Economics for Leaders

1. Economics for Leaders Lesson 5: Labor Markets

2. Low, Middle, & High Income Nations

3. ERP-4: Institutions are the “rules of the game” that influence choices. Laws, customs, moral principles, superstitions, and cultural values influence people’s choices.

4. ERP-2: Choices impose costs; people receive benefits and incur costs when they make decisions.

5. What about the income of people?

6. What determines how much people are paid? • What will determine how much money you make?

7. Demand for labor isDerived Demand There is only a demand for laborers if there is demand for the goods and services those laborers produce.

8. Price ≈ ≈ 0 Qs Market for Kites $20 7500

9. Market for Kite-Makers $8/hr Wage ≈ ≈ 0 75 Qs

10. What if: bad weather, abnormally calm winds, oil spill closes all the beaches ???

11. Market for Kites Price $20 $17 ≈ ≈ 0 6300 7500 Qs

12. Market for Kite-Makers Wage $8/hr $7/hr ≈ ≈ 0 65 75 Qs

13. What if it’s a very windy summer, or the national kite festival is scheduled in the area, or a huge, new beach-side resort opens?

14. Market for Kites Price $23 $17 ≈ ≈ 0 6300 8800 Qs

15. Market for Kite-Makers Wage $8/hr $7/hr ≈ ≈ 0 65 80 Qs

16. Over Supply: Migrant Workers Until effective legislation to stem the flow of illegals, large and growing demand for crop workers could be satisfied without raising wages because of the over supply of illegal immigrants.

17. High Demand:Rosie the Riveter: High demand in WWII pulled women into the factory work force at higher wages than they could make in traditional “women’s occupations.”

18. Markets Determine the Price (Wage) of Labor • In competitive markets, wages & benefits are determined by the supply & demand for labor • Demand: Employers’ hiring decisions are based on the opportunity cost of hiring one worker over another, or hiring a worker rather than buying a machine. • Supply: Workers consider wages, work conditions, & opportunity costs like welfare or unemployment compensation, other job offers etc.

19. Labor force =# of people employed or seeking employment Employment= # of people that are employed Unemployment= # of people seeking employment, but not working Labor force participation= % of population at work Labor Market Terminology

20. Use economic reasoning tools to prepare for the labor market • Derived demand: • Choose the right market – the market for what you can produce is an important determinant of wages

21. Listen to your Mama • Make Yourself Scarce, Young Lady! • Relative wages reflect the relative scarcity of the worker. • Wage rates are determined largely by worker productivity

22. Use economic reasoning tools to prepare for the labor market • Productivity: • More productive employees within an industry earn higher wages • Improve your “human capital” to make yourself more productive: • Education and training • Experience • Choose the right place to work: • Infrastructure • Technology • Institutions – the rules of the game

23. From BLS Table 6:The 30 fastest-growing occupations, 2006-2016 • Network systems and data communications analysts • Personal and home care aides • Health care aides • Computer software engineers • Veterinary technologists and technicians • Personal finance advisors • Make-up artists, theatrical and performance • Medical assistants • Veterinarians • Substance abuse and behavioral disorder counselors • Gaming surveillance officers and investigators • Physical therapist assistants

24. From BLS Table 8:The 30 occupations with largest employment declines, 2006-2016 • Store clerks and order fillers • Cashiers, except gaming • Packers and packagers, hand • File clerks • Farmers and ranchers • Order clerks • Cutting, punching, and press machine setters, operators, and tenders, metal and plastic • Telemarketers • Inspectors, sorters, testers, samplers, and weighers • First line supervisors of production • Computer operators • Photographic processing machine operators

25. How Do Employers Decide How Many People to Hire? Marginal Benefit = Marginal Cost Marginal Benefit is additional worker contribution to total revenue Marginal Cost is additional worker contribution to total cost

26. What affects worker Productivity? • Skills - Investment in human capital • Quality and quantity of physical capital with which labor works Other factors in the country/economy

27. Superstars $112 milion XXX What do these people have in common? How does technology allow them to leverage their labor time and raise their income? $225 million $647 million $150 million

28. Poverty = Low Productivity • Relative wages reflect the relative scarcity of the workers • Wages are determined by productivity. • Data on income by occupation supports the argument that the poor are by and large those with few valued skills; their productivity is low

29. Government & Labor Markets • Government policies may impact labor markets by changing the incentives facing employers and/or workers: • Mandated benefits • Legislation: ADA • Welfare • Minimum wage • How could raising the minimum wage increase unemployment? (2 answers – supply and demand) • When would raising the minimum wage have no effect on employment?

30. Labor Issue: Government Regulation: All restrict labor markets: Family Leave Act Am. With Disabilities Act Mandated Benefits CAFÉ standards Costs/Benefits? Unintended Consequences?

31. The Supply of Labor impacts wages Unions and professional associations (like AMA, NEA) don’t set wages; they keep wages high by restricting the supply of labor. Good or bad? It depends on . . . Price $24 $20 ≈ ≈ 0 6250 7500 Qs

32. ERP-5:Understanding based on knowledge and evidence imparts value to opinions.

33. Labor Issue: Sweatshops The important questions: opportunity cost & alternatives ????

34. The important questions: Where can they go?What are the unintended consequences of policies? Labor Issue: Child Labor:

35. The “Big Ideas” from Lesson 5: • Labor markets are affected by the demand for the goods and services that labor helps to produce. • Individual productivity affects wages and technology affects individual productivity. • Institutions (unions, government, etc.) affect the labor markets when they affect the supply of labor, the cost of hiring, and the prices of goods and services produced.

36. How to increase YOUR income and job satisfaction • Make yourself scarce (talent skill) • Increase your productivity education, skill, use of technology, infrastructure • Do something fulfilling ..\..\My Videos\RealPlayer Downloads\Qwest DSL with MSN Premium.flv

37. Rule 1: Life is not fair - get used to it! Rule 2 : The world won't care about your self-esteem. The world will expect you to accomplish something BEFORE you feel good about yourself. Rule 3 : You will NOT make $60,000 a year right out of high school. You won't be a vice-p resident wit h a car phone until you earn both. Rule 4 : If you think your teacher is tough, wait till you get a boss. Rule 5 : Flipping burgers is not beneath your dignity. Your Grandparents had a different word for burger flipping: they called it opportunity.. Rule 6: If you u mess up, it's not your parents' fault, so don't whine about your mistakes, learn from them. Rule 7: Before you were born, your parents weren't as boring as they are now. They got that way from paying your bills, cleaning your clothes and listening to you talk about how cool you thought you were. So before you save the rain forest from the parasites of your parent's generation, try delousing the closet in your own room. Rule 8: Your school may have done away with winners and losers, but life HAS NOT. In some schools, they have abolished failing grades and they'll give you as MANY TIMES as you want to get the right answer. This doesn't bear the slightest resemblance to ANYTHING in real life. Rule 9: Life is not divided into semesters. You don't get summers off and very few employers are interested in helping you FIND YOURSELF. Do that on your own time.. Rule 10: Television is NOT real life. In real life people actually have to leave the coffee shop and go to jobs. Rule 11: Be nice to nerds. Chances are you'll end up working for one.