The Role of Labor
Dr. T. D. Mitchell
Bonneville High School
Idaho Falls, Idaho
Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9
The Role of Labor
Concept Review
Labor productivity is the value of the goods or services a worker can
produce in a set amount of time.
Chapter 9 Key Concept
Labor, the human effort used to produce goods and service, is subject
the same forces of demand and supply that govern the rest of the
economy.
Why the Concept Matters
The value of your labor depends on the demand for what you do and
the supply of other people able to do the same thing.
Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9
How are Wages Determined?
Section 1
Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9
Labor: Demand and Supply
We have learned about the four
factors of production: land, labor,
capital, and entrepreneurship.
Each one has a price that must
be figured into production costs.
The price for labor is wages, the
payments workers receive in
return for their work.
Wages, just like the other factors
of production, are governed by
the forces of supply and demand.
Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9
Labor: Demand and Supply
An equilibrium wage is the wage
at which the number of workers
needed equals the number of
workers available.
An equilibrium wage produces
neither a surplus nor a shortage of
workers.
Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9
Demand for Labor
In a competitive market, wages
reflect a worker’s productivity.
A business hires workers to help
produce goods and services.
A producer’s demand for labor is
called derived demand.
A demand for a product or
resource because of its
contribution to the final product.
Workers with higher productivity
tend to earn higher wages.
Demand for labor depends in
part on the demand for the
product.
Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9
Supply of Labor
Worker’s point of view.
Many workers leave jobs to take
better paying jobs.
For this reason, the supply curve
for labor is upward slopping.
Since wages are the price of
labor, they too gravitate toward
equilibrium.
High wages produce a greater
supply of labor; low wages give
workers less incentive to work.
Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9
Why Do Wage Rates Differ?
Different jobs have different wage rates, the rates of pay for specific
jobs or work performed.
Wages are determined by supply and demand, which in turn are
influenced by four key factors:
Human Capital
Working Conditions
Discrimination in the workplace
Government actions
Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9
Trends in Today’s Labor Market
Section 2
Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9
The Changing Labor Force
U. S. labor force has changed
dramatically since the 1950s.
In the 1950s workers stayed with
the same company until
retirement.
Today, few workers stay with the
same company their entire
career.
Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9
The Changing Labor Force
Civilian labor force, people who
are 16 or older who are
employed or actively seeking for
and available for work.
The civilian labor force excludes
people in the military, in prison, or
in other institutions.
Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9
Changes in the U. S. Labor Force
1955 family
2013 family
Women in workforce has increased.
Opportunities for women in the labor market has expanded.
As job opportunities have improved, wages for women have risen, and many
more women have been drawn to the work force.
The U. S. work force has also become better educated.
About 30% of people in the labor force have a college degree.
An additional 30% have some college credits.
With such a high degree of human capital, productivity and wages are
also high compared to many other nations.
Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9
Economic Sectors
Primary Sector
Directly related to natural resources.
Secondary Sector
Related to production.
Tertiary Sector
Service related jobs.
All of the ten fastest-growing occupations are service related
Most of them in the area of medical services.
Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9
Employment in U. S. by Sector
Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9
Technology and Change
Gas station attendants have
been replaced by computerized
self-serve, credit card operated
gas pumps.
ATMs have greatly affected the
occupation of bank teller.
Technology changes have
eliminated or redefined many
other jobs in all three sectors.
Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9
Globalization and Jobs
Today’s job market is global.
Technology allows companies to employ people not just around the
country, but around the world.
Many companies cut costs by outsourcing.
Most outsourcing in the U. S. goes to other U. S. companies.
Outsourcing has become connected with the practice of moving jobs to
foreign countries.
Many companies actually add jobs in the U. S. when they outsource abroad.
The American economy has also benefited from insourcing, the practice of
foreign countries establishing operations in the U. S.
Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9
Changes in the Way People Work
Telecommuting
Working from home.
Contingent employment
Alternatives to permanent
employment.
Independent contractors
Changing careers more often.
Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9
Organized Labor in the U. S.
Section 3
Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9
Labor’s Rise to Power
Organized labor helped shape
the modern workplace.
Most of the benefits workers take
for granted today did not exist
200 years ago.
Eight-hour days
Five-day workweek
Vacations
Sick leave
A big change from the workers of
the 1800s.
Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9
Labor’s Rise to Power
To improve their bargaining
power factory workers began to
join together and act as a group.
A labor union is an organization of
workers who collectively seek
better condition.
Unions attempt to negotiate with
businesses to achieve their goals.
When businesses resisted, union
looked for ways gain negotiating
power.
Strikes
Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9
Union History in the U. S.
Local craft unions were the main
sort of worker association in early
U. S. history.
Local unions began to join
together, by the 1830s, into
federations.
In 1869, the Knights of Labor.
Organized by industry, not by
trade or skill level.
Nationwide union
Adopted political goals
Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9
Union History in the U. S.
During the explosion of
industrialism in the late 1800s,
employers strongly resisted the
efforts of workers to organize.
Many protests became violent.
1886, one killed and several
injuries at the McCormick
Harvester Company in Chicago.
1892, ten workers killed in
Homestead, PA.
1894, Pullman Palace Car
Company helped close many of
the nation’s railroads.
Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9
A New Model for Unions
Most people were repulsed by
the violence and controversial
political agenda of the unions.
Samuel Gompers, American
Federation of Labor, focused on
skilled labor.
The AFL focused on economic
power instead of through
legislation.
1.7 million members
Women began to organize.
Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9
Unions Gain Power
1930s, union membership declined as many people lost their jobs.
Yet, unions gained power through a series of reforms in the New Deal.
NorrisLaGuardia
Act
Wagner Act
Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9
Fair Labor
Standards Act
Unions Gain Power
During the 1930s, the Congress of
Industrial Organizations (CIO)
organized unions for industrial
workers.
Originally part of the American
Federation of Labor (AFL).
Favored craft unions.
The two unions broke apart in
1938. Then, Re-united in 1955 as
AFL-CIO.
AFL succeeded in organizing the
United Auto Workers (UAW).
Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9
Backlash Against Unions After WW2
The end of WW2 ushered in a
period of anti-union legislation.
1947, over the veto of President
Truman, the Taft-Hartley Act was
passed to amend the Wagner
Act.
Fear of communism led to further
restrictions on unions.
Landrum-Griffin Act
Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9
Steady Decline of Labor Movement
Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9
Steady Decline of Labor Movement
For 30 years following WW2, labor unions represented 30 percent of the U. S.
workforce.
Since the mid-1970s memberships in unions has declined steadily.
Falling to 12.5 percent in 2005.
The decline can be traced to causes:
Loss of Reputation
• Prolonged strikes
• Featherbedding
Changes in the Labor Force
• Manufacturing jobs have declined
• Increase in service jobs; as well as contract employees
Right-To-Work Laws
• Legislation that tries to limit union influence.
• Laws
requiring
Economics: Concepts and Choices.
Holt against
McDougal, 2011.
Chapter 9 workers to join unions.
Union Negotiating Methods
Unions continue to use collective
bargaining to wield power.
Unions negotiate for job security,
and fringe benefits, like health
insurance. They bargain against
pay cuts, and reductions in
benefits.
Strikes or work stoppages have
been severely cut down,
because management is willing
to replace workers or close down
plants permanently.
Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9
Collective Bargaining
The vast majority of union
contracts are settled without
strikes or stoppages.
Some negotiations require
additional interventions:
Mediator
Binding arbitration
Injunction
Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9
A Collective Bargaining Example
Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9
Any questions?
Economics: Concepts and Choices. Holt McDougal, 2011. Chapter 9
0
