Economics - Chapter 9 Labor, Employment and Wages

Transcription

1 Sectin 1: What Determines Wages? Ecnmics - Chapter 9 Labr, Emplyment and Wages Supply and Demand in the Labr Market Supply and demand can be used t analyze hw we determine the f a resurce (factr f prductin), such as. In this market, the peple wh labr are emplyers and the peple wh labr are emplyees. The price f labr is called the. The demand curve fr labr slpes. Emplyers will be willing and able t hire peple at wage rates than at higher wage rates. In cntrast, the supply curve fr labr slpes. Mre peple will be willing and able t wrk at wage rates than at wage rates. Hw the Equilibrium Wage Rate Is Established The equilibrium wage rate is the wage at which the quantity demanded f labr the quantity supplied f labr. When the quantity supplied f labr is greater than the quantity demanded, there is a f labr and wage rates. Quantity supplied f labr > Quantity demanded f labr = a surplus f labr A surplus f labr = wage rates fall When the quantity demanded f labr is greater than the quantity supplied, there is a f labr and wage rates. Quantity demanded f labr > Quantity supplied f labr = a surplus f labr A shrtage f labr = wage rates rise Why D Sme Peple Earn Mre than Others? Wage rate = hw much a persn earns n an basis Wage rates may differ because The f different types f labr is nt the same. The fr different types f labr is nt the same. Average hurly earning f wrkers in different industries Cnstructin = $ Manufacturing = $ Financial activities = $ Leisure and hspitality = $ Business and prfessinal services = $

2 Are Mney Benefits the Only Thing That Matters? A higher incme is the nly thing that matters t peple. Other influences include, between hme and wrk, wrked per week, and time. Benefits in a jb = Mnetary benefits (incme) + Nnmney benefits Each f us needs t make a as t what is imprtant t us when chsing a jb The Demand fr a Gd and Wage Rates If demand fr a decreases, then demand fr t prduce that prduct will als decrease. demand is demand that is the result f sme ther demand. What Will Yu Earn? Wage rates fr different vary. Yur wage rate (and salary) will depend n a number f things. One is the fr yur labr services. Tw factrs will make the demand fr yur labr services high: The demand fr the yu prduce. Yur. Yur prductivity can be influenced by many factrs, such as natural ability, effrt, quality and length f educatin and training. Demand is nt the nly factr influencing yur ptential earnings. The f qualified peple als helps determine wages. High wages are the result f cmbined with. Gvernment and the Minimum Wage The minimum wage law is a law that specifies the hurly wage rate that can be paid t wrkers. This law was riginally passed during the. At that time, it established a minimum wage f 25 cents an hur. As f 2009, the minimum wage is $7.25 an hur. Individual can set their minimum wage higher than the federal rate. The minimum wage rate may be higher r lwer than the wage rate fr a particular area r ccupatin. When Cngress changes the minimum wage, it may have the effect f increasing because emplyers will be willing and able t hire fewer wrkers. Tw Types f Wages: Mney and Real Measuring a persn s wage rate in terms f gives us the persn s mney wage, r wage. We usually refer t this rate as a dllar amunt per hur, such as $9 per hur. Measuring a persn s wage rate in terms f what it gives us the persn s wages. A persn s mney wage can rise while his r her real wage falls. This happens when the price f gds and services mre than wages. Real wage is mre than mney wage because it measures what we can d with the mney wage we receive. The gvernment measures the average price f the variety f gds that peple usually buy. This average price is called a. One well-knwn index is the (CPI). The CPI is cmputed.

3 Yu can find yur real wage fr a given year by yur mney wage by the CPI. Suppse yu made $7 per hur last year, and the CPI was 120. Yur real wage last year was 5.8 percent f ne unit f a cmpsite gd. Nw suppse yu have received a prmtin and yu are making $9 per hur this year. But the CPI has als risen; this year it is 170. Yur real wage this year is 5.3 percent f ne unit f a cmpsite gd. Even thugh yur wages increased frm $7 t $9 per hur, yur real wage decreased frm 5.8 percent t 5.3 percent. ********************************************************** Applying the Principles Ecnmics - Chapter 9, Sectin 1 What Determines Wages? Wages In An Unskilled Labr Market The fllwing table shws the number f wrkers demanded and supplied at varius wages in the unskilled labr market in H -Twn. Use this table t respnd t questin 1. UNSKILLED LABOR MARKET IN H-TOWN Hurly Number f wrkers Wage Demanded Supplied $2 14,000 2,000 $3 12,000 4,000 $4 10,000 6,000 $5 8,000 8,000 $6 6,000 10,000 $7 4,000 12,000 $8 2,000 14, Use the infrmatin in the table t draw the supply and demand curves fr this labr market n the grid abve. Use the wage rates (prices) and number f wrkers (quantities) demanded t plt the demand curve. Label it D 1. Use the wage rates and number f wrkers supplied t plt the supply curve. Label it S 1. Use the graph yu created in questin 1 t answer questins 2 and The equilibrium wage fr unskilled labr in H - Twn is 3. The equilibrium quantity fr unskilled labr in H - Twn is wrkers. Minimum Wage Many cmmunity leaders make passinate speeches befre the city cuncil n behalf f the lw-wage wrkers in H-Twn. The cmmunity leaders maintain that the way t help lw-wage wrkers is t raise the minimum wage. Due t the hard wrk and persuasive speeches, the city cuncil f H-Twn passes a law that sets the minimum wage at $7 an hur. Lw-wage wrkers celebrate at the prspect f earning $7 an hur. Use the abve infrmatin t respnd t questin Illustrate the minimum wage by drawing a hrizntal line at $7 n the graph yu created in questin 1.

