Transcript Earnings, productivity, and the job market

Labor Unions
Discrimination
and
Immigration
“In the making of the wages contract the
individual laborer is always at a
disadvantage. He has something which he
is obliged to sell and which his employer is
not obliged to take, since he [that is, the
employer] can reject single men with
impunity.”
John Bates Clark (1847–1938)
1. U.S. laws to create a more equal balance of power
between workers and employers
a. Setting minimum hourly wages
b. Setting maximum hours of work (at least before
employers pay overtime rates)
c. Prohibiting child labor
d. Regulating health and safety conditions in the
workplace
e. Preventing discrimination on the basis of race,
ethnicity, gender, sexual orientation, and age
f. Requiring employers to provide family leave
g. Requiring employers to give advance notice of
layoffs
h. Covering workers with unemployment insurance
i. Setting a limit on the number of immigrant workers
from other countries
2. Prominent U.S. Workplace Protection Laws
a. National Labor- Management Relations Act of 1935
b. Social Security Act of 1935
c. Fair Labor Standards Act of 1938.
d. Taft-Hartley Act of 1947
e. Civil Rights Act of 1964
f. Occupational Health and Safety Act of 1970
g. Employee Retirement and Income Security Act of 1974
h. Pregnancy Discrimination Act of 1978
i. Immigration Reform and Control Act of 1986
j. Worker Adjustment and Retraining Notification Act of 1988
k. Americans with Disabilities Act of 1990
l. Family and Medical Leave Act of 1993
m . Pension Protection Act of 2006
n. Lilly Ledbetter Fair Pay Act of 2009
Labor Unions
+
the workers’ primary line of defense
against efforts by profit-seeking firms to hold
down wages?
- grab as much as they can in the short term,
even if it means injuring workers in the long
run by driving firms into
bankruptcy or by blocking the new
technologies and production methods that lead
to economic growth
1. 11.3% of all U.S. workers belong to unions.
2. 12.0% of U.S. male workers belong to unions;
10.5% of female workers do
Incidence of Union Membership – by sex
Men
Women
15.2 %
11.5 %
Union members as a share of group, 2000
Incidence of Union Membership – by sex
Men
Women
12.0 %
10.5 %
Union members as a share of group, 2013
3. 11.1% of white workers,
13.4 % of black workers,
9.8 % of Hispanic workers belong to unions
Incidence of Union Membership – by race
White
13.0 %
Black
Hispanic
17.1 %
11.4 %
Union members as a share of group, 2000
Incidence of Union Membership – by race
White
Black
Hispanic
11.1 %
13.4 %
9.8 %
Union members as a share of group, 2013
4. 12.5% of full-time workers and 6.0% of part-time
workers are union members
Incidence of Union Membership – full
time/part time
Full time
Part time
12.5 %
6.0 %
Union members as a share of group, 2013
5. 4.2% of workers ages 16–24 belong to unions, and
14% of workers ages 45-54
Incidence of Union Membership – age group
16 - 24
45 - 45
4.2 %
14.0 %
Union members as a share of group, 2013
high percentages of unionized workers:
- the federal government (26.9%),
- state government (31.3%),
- local government (41.7%);
- transportation and utilities (20.6%);
- natural resources, construction, and maintenance
(16.3%);
- production, transportation, and material moving
(14.7%)
low percentages of unionized workers:
- agricultural workers (1.4%),
- financial services (1.1%),
- professional and business services (2.4%),
- leisure and hospitality (2.7%),
- wholesale and retail trade (4.7%)
The Largest American
Unions in 2013
Union
Membership
National Education Association (NEA)
3.2 million
Service Employees International Union (SEIU)
2.1 million
American Federation of Teachers (AFT)
1.5 million
International Brotherhood of Teamsters (IBT)
1.4 million
The American Federation of State, County, and Municipal Workers
(AFSCME)
1.3 million
United Food and Commercial Workers International Union
1.3 million
United Steelworkers
1.2 million
International Union, United Automobile, Aerospace and Agricultural
Implement Workers of America (UAW)
990,00
International Association of Machinists and Aerospace Workers
720,000
International Brotherhood of Electrical Workers (IBEW)
675,000
Union Membership Trend
Since the mid-1950s, union membership has declined.
