Labor, Employment, and Wages
Warm Up:
1. How many of you are interested in
the amount of money you will earn
on a job?
2. Why is it that professional athletes
and movie stars get paid so much?
What is
• The Civilian Labor Force?
• Men and women over the age of 16
• Working or actively searching for work
Supply & Demand
• You’ve learned about Supply and Demand
• How they affect prices of goods
• Supply and Demand can also be used to
analyze how we determine price of a resource
or factor of production (such as labor)
• People who demand labor = employers
• People who supply labor = employees
• We can create a supply and demand curve
showing the price of labor
• The price of labor is called wages (wage rate)
Using Supply/Demand Concepts
• With a partner
• Create 2 graphs
– Supply curve for labor
– Demand curve for labor
• Quantity = the number of your workers
• Price = wage rate
Supply & Demand in the Labor Market
• Downward sloping demand curve for labor
– Employers are willing and able to hire more
people at lower wages that at higher ones
• Upward sloping supply curve for labor
– More people are willing and able to work at higher
wages than at lower ones
Equilibrium
• Wage at which the quantity demanded of
labor equals the quantity supplied
• It is the wage rate at which the number of
people employers are willing and able to hire
is the same as the number of people who are
willing and able to work
Surplus? Shortage?
• Sure!
• When the market has a surplus of labor, the
wage falls
• When the market has a shortage of labor, the
wage rises
Why do some people earn more than
others?
• Supply of different labor types is not the same
• Demand for different labor types is not the same
• 2003
–
–
–
–
–
Construction $18.95
Manufacturing $15.74
Financial Activities $17.13
Leisure and hospitality $8.76
Business and professionals $17.20
Are Money Benefits the only thing that
matters?
• ???
• What is important to you???
What will you earn?
• Depends on how much your field is
demanded, how many people can do the
same thing you can do, and how productive
you are
• US Dept of Labor Occupational Outlook
Handbook
– Median salary, job growth, education required
– Every 2 years
Occupation
Growth rate 2002-2012
Medical Assistants
59%
Physician Assistants
49%
Social and Human Service Assistants
49%
Home Health Aides
48%
Medical Records and Health Information
Technicians
47%
Physical Therapist Aids
46%
Computer Software Engineers
46%
Education
Unemployment Rate
Median WEEKLY earnings
(2003)
Doctoral Degree
2.1
$1,349
Master’s Degree
2.9
$1,064
Bachelor’s Degree
3.3
$900
Associate’s Degree
4.0
$672
Some college, no degree
5.2
$622
High School graduate
5.5
$554
Some High School
8.8
$396
Two types of Wages
• Money or nominal wage ($7/hr)
• Real – how much the way will buy
• Consumer price index (CPI) – average costs of
goods
• Real wage = money wage/CPI
Questions
• If the quantity demanded of labor is greater
than the quantity supplied, what will happen
to the wage?
• Rachel’s money wage increased by 10% and
prices increased by 13%. Has Rachel’s real
wage increased? Decreased? Stayed the
same?