Chapter Introduction
Section 1: The Labor
Movement
Section 2: Wages and
Labor Disputes
Section 3: Employment
Trends and
Issues
Visual Summary
Yesterday you found out that your
first college choice has accepted
you and offered you a scholarship
to cover your tuition and books. You
will still have to pay for your room
and board. Today, your best friend
announced that she has received a
“full ride” basketball scholarship to
the same college—all her expenses
will be covered. Why do you think
she received a larger scholarship
even though your grades are much
better than hers? Read Chapter 8
to find out more about labor and
wages.
The labor market, like other
markets, is determined by
supply and demand.
Section Preview
In this section, you will find out that labor unions
are organizations that attempt to improve the
working conditions of their members.
Content Vocabulary
• craft union
• trade union
• industrial
union
• strike
• picket
• company
union
• Great
Depression
• right-to-work
law
• boycott
• independent
union
• lockout
• closed shop
• union shop
• modified union
shop
• agency shop
• civilian labor
force
Academic Vocabulary
• legislation
• prohibited
Are you familiar with the many
historic struggles between workers
and employers in the United States?
A. Yes, many of them
B. No, none of them
C. Maybe a few of them
0%
A
A. A
B. B
C.0%C
B
0%
C
Colonial Times to the 1930s
Early unions formed to
negotiate terms for their
members, but employers and
courts opposed them.
Colonial Times to the 1930s (cont.)
• Unions played a major role in creating
legislation that affects our pay and working
conditions today.
• The first attempt to organize labor was in
1778 with the printers in New York City.
• Most unions up until 1820 were made up
of skilled workers who possessed strong
bargaining power.
Colonial Times to the 1930s (cont.)
• After 1820, immigrants began to arrive in
great numbers and posed a threat to the
unions, as did public opinion.
• From the Civil War to the 1930s
manufacturing expanded and farming
declined.
Colonial Times to the 1930s (cont.)
• Working conditions were difficult in some
industries—hostile feelings about unions
declined.
Colonial Times to the 1930s (cont.)
• Types of unions in industrial post-Civil War
period
– Craft union or trade union
– Industrial union
Trade (Craft) and Industrial Unions
Colonial Times to the 1930s (cont.)
• Unions helped workers by
– Negotiating higher pay
– Helping job security
– Achieving better hours and working
conditions
Trade (Craft) and Industrial Unions
Colonial Times to the 1930s (cont.)
• Workers would strike, picket, and even
boycott if employers did not meet
agreements.
• Employers fought back with a lockout or
even a company union.
– Deadliest in history was the Ludlow
massacre of 1914.
Trade (Craft) and Industrial Unions
Colonial Times to the 1930s (cont.)
• Courts during this period held an
unfavorable attitude toward unions.
Trade (Craft) and Industrial Unions
Which industry giant did the Ludlow
massacre involve?
A. Andrew Carnegie and
the mining industry
B. Andrew Carnegie and
the railroad industry
C. John Rockefeller and
the mining industry
D. John Rockefeller and
the oil industry
A. A
B. B
0% C.0%C
D. D
A
B
0%
C
0%
D
Labor Since the 1930s
Most of the significant labor
laws in effect today were
passed in the 1930s, 1940s,
and 1950s.
Labor Since the 1930s (cont.)
• Common problems from the Great
Depression united factory workers and
renewed union efforts.
Labor Since the 1930s (cont.)
• Congress passed a series of labor
protection laws that supported organized
labor during the 1930s, with many still in
effect today.
– Norris-LaGuardia Act of 1932
– The National Labor Relations Act, or
Wagner Act
– The Fair Labor Standards Act
Labor Since the 1930s (cont.)
• Union movement grew strong by the end
of World War II.
• Public opinion of unions began to
shift again.
– Taft-Hartley Act of 1947 allowed
individual states to pass a
right-to-work law.
Right-to-Work, State by State
Labor Since the 1930s (cont.)
• The American Federation of Labor (AFL)
and the Congress of Industrial
Organizations (CIO) merged in 1955 to
form the AFL-CIO.
– In 2005 many of the trade and service
unions making up the AFL-CIO left and
formed the Change to Win Coalition.
Labor Since the 1930s (cont.)
• Unions unrelated to the AFL-CIO and
Change to Win Coalition are called
independent unions.
What was the average hourly wage
in 1932?
A. 55 cents
B. 25 cents
C. 5 cents
0%
A
A. A
B. B
C.0%C
B
0%
C
Organized Labor Today
Unionized workers can
participate in several types of
union arrangements.
Organized Labor Today (cont.)
• Union arrangements
– Closed shop
– Union shop
– Modified union shop
– Agency shop
The Global Economy & YOU
EU’s Four Largest Countries—
Percentage of Union Workers
Organized Labor Today (cont.)
• About 150 million people in the United
States make up the civilian labor force.
Profiles in Economics:
César Chávez
Organized Labor Today (cont.)
• Approximately 13.7 million workers are
union members or represented by unions.
– Union membership is uneven among the
different demographic groups.
– Union membership differs considerably
by state.