4 Questins 5-10 are based n the new graph, which nw shws a minimum wage f $7 an hur. Write yur answers in the blanks prvided. 5. The quantity demanded at the minimum wage is wrkers. 6. The quantity supplied at the minimum wage is wrkers. 7. The gvernment f H-Twn intended t help lw-wage wrkers by setting the minimum wage at $7 an hur but, instead, has created a f wrkers. 8. Because these peple are lking fr wrk but cannt find it, they are cnsidered. 9. Setting the minimum wage at $7 an hur had the f creating an unemplyment prblem in H-Twn. 10. Nw, suppse that many f the citizens f H-Twn want t get rid f the minimum wage f $7 an hur t try t reduce unemplyment. In ppsitin, persuasive speakers paint a picture f wrkers earning nly $2 an hur in the absence f gvernment regulatin. Explain why this scenari is highly unlikely. Write yur answers t questins 11 and 12 in the blanks prvided. 11. Wh are the winners and wh are the lsers when the minimum wage is increased? 12. D yu supprt an increase in the minimum wage? Why r why nt? Why Different Wages? Questins relate t the wages earned by different peple. Write yur answers in the blanks prvided. 13. What are tw f the reasns why sme peple earn mre than thers? 14. Bth dctrs and sanitatin wrkers may have a significant effect n peple's health. Explain why dctrs earn mre than sanitatin wrkers earn. 15. Sally has just earned a degree in ecnmics. She has tw jb ffers, ne frm a university fr $70,000 a year and ne frm a Wall Street investment bank fr $150,000 a year. Assume Sally chses the university jb. Cmplete the frmula that applies t this situatin. Benefits in a jb = 16. Hw much are the nnmney benefits f the university jb wrth t Sally?

5 Real Wages Real wages measure wages in terms f what the wage can buy. The frmula Real wage = Mney wage/cpi prvides a way t cmpare the wages earned in different years. Questins relate t cmparing real wages. 17. Yur great-grandfather, grandfather, and father are arguing abut wages ver dinner n Thanksgiving Day. Each claims t have had a tugher time supprting his family. Yur great -grandfather earned $4,000 a year in 1940 when the CPI was 13.9; yur grandfather earned $12,000 a year in 1970 when the CPI was 37.8; and yur father earned $50,000 a year in 2004 when the CPI was Rank yur patriarchal line frm highest t lwest accrding t real wages. Include the real wage value fr each runded t the nearest whle number. Highest real wage: Secnd highest real wage: Lwest real wage: 18. Yur Aunt Judy cmplains that althugh she cntinues t earn mre mney each year, she desn't seem t have as much buying pwer as she used t have. Use the real wage frmula t fill in the missing numbers in the fllwing table. Rund yur answers t the nearest whle number. Aunt Judy's Aunt Judy's Year Mney Wage CPI Real Wage 1985 $25, $30, $35, $39, $43, Is yur Aunt Judy crrect? Has her buying pwer been decreasing ver time?

