Decline?
Right-to-work Laws?
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Most of these states are in the south, production will move to this location
because they are less union friendly.
Membership:
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Peaked in the 1950s at about 30 percent of the nation’s nonfarm work force.
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By 1997, union membership dropped to just 14.1 percent of the nonfarm work
force.
Structural Changes in the economy:
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Unions have been traditionally strongest in the manufacturing sector, a high
portion of this sector are blue-collar workers. Blue-collar jobs have been
declining causing union jobs to disappear.
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Foreign competition
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Unions are the weakest in the white-collar professions.
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Rising number of women joining the workforce.
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Women are less likely to join unions and fewer women work blue-collar jobs.
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Types of Workplaces:
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Closed Shop: hires only union members.
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This type of workplace is now illegal.
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Union Shop: will hire nonunion members but requires them to
join the union within a certain period of time.
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Agency Shop: will hire nonunion members and does not require
them to join the union in order to keep their jobs.
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However, nonunion workers must pay union dues or similar fees, and
they are covered by the union contract.
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Free-rider effect
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Labor Force:
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All nonmilitary people who are employed or unemployed.
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Employment:
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People are considered employed if they are 16 years or older and meet at least one
of the following requirements:
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They worked at least one hour for pay within the last week;
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They worked 15 or more hours without pay for a family business, such as a farm;
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They held jobs but did not work due to illnesses, vacations, labor disputes, or bad
weather.
Unemployment:
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People are counted as unemployed if they are 16 years or older, not institutionalized
(nursing home or prison), not currently working, and meet one of the following
criteria:
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They are temporarily laid off from their job;
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They will be reporting to new jobs within 30 days;
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They are not working but have actively looked for jobs within the last 4 weeks.
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Labor Statistics:
Statistics are calculated by the BLS (Bureau of Labor Statistics)
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They try to answer two questions:
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1. How many people are in the labor force?
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2. How many are employed and unemployed at any given time?
The BLS reports the unemployment rate every month
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These figures indicate the health of the labor market
https://www.stlouisfed.org/education/economic-lowdown-videoseries/episode-4-the-labor-market
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Supply and Demand for Labor:
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Employment or unemployment in a labor market depends on how
closely the demand for workers—the number of available jobs—meets
the supply of workers seeking jobs.
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The demand for labor comes from private firms and government
agencies that hire workers to produce goods and services.
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In most labor markets, dozens or hundreds of firms compete with one
another to hire workers.
In a competitive labor market, workers are usually paid according to how
much revenue they produce.
 Aka: Productivity- the value of output
How to firms and workers react to changes in wages?
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Supply of labor comes from households, they supply labor in exchange
for wages.
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Equilibrium wage: the wage rate that produces neither an excess of
supply of workers nor an excess of demand or workers in the labor
market.
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1. Unskilled labor: requires no specialized skills, education, or training.
Usually earn an hourly wage.
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Examples: lifeguards, short-order cooks, and some construction workers.
3. Skilled labor: requires specialized skills and training to do tasks such as
operating complicated equipment. Skilled workers need little supervision and
usually earn an hourly wage.
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Examples: restaurant servers, janitors, and some factory and farm workers.
2. Semi-skilled labor: requires minimal specialized skills and education, such
as operation of certain types of equipment. Usually earn an hourly wage.
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Wages and Skill Levels:
Examples: auto mechanics, bank tellers, plumbers, chefs, carpenters, and
firefighters.
4. Professional labor: demands advanced skills and education. Usually whitecollar workers who receive a salary.
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Examples: managers, teachers, bankers, doctors, actors, and professional athletes.
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Wages and Discrimination:
In the 1960s, Congress passed anti-discrimination laws that had an enormous
impact on society and the economy.
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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.
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The Civil Rights Act of 1964 had Title VII that forbids job discrimination on the
basis of race, sex, color, religion, or nationality. (Religious institutions and some
small businesses are exempt from the law.)
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Under this Act the federal government started enacting affirmative action
laws.
 The use of policies, programs, and procedures to ensure the inclusion of
minorities and women in job hiring, college admission, and the awarding
of government contracts.
 To enforce these provisions, the Civil Rights Act of 1964 created the Equal
Employment Opportunity Commission (EEOC).
 The EEOC handles complaints of job discrimination. If necessary, it
takes companies to court to force them to comply with the law.
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Wages and Discrimination Continued:
Despite these protections, women today earn only about 75% of what
men earn!!
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Social Conditions that contribute to this earnings gap:
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1. “Women’s Work”
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2. Human Capital: less productive?
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3. Women’s career paths
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Glass Ceiling: The unofficial invisible barrier that prevents some women
and minorities from advancing to the top ranks of business.
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Minorities and Wage?
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Minorities tend to earn lower pay then whites do.
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Income differences are sometimes caused partly by productivity differences.
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Less access to education and work experience
Discrimination can account for this difference in earnings.
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Denied entrance into higher-paying jobs.
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Wages and Unions:
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Union members tend to earn higher wages than nonunion workers in
similar jobs.
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Union members are also far more likely to enjoy benefits such as pensions and
medical insurance.
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Do unions lower the wages of nonunion workers?
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1. Unions press employers to raise their members’ wages
2. When wages go up, the quantity of labor demanded goes down. Thus, the number of
union jobs decreases.
3. As union jobs are cut, more workers are forced to seek nonunion jobs.
4. An increase in the supply of available nonunion workers causes the wage rate for
nonunion jobs to fall.
Featherbedding?
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Some unions negotiate labor contracts that keep unnecessary workers on the company
payroll.
 Railroads.