Union Membership and Representation by Industry
Organized Labor Today (cont.)
– Local, state, and federal governments
have the highest rate of unionization.
Union Membership and Representation by Industry
Which is not a factor contributing to
the decline of unions?
A. Rise in the number
of working women
B. Increase in part time
workers
C. Growth of large
companies
D. Expansion of the
service industry
0%
A
A.
B.
C.
0%
D.
B
A
B
C
0%
D
C
0%
D
Section Preview
In this section, you will learn that unions and
management negotiate contracts through a
process known as collective bargaining.
Content Vocabulary
• wage rate
• unskilled labor
• equilibrium
wage rate
• grievance
procedure
• theory of
• mediation
• semiskilled labor
negotiated
• arbitration
wages
• skilled labor
• binding
•
seniority
• professional
arbitration
labor
• signaling theory
• fact-finding
• market theory of • collective
wage
• injunction
bargaining
determination
• seizure
Academic Vocabulary
• anticipate
• distorted
Do you favor or disfavor professional
sports teams striking?
A. Favor
B. Disfavor
C. Doesn’t matter
0%
A
A. A
B. B
C.0%C
B
0%
C
Wage Determination
Different occupations and
levels of training are rewarded
with different wages.
Wage Determination (cont.)
• A wage rate can differ amongst and
sometimes within the same occupations.
Median Weekly Earnings
by Occupation and Union Affiliation
Wage Determination (cont.)
• Reasons for these differences
– Categories of labor
• Unskilled labor
• Semiskilled labor
• Skilled labor
• Professional labor
Median Weekly Earnings
by Occupation and Union Affiliation
Wage Determination (cont.)
– The market theory of wage
determination
• The intersection of supply and demand
determines the equilibrium wage rate.
Market Theory of Wage Determination
Wage Determination (cont.)
– The theory of negotiated wages
• Seniority is an important factor to unions.
– Signaling theory
What might be an exception to the market
theory of wage determination?
A. Political influence
B. Family ties
C. Discrimination based
on race or gender
D. All of the above
0%
A
A.
B.
C.
0%
D.
B
A
B
C
0%
D
C
0%
D
Resolving Labor Disputes
There are a number of
different ways to resolve a
labor dispute if collective
bargaining fails.
Resolving Labor Disputes (cont.)
• Methods used to resolve labor disputes
– Collective bargaining
• Grievance procedure—included in final
contract for future concerns
– Mediation
– Arbitration or binding arbitration
– Fact-finding
Resolving Labor Disputes (cont.)
– Injunction
• Seizure in extreme cases
– Presidential intervention
With what group has the President
of the United States intervened in a
strike?
A. National Hockey League
B. Professional baseball
C. Air traffic controllers
D. Luggage and baggage
handlers at airports
0%
A
A. A
B. B
C.0% C 0%
D. D
B
C
0%
D
Section Preview
In this section, you will learn that important
employment issues include union decline,
unequal pay, and the minimum wage.
Content Vocabulary
• giveback
• two-tier wage
system
• glass ceiling
• set-aside
contract
• minimum wage
• current dollars
Academic Vocabulary
• trend
• equivalent
• constant dollars
• real dollars
• base year
Which is the better relationship for all
involved in working?
A. Us against them attitude
A. A
B. B
0%
B
0%
A
B. Workers input throughout
process for a sense of
ownership
Decline of Union Influence
Labor unions have been
losing their influence and
power ever since the 1940s.
Decline of Union Influence (cont.)
• Reasons for today’s declining trend in
union membership
– Employers make efforts to keep unions
out of their business.
– Additions to labor force have little loyalty
to organized labor.
– Unions’ higher wages make their
products more expensive.
Union Membership
Decline of Union Influence (cont.)
• Employers’ attempts to lower their
union wages
– Requesting a giveback
– Filing bankruptcy
– Two-tier wage system
Do you think the two-tier system is
fair and equitable to the employees?
A. Yes, completely
B. No, not at all
C. Fair to some,
not to others
0%
A
A. A
B. B
C.0%C
B
0%
C
Lower Pay for Women
Men are generally paid more
than women because of
differences in skills, the types
of jobs they choose, and
discrimination.
Lower Pay for Women (cont.)
• Income earned by women is generally less
than the income earned by men.
Gender and Income
Lower Pay for Women (cont.)
• Reasons for this difference in pay
– Differences in skills and experience
brought to the labor market.
– Women generally have lower levels of
education.
Gender and Income
Lower Pay for Women (cont.)
– Uneven distribution of men and women
among various occupations
– Discrimination in the labor market—glass
ceiling
Gender and Occupation
Lower Pay for Women (cont.)
• Two federal laws designed to fight wage
and salary discrimination
– Equal Pay Act of 1963
– Civil Rights Act of 1964
In which occupations do women
make up less than 20% of the
workforce?
A. Architectural and
engineering
B. Protective services
C. Sales and related
D. Transportation and
material moving
0%
A
A.
B.
C.
0%
D.
B
A
B
C
0%
D
C
0%
D
The Minimum Wage
The minimum wage has lost
purchasing power over time
because it was fixed at $5.15
while prices were rising.