Union Membership As A Share Of Nonagricultural Employment
30 %
35 %
11.3 %
20 %
15 %
10 %
5%
1910
1920
1930
1940
1950
1960
1970
1980
1990
2013
Higher Wages for Union Workers
1. Supply Restrictions
Before union restriction - E0 and w0
After W1 E1 and an excess supply of labor.
Price
Excess supply
(wage)
Supply
Restriction
S1
w1
S0
w0
D
Employment
E1 E0
2. Bargaining Power
After employing bargaining techniques, a new higher wage
level W1 with a lower level of employment, E1 results.
Again,
an excess supply of labor results.
Price
Excess supply
(wage)
Supply
Restriction
S1
w1
S0
w0
Price
Excess supply
(wage)
Bargaining
Power
S0
w1
w0
D
D
Employment
E1 E0
Employment
E1 E0
3. Increase Demand
a. If a union is to be strong, the demand for union
labor must be inelastic.
This will enable the union to obtain large wage
increases while suffering only modest reductions in
employment.
b. Demand for union labor is inelastic when:
There is an absence of good substitutes for the
services of union employees.
The demand for the product produced by the
union labor is highly inelastic.
The union labor input is a small share of the total
cost of production.
The supply of available substitutes is inelastic.
4. Increased Productivity from Unions?
a. If yes, a firm can afford to pay higher wages.
1) Higher wages may encourage more productivity.
2) Union workers tend to stay longer, decreasing
training costs.
3) Firms may use more capital and less labor.
b. If no, lower profits and losses for the firms
1) Firms may purchase inputs from non-union
producers rather than produce their own.
2) Firms may move.
Three Production Choices
Hours of
Labor
Number of Cost of Labor +
Cost of Labor +
Machines Machine $16/hour Machine $20/hour
Cost of Labor +
Machine $24/hour
30
3
$480 + $600 =
$1,080
$600 + $600 =
$1,200
$720 + $600 =
$1,320
40
2
$640 + $400 =
$1,040
$800 + $400 =
$1,200
$960 + $400 =
$1,360
50
1
$800 + $200 =
$1,000
$1000 + $200 =
$1,200
$1200 + $200 =
$2,400
Causes of Union Decline
1. Employment growth where unions have
been weak.
1. Small firms
2. Sunbelt
3. Services
Causes of Union Decline
2. Foreign Competition
3. Workplace protection laws
Causes of Union Decline
4. More difficult for unions to organize in the US
International Comparisons of Union Membership
and Coverage in 2012
Country
Union Density: Workers
Belonging to a Union (%)
Union Coverage: Workers Whose Wages
Are Determined by Union Bargaining (%)
Austria
37
99
France
9
95
Germany
26
63
Japan
22
23
The Netherlands
25
82
11.3
81
Sweden
82
92
United Kingdom
29
35
11.3
12.5
Spain
United States
in many countries, the wages of many workers who do not officially belong to a union are still
determined by collective bargaining between unions and firms.
Results
Wage Premium of Union Workers Relative to Similar Non-Union Workers
20 %
18 %
15 %
11 %
19 %
17 %
15 %
12 %
1950-54 1955-58 1967-70 1971-75 1976-79 1980-82 1983-89 1990-00
Sources: Lewis, H.G. Unionism and Relative Wages in the United States: An Empirical Inquiry (Chicago: University of Chicago Press,
1963); and Lewis, H.G. Union Relative Wage Effects: A Survey (Chicago: University of Chicago Press, 1986). The 1983-1989 and 19902000 figures are from Hirsch, B.T. and MacPherson, D.A. Union Membership and Earnings Data Book: Compilations from the Current
Population Study, 2001 edition (Washington D.C.: The Bureau of National Affairs, 2001).