6 Ecnmics - Chapter 9 Labr, Emplyment and Wages Sectin 2: Labr and Gvernment Regulatin Sme Practices f Labr Unins A is an rganizatin that seeks t increase its members and imprve its members. T btain higher pay fr its members, a labr unin can try t increase fr its labr, decrease fr its labr, r bth. A labr unin might use t try t increase demand fr the wrk that its members perfrm. A labr unin might try t decrease the labr supply because the fewer peple t perfrm a jb, the mre thse peple can demand in wages. In the past, unins supprted. These were rganizatins that hired nly unin members. Tday, clsed shps are. The Taft-Hartley Act f 1947 made clsed shps illegal. The Taft-Hartley Act als gave states the right t pass laws. These state laws prhibit emplyers frm emplyees t jin a unin as a cnditin f emplyment. states have passed right-t-wrk laws. Califrnia is nt a right-t-wrk state The is legal in many states. A unin shp is an rganizatin that requires emplyees t jin the unin within a certain perid after being hired. Apprximately percent f all wrkers are members f unins. Labr unins wrk by gaining ver the supply f labr. Unin members can pressure an emplyer t meet its demand by calling a. When members call a strike, they agree t stp wrking until the emplyer t d whatever the unin has demanded. Typical unin demands ask fr increased, increased, r decreased. Unins Effects n Unin and Nnunin Wages Unins can have an interesting effect n bth unin and nnunin wages. If a unin is able t cmmand higher wages, the emplyer will seek t its number f emplyees. Emplyees wh are fired will jin the labr market, thereby creating a greater supply f labr. This will cause the wages f nnunin emplyees t dip, creating an even larger between unin and nnunin wages. Tw Views f Labr Unins The traditinal view is that labr unins are an t establishing reasnable wrk standards. Thus, cmpanies that emply unin labr are less. A newer view states that the labr unin is a valuable vice fr its members. Sme evidence shws that unin firms have a higher rate f. Prductivity may increase because unin members have a vice and feel mre in their wrk. A Brief Histry f the Labr Mvement The Knights f Labr had apprximately members by This grup welcmed wh wrked fr a living. The American Federatin f Labr (AFL) grew t millin labr members in In the early days, unins were cnsidered cnspiracies, and unin leaders were regularly prsecuted and sued. In, the Supreme Curt f Massachusetts ruled that unins were nt illegal, but that certain were. In the early 1900s, curt rders called were used against labr unins t prevent strikes. The passage f the Act in 1932 limited the use f injunctins. It declared that wrkers shuld be free frm the interference, restraint, r cercin f emplyers in chsing their unin representatives.

7 In 1938, Jhn L. Lewis f the United Mine Wrkers left the AFL and frmed the (CIO). The CIO successfully uninized the steel, rubber, textile, meatpacking, and autmbile industries. In 1955, the AFL and CIO. The Landrum-Griffin Act was passed in 1959 with the intent f the internal affairs f labr unins. emplyee unins grew in ppularity in the 1960s and 1970s. These unins cmprised emplyees f lcal, state, and federal gvernments, such as plice fficers and firefighters. Gvernment Regulatin The Occupatinal Safety and Health Administratin (OSHA) prtects wrkers against ccupatinal and. The Cnsumer Prduct Safety Cmmissin (CPSC) specifies minimum standards fr ptentially prducts. The Envirnmental Prtectin Agency (EPA) regulates the amunt f businesses can emit int the air r rivers. There are bth benefits and csts t any gvernment regulatin. may include cleaner air and streams. may include mney spent installing pllutin cntrl equipment. ********************************************************** Applying the Principles Ecnmics - Chapter 9, Sectin 2 Labr and Gvernment Regulatin One f the bjectives f a labr unin may be t btain higher wages fr its members. Wages are largely determined by supply and demand in the labr market. Write yur answers t questins 20 and 21 in the blanks prvided. 20. Hw d unins try t influence the demand fr labr t achieve higher wages? 21. Hw d unins try t influence the supply f labr t achieve higher wages? Each f the graphs in questins 22 and 23 shws the supply f and demand fr unin wrkers in a particular labr market. Then the event described ccurs. Illustrate the shift in the supply curve r the demand curve as a result f the event. Then fill in the blanks in the statements belw the graph with the crrect answers. (Nte: The level f emplyment refers t the number f unin wrkers emplyed.) 22. Event: The unin increases demand fr the gd prduced. The curve shifts t the, the wage fr unin wrkers, and the level f emplyment.

8 23. Event: The unin decreases the supply f unin wrkers. The curve shifts t the, the wage fr unin wrkers, and the level f emplyment. 24. What is a clsed shp? 25. What is a unin shp? 26. Which is mre restrictive, a unin shp r a clsed shp? 27. What law made clsed shps illegal? 28. What is a right-t-wrk law? 29. Summarize the tw majr views f labr unins cncerning their effects n prductin and efficiency. 30. D yu think labr unins are a beneficial aspect f the ecnmy? Why r why nt? 31. The Latin phrase caveat emptr means "let the buyer beware." In practical terms, the phrase means that cnsumers are ultimately respnsible fr their buying decisins. Lately, gvernment has tried t reduce the burden n cnsumers by regulating firms n behalf f cnsumers. Sme peple argue that the csts f regulatin are t high. Other peple say that cnsumers need the prtectin prvided by regulatin. List and discuss the csts and benefits f gvernment regulatin. 32. D yu think there shuld be mre r less gvernment regulatin? Give reasns fr yur answer.