The Minimum Wage (cont.)
• The minimum wage has always been
controversial.
• Supporters argue
– Objectives, equity, and security are
consistent with economic goals.
– Wage isn’t high to begin with.
The Minimum Wage
The Minimum Wage (cont.)
• Opponents argue
– Wage discriminates; young people can’t
find jobs.
– Economic freedom is not promoted.
The Minimum Wage
The Minimum Wage (cont.)
• Minimum wage is shown in current
dollars and in real or constant dollars.
– Constant dollars involve the use of a
base year.
– Inflation erodes the purchasing power of
the minimum wage.
The Minimum Wage (cont.)
• Some people want to link minimum wage
to inflation—wage automatically rises
when prices rise.
Some people want to link the minimum
wage to inflation, so the wage
automatically rises when prices rise.
What do you think?
A. Agree
B. Disagree
C. Not sure
A. A
B. B
C
0%C. 0%
A
B
0%
C
Wage Determination Wage rates can be explained
in three ways. The market theory of wage
determination relies on the tools of supply and
demand. The theory of negotiated wages recognizes
the influence of
unions in bargaining
for higher wages.
The signaling theory
states that employers
are willing to pay
higher wages to
people with diplomas
and other signals
of ability.
Labor Dispute Resolution Union and management
representatives can use several strategies to resolve
deadlocks when collective bargaining fails.
Employment Issues Current labor issues include
the loss of influence and power since the 1940s, the
wage gap between women and men, and the
minimum wage and its purchasing power.
César Chávez
(1927–1993)
• led the only successful union
to organize farmworkers
• posthumously awarded the
Presidential Medal of
Freedom in 1994, the
highest honor given to
civilians
Economic Concepts
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Select a transparency to view.
craft union
labor union whose members perform
the same kind of work
trade union
labor union whose members perform
the same kind of work
industrial union
labor union whose members perform
different kinds of work in the same
industry
strike
union organized work stoppage
designed to make an employer meet
union demands
picket
demonstrate or march before a place
of business to protest a company’s
actions
boycott
refusal to buy products from an
employer or company
lockout
management refusal to let employees
work until demands are met
company union
union organized, supported, or run by
an employer
Great Depression
worst period of economic decline in
U.S. history, lasting from 1929 to
approximately 1939
right-to-work law
state law making it illegal to require a
worker to join a union
independent union
labor union not affiliated with the AFLCIO or the Change to Win Coalition
closed shop
arrangement under which workers
must join a union before they
are hired
union shop
arrangement under which workers
must join a union after being hired
modified union shop
arrangement under which workers
have the option to join a union after
being hired
agency shop
arrangement under which nonunion
workers must pay union dues
civilian labor force
noninstitutionalized part of the
population, aged 16 and over, either
working or looking for a job
legislation
enactment of a law
prohibited
prevented or forbade
wage rate
prevailing pay scale for work
performed in an occupation
unskilled labor
workers not trained to operate
specialized machines and equipment
semiskilled labor
workers who operate machines that
require a minimum amount of training
skilled labor
workers who are trained to operate
complex equipment and require little
supervision
professional labor
workers with a high level of training,
education, and managerial skills
market theory of wage
determination
explanation of wage rates relying on
theory of supply and demand
equilibrium wage rate
wage rate leaving neither a surplus
nor a shortage in the market
theory of negotiated wages
explanation of wage rates based
on the bargaining strength of
organized labor
seniority
length of time a person has been on
a job
signaling theory
theory that employers are willing to
pay more for people with certificates,
diplomas, and other indicators of
superior ability
collective bargaining
process of negotiation between union
and management representatives
over pay, benefits, and job-related
matters
grievance procedure
provision in a labor contract that
outlines how future disputes and
disagreements will be resolved
mediation
process of resolving a dispute by
bringing in a neutral third party
arbitration
agreement by two parties to place a
dispute before a third party for a
binding settlement
binding arbitration
agreement by two parties to place a
dispute before a third party for a
binding settlement
fact-finding
agreement between union and
management to have a neutral third
party collect facts about a dispute and
present nonbinding recommendations
injunction
court order issued to prevent a
company or union from taking action
during a labor dispute
seizure
temporary government takeover of a
company to keep running during a
labor-management dispute
anticipate
to expect or be sure of in advance
distorted
not truthfully represented
giveback
wage, fringe benefit, or work rule
given up when renegotiating a
contract
two-tier wage system
wage scale paying newer workers a
lower wage than others already on
the job
glass ceiling
seemingly invisible barrier hindering
advancement of women and
minorities in a male-dominated
organization
set-aside contract
guaranteed contract or portion of a
contract reserved for a targeted
group, usually a minority
minimum wage
lowest legal wage that can be paid to
most workers
current dollars
dollar amounts or prices that are not
adjusted for inflation
constant dollars
dollar amounts or prices that have
been adjusted for inflation
real dollars
dollar amounts or prices that have
been adjusted for inflation
base year
year serving as point of comparison
for other years in a price index or
other statistical measure
trend
a pattern or general tendency
equivalent
equal in value
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