Studies indicate that the wages of union workers have been
between 18% and 20% higher than those of similar nonunion workers during the past two decades.
Which is slightly higher than during the 1950’s and 1960’s.
1. Since 1970, union membership, as a percent of the labor force, has
a. remained virtually unchanged.
b. increased slightly.
c. declined steadily.
d. increased significantly.
2. Which of the following is true?
a. Women are more highly unionized than men.
b. A higher percent of white workers belong to unions than do
African-American workers.
c. The proportion of government employees belonging to a union is
substantially higher than the proportion of private-sector workers
who are union members.
d. There is little difference in incidence of unionization among
occupational categories.
3. How does competition from nonunion firms and foreign producers
affect the ability of a union to increase the wages of its members?
a. Such competition reduces the ability of a union to achieve wage
increases.
b. Such competition does not affect the ability of a union to achieve
wage increases.
c. Such competition will increase the strength of a union if it produces
a product sold in the domestic market but reduce the strength of the
union if it produces an export product.
d. The effect of this type of competition will be entirely dependent on
the elasticity of demand for labor in the domestic market.
4. Most studies indicate that during the last two decades, the wages of
union members have been approximately
a. 5 percent higher than the wages of similar nonunion workers.
b. 14 to 19 percent higher than the wages of similar nonunion workers.
c. 34 to 39 percent higher than the wages of similar nonunion workers.
d. 64 to 69 percent higher than the wages of similar nonunion workers.
5. Which of the following factors will make it easier for a labor union to
increase the wages of its members?
a. a highly inelastic demand for the products produced by the union
labor
b. a readily available supply of similar products produced by nonunion
labor
c. low tariffs and strong competition from foreign firms producing the
products supplied by the union labor
d. a reduction in the demand for the products produced by the union
labor
Discrimination
1. Employment Discrimination
Fewer jobs available for minorities
2. Wage Discrimination
Lower wages for minorities
Employment Discrimination
1. Race and gender:
• Discrimination - if workers with the same skill
levels—as measured by education, experience,
and expertise—receive different pay receive
different pay or have different job
opportunities because of their race or gender.
Is Discrimination
Responsible for the
Earnings Differences
Between Men and
Women?
Level of Education and Earnings
(and Discrimination)
• The earnings of
both men and
women increase
with education.
Less than
9th grade
High
School
Some
college
• Note, though,
Bachelor’s
that women’s
degree
earnings were only
about 2/3 those of
Master’s
similarly educated
degree
men.
Doctoral
degree
Men
24,595
Women
18,578
35,121
23,498
42,946
29,500
62,543
40,263
75,411
49,635
107,988
56% of men’s
69,085
Mean earnings ($) of
year-round-full-time workers (2000)
Level of Education and Earnings
• Updated in 2001
• Both still increase
with education.
Less than
high school
High
school
Some
college
• Women’s earnings
still about 2/3
those of similarly Bachelor’s
degree
educated men.
Master’s
degree
Doctoral
degree
Men
27,190
Women
22,361
37,362
26,660
45,271
32,511
70,253
45,290
87,022
57,770
10% above 2000
71,608
14% above 2000
66% of men’s
Mean earnings ($) of
year-round-full-time workers (2001)
118,853
Level of Education and Earnings
• Updated in 2005
• Both still increase
with education.
•Less than
high school
•High
school
•Some
college
• Women’s earnings
still about 2/3
those of similarly •Bachelor’s
educated men.
degree
•Master’s
degree
•Men
•28,415
•Women
•20,508
•40,112
•28,657
•49,537
•35,521
•75,130
•49,326
•95,794
•59,569
14.9% from 2001
14.9% from 2001
47% of men’s
•Mean earnings ($) of
year-round-full-time workers (2005)
•Doctoral
degree
•136,567
•92,650
Level of Education and Earnings
• Updated in 2007
• The earnings of
both men &
women
increase with
education.
•Less than
high school
•High
school
•Some
college
Women’s earnings •Bachelor’s
degree
still only about
2/3
those of similarly •Master’s
degree
educated men.
•Doctoral
degree
•Men
•Women
•30,602
•21,906
•42,042
•30,657
•50,103
•38,396
•77,536
•52,857
•94,763
•63,156
•132,706
•85,190
• Comparison over time
•2000
• Bachelor’s
Degree
2001
62,543
•Men
40,263
•Women
70,253
45,290
2005
75,130
49,326
2007
77,536
52,857
Employment Discrimination
and Earnings of Women
75
70
65
85
77.0
Female/male annual
earnings, full-time
workers (left scale)
65
60
60.4
Share of females age
20 and over in the
labor force (right scale)
55
50
1960
1965
1970
1975
75
1980
1985
1990
1995 2000
55
45
35
2005
The labor force participation rate of women has steadily
increased for several decades.
The earnings of women remained around 60 % that of
men during the 1960’s and 1970’s. Since 1980 the
earnings of women have been rising relative to men.
Employment Discrimination and
Earnings of Women
Median female/male annual earnings ratio (%), 2005
All workers:
Married
(spouse present)
Total
Never Married
Full-time, full-year workers:
Married
(spouse present)
•otal
Never Married
58 %
69 %
81 %
69 %
76 %
100 %
The earnings of married female workers are about ½ those
of married men. The earnings of single female workers are
about 81 percent that of single men.
The earnings of full-time married female workers are 69
percent that of full-time married male workers.
In 2013, childless women with the same education
and experience levels as men are typically paid
comparably.
However, women with families and children are
typically paid about 7% to 14% less than other
women of similar education and work experience
(Married men earn about 10% to 15% more than
single men with comparable education and work
experience.)
Possible sources of earnings
differences between men and women:
1. Women are likely to bear a disproportionately
large share of household responsibilities.
2. A mother of young children is more likely to
drop out of the labor force for several years or
work on a reduced schedule than is the father.
3. As a result, women in their 30s and 40s are
likely, on average, to have less job experience
than men.
The Changing Workforce Objectives
of Women
Women as a Proportion of Persons
Earning Selected Professional Degrees, Selected Years
Field of study
Engineering
Dentistry
Optometry
Law
Veterinary medicine
Medicine
Accounting
Economics
Architecture
Pharmacy
1970–71
1987–88
2000–01
2004–05
0.8
1.2
2.4
7.3
7.8•
9.2
10.1
11.2
12.0
25.2
15.3
26.1
34.3
40.4
50.0
33.0
52.6
32.8
38.7
59.7
19.9
38.6
54.5
47.3
69.8
45.3
60.5
34.1
35.8
66.1
19.9
43.8
61.5
48.7
75.6
47.3
59.7
31.9
38.8
67.5
The career goals and educational choices of women have
changed dramatically during the last 35 years.
Progress by 2013
• 58.6% of adult women held jobs while
71.2% of adult men did.
In 1971, 44% of bachelor’s degrees went to women;
In 2013, 56% of bachelor’s degrees went to women.
In 1970, women received 5.4% of the law degrees, and
8.4% of the degrees from medical schools.
By 2013, women were receiving 47.2% of the law degrees
48.3% of the medical degrees
Women as a Share of Persons
Graduating from College: 1961-2006
Female Share of College Graduating Classes
49 %
39 %
1961
53 %
57 %
58 %
56 %
2000
2006
2013
43 %
1970
1980
1990
Women have constituted an increasing share of college graduates.
Today, almost three of every five graduating seniors are women.
Does this indicate that colleges discriminate against men?
TRUE or FALSE
1. The labor force participation rate of women has risen
from 37.6% in 1960 to 60.6% in 2002.
2. The hourly earnings of full-time working women were
approximately 80% of those of men in 2002.
3. Until recently, more than ½ of all women were employed
in just 4 occupations – clerical workers, teachers, nurses,
and food service workers.
4. Women have tended to seek jobs with more flexible
hours.
5. The male/female earnings differential was just as large
between single males and females as between married
males and females, strongly suggesting that employment
discrimination is responsible for the earning difference.
TRUE or FALSE
6. By 1968, the majority of females 14 to 24 expected
to be working at age 35.
7. Since 1970, the proportion of degrees in economics and
engineering earned by women has fallen, while the
proportion in veterinary medicine and accounting has risen.
8. The 1962 equal pay legislation and the 1964 civil rights
legislation resulted in a substantial increase in the earnings
of females relative to males during the 60s and 70s.
9. The earnings of women is expected to continue to rise
relative to the earnings of men in the near future.
10. When employment discrimination results from the
personal prejudices of employers, economic theory suggests
that employers who discriminate will have higher costs than
employers who do not.
The Black/White Earnings Gap
1. Until the passage of the Civil Rights Act of
1964, it was legal in many states to refuse to
hire a black worker, regardless of the
credentials or experience of that worker.
2. Blacks were often denied access to
educational opportunities, which in turn meant
that they had lower levels of qualifications for
many jobs.
3. the ratio of total earnings of black male
workers to white male workers rose from 62% in
1964 to 75.3% in 2013 (BLS)
The Black/White Earnings Gap
4. the earnings gap between black and white
workers has not changed as much as the
earnings gap between men and women has in the
last half century.
5. black women who have the same levels of
education and experience as white women
receive, on average, about the same level of pay.
6. white and black college graduates have
identical salaries immediately after college;
however, the racial wage gap widens over time
Educational Attainment by Race and
Ethnicity, 2011
White
Hispanic
Black
Asian
Completed four years
of high school or more
87.6 %
62.9 %
84.2 %
88. 9 %
Completed four years
of college or more
30.3 %
13.9 %
19.8 %
52.4 %
Employment Discrimination
• Discriminated workers are restricted in the
types of jobs and occupations they enter.
• Supply in the unrestricted jobs will increase,
causing wages to fall in these jobs.
• When the supply (of minorities) to an occupation
is restricted, the wages (of white males) will rise.
Wages
Wr
Wn
Wages
Sr
Du
Quantity
Su
Wn
Wu
Du
Quantity
Employment Discrimination
Discrimination is costly to employers.
• When employers can hire equally productive
minorities (or women) at a lower wage than whites
(men), the profit motive gives them a strong
incentive to do so.
• Employers who ignore minority and gender
status when employing workers will have lower
wage costs than employers who discriminate.
Public Policies to Reduce Discrimination
1. Equal Pay Act (1963)
- said that men and women who do equal work at
a company must be paid the same
2. The Civil Rights Act (1964)
- prohibits employment discrimination based on
race, color, religion, sex, or national origin.
3. The Age Discrimination in Employment Act (1967)
- prohibited discrimination on the basis of age
against individuals who are 40 years of age or older
Public Policies to Reduce Discrimination
4. The Civil Rights Act (1991)
- provides monetary damages in cases of
intentional employment discrimination.
5. The Pregnancy Discrimination Act (1978)
- aimed at prohibiting discrimination against women
in the workplace who are planning to get pregnant,
are pregnant, or are returning after pregnancy
An Increasingly Diverse Workforce
The projected changes in the ethnic makeup of the U.S. population by 2060.
Note that “NHPI” stands for Native Hawaiian and Other Pacific Islander. “AIAN” stands for
American Indian and Alaska Native. Source: US Department of Commerce
Immigration
View 1. Concern about immigration levels to the
United States which shows total inflows of
immigrants decade by decade through the
twentieth century.
Immigration
View 2. the seemingly high levels in immigration in
the 1990s and 2000s look relatively smaller when
they are divided by the population.
Economic Effects of Immigration
Scenario 1: Immigrants matched the existing
U.S. population in age range, education, skill
levels, family size, and occupations.
1. Immigrants would be much better off, because their
standard of living would be higher in the United States.
2. Immigrants would contribute to both increased
production and increased consumption.
3. Given enough time for adjustment, the range of jobs
performed, income earned, taxes paid, and public
services needed would not be much affected by this
kind of immigration.
4. It would be as if the population simply increased a little.
Economic Effects of Immigration
Reality: Immigrants are not identical to the rest
of the U.S. population. About 1/3 of immigrants
over the age of 25 lack a high school diploma.
1. many of the recent immigrants end up in jobs like
restaurant and hotel work, lawn care, and janitorial work,
which will lead to lower wages for these jobs..
2. Competing low-skilled U.S. workers will tend to suffer
from immigration.
3. the effects of immigration on taxes are generally
positive at the federal level,
4. they are negative at the state and local levels in places
where there are many low-skilled immigrants.
Proposals for Immigration Reform
1. The Congressional Jordan Commission of the
1990s
- proposed reducing overall levels of immigration
and refocusing U.S. immigration policy to give
priority to immigrants with a higher level of skills
2. “DREAM Act” (not yet passed by Congress)
- would offer a path to citizenship for illegal
immigrants brought to the United States before
the age of 16.
1. Since 1980, the female/male annual earnings ratio of full-time workers
has been _____________, while the labor force participation rate of
women has been _____________________ during this same period.
a. rising; declining
b. rising; increasing
c. falling; increasing
d. falling; declining
2. Which of the following is true?
a. Employers who discriminate against women will have lower costs
than rival firms that hire employees strictly on the basis of merit
(productivity).
b. If employers can hire equally productive female employees at a
lower wage than males, the profit motive gives them a strong
incentive to do so.
c. The female/male earnings ratio is higher for persons who are
married than for those who remain single.
d. Both a and c are true.
3. (I) The female/male earnings ratio is lower for persons who are
married than for those who remain single.
(II) Gender differences in household responsibilities are an important
determinant of the earnings differential between men and women.
a. Both I and II are true.
b. Both I and II are false.
c. I is true; II is false.
d. I is false; II is true.
4. Which of the following is true about those graduating with college
degrees?
a. The proportion of college degrees earned by women has been
declining in recent decades.
b. The proportion of college degrees earned by women has been
virtually constant during the last four decades.
c. In 2002, only about 40 percent of those graduating from college
were women.
d. In 2002, only about 40 percent of those graduating from college
were men.
5. Which of the following factors are likely to lead to an increase in
the female/male earnings ratio in the future?
a. As the labor force participation of women increases, their
years of work experience will become more similar to men.
b.In recent years, a higher proportion of women have been
preparing for careers in the professions.
c. As the proportion of families headed by a female parent
increases, the average hours worked per week of female
employees will decline.
d.Both a and b are correct.
6. Wages in the United States are higher than those in India primarily
because
a. the weather is better in the United States.
b. a larger proportion of the labor force is unionized in the US.
c. less capital per employee is required in the United States.
d. the human and physical capital of American workers exceeds that of
their Indian counterparts.
7. When employment discrimination results from the personal
prejudices of employers, economic theory suggests that
a. it is costless for employers to discriminate against groups they do
not like.
b. the wages of employees who are discriminated against will actually
rise.
c. an employer who discriminates will experience higher costs.
d. discrimination by an employer will reduce production costs since
the employer can pay lower wages.
8. In a market economy, which of the following is most important if
one is going to achieve high earnings?
a. hard work
b. provision of goods and/or services that others value highly
c. having a graduate degree in a field like history or sociology
d. membership in a labor union