HOLT: EconomicsChapter 8

Labor and Unions

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Sect. 1: The U.S. Labor Force• The labor force includes all people who

are at least 16 years of age and who are working or actively looking for work

• Does not include those in the military• The term wage is the hourly, weekly,

monthly, or annual pay that a worker receives in exchange for his labor

Unemployment Rate 02/2015

Considerations when looking for work

• Most people consider the following when looking for work…

• …wages• …skills• …working conditions• …location• …intrinsic rewards• …market trends

Wages• The laws of supply and demand affects

the wages paid for workers labor• Wages paid for occupations where large

numbers of people qualify for the job tend to be low

• Wages paid for occupations where small numbers of people qualify for a job tend to be high

Equilibrium Wage• The equilibrium wage is the point where

the quantity of workers supplied and quantity of workers demanded is the same at a particular salary

• Lets examine the equilibrium wage for two sample occupations

Plotting Equilibrium Wages

Skills• Businesses want to hire only qualified

people• Skill levels required limit the supply of

workers• Jobs requiring high skill levels usually offer

higher wages• Jobs requiring lower skill levels usually

offer lower wages

Working Conditions• Most jobs are covered by federal and state

health and safety standards• Noise levels/cleanliness• High risk jobs still exist such as skyscraper

construction, fire fighting, and coal mining • High risk jobs sometimes compensate

workers for the risk involved in the occupation

Location• When considering an occupation you

should also consider where you want to be• City/country• Are you willing to work in remote or distant

locations

Intrinsic Rewards• Intrinsic rewards are nonmonetary reasons

for working at a particular job• Pride and satisfaction in the job• Status, prestige, respect

Market Trends• What industries are expanding?• …consumer demands for a good or

service create a demand for jobs in that area

• What industries are contracting?• “Occupational Outlook Handbook”• Derived demand is when demand for

workers follow demand for a good or service

Changes in the Labor Force• The people who make up the labor force

are very different today than in the past• We started with most of the people in the

US earning their living from agriculture• New technologies introduced

industrialization, the process of mechanizing all major forms of production

Industrialization• The Industrial Revolution started in Great

Britain in the mid 1700’s and spread to the US

• …created new factory based jobs• …shifted economy away from agriculture• …caused a greater reliance on capital

goods

More About Industrialization• Industrialization caused the US economy

to become capital-intensive or dependent on machines to produce goods

• This is the opposite of labor-intensive economies which produce goods through animal and human power

Women In The Workplace• World Wars I & II brought many women

into the workplace in what was then non-traditional jobs for women

• Auto mechanics, truck drivers, brick layers, metal workers, railroad engineers, pilots, shipbuilding, etc.

Women in the Workplace

• Princess Elizabeth worked as a truck mechanic for the British military during WWII

• Why?

Women In The Workforce• Before industrialization most women

worked on family farms without being paid a wage

• England’s textile industry began to employ women in the early 1800’s

• By 1900, women made up about 18% of the total labor force

Higher Education Levels• The general education level of workers

has increased over the years • Free, public schools have increased the

education level of US citizens• In the 1960’s 41% had a high school

education• 2013-US HS graduation rate was 81%• 2013-TX HS graduation rate was 88%• 2013-Northeast graduation rate was

89.9%

Higher Education = Higher Wages

• A direct relationship exists between a worker’s level of education and his/her income

Government Influence on Labor• Passed mandatory attendance laws to

encourage more people to get higher levels of education

• Passed several anti-discrimination laws to protect rights of workers

• Minimum wage laws

Anti-Discrimination Laws• Equal Pay Act of 1963 required employers

to pay the same wages to male and female workers who performed the same job

• Civil Rights Act of 1964 protects workers from discrimination based on race, sex, religion, or national origin

• Same act created the Equal Employment Opportunity Commission (EEOC) to enforce it’s provisions

Affirmative Action• In the 1960’s President Johnson pursued

a policy of affirmative action-making up for patterns of discrimination against women, minorities, etc.

• The Department of Labor followed by establishing the practice of quotas, or numerical goals for hiring and promoting women and minorities

• Using quotas continues to be controversial and has prompted numerous court actions

Minimum Wage Laws• The 1938 Fair Labor Standards Act

attempted to insure that all workers be paid at least a basic level of income

• It established a minimum wage or lowest hourly wage an employer legally can pay a worker for a job

• 40 cents was the original minimum wage and has risen to $7.25 effective 7/24/09

Tracking Minimum Wage

Sect. 2: Growth of Labor Unions• A labor union is an organization of workers

that negotiates with employers for…• …better wages• …improved working conditions• …and job security• The first labor union in the US was when

printers in New York City joined forces to demand higher pay in 1778

Development of Unions• The industrial revolution changed the

relationship between employers and their workers

• The switch to capital intensive industrialization placed more power with factory owners than with laborers

• In 1860 the average work week was 60 hours and the average wage was 10 cents

• In 1890 nearly 20% of children between the ages of 10-15 worked for wages

Types of Unions• A craft union is composed of one trade’s

skilled workers-for example plumbers, electricians, or carpenters—Ex. International Union of Bricklayers

• An industrial union includes all workers in an industry, whether they are skilled, semiskilled, or unskilled—Ex. United Auto Workers

Early Union Organizations• One early union, the Knights of Labor,

welcomed both skilled and unskilled laborers from a variety of crafts and industries

• It offered membership to women and African Americans

• It supported an 8-hour work day, the end of child labor, and other social issues

• By 1900 this union ceased to exist due to internal conflict between skilled and unskilled workers

American Federation of Labor• Beginning in 1886 the modern labor

movement started with a loose association of craft unions organized as the American Federation of Labor (AFL) under the leadership of Samuel Gompers

• They concentrated on higher wages and better working conditions and did not include social issues which proved to be the downfall of the Knights of Labor

Samuel Gompers Connection…• Samuel Gompers died

in San Antonio in 1924• He was returning from

a trip to Mexico and had to be hospitalized here

Samuel Gompers Connection…• A statue of Gompers

is in downtown San Antonio on Market Street (River City Mall and Marriott Hotel are to the right)

Decline of Organized Labor• Antiunion sentiment rose in the 1920’s as

unions were supporting radical platforms and actions

• Our federal government grew to be anti-union during the 1920’s and union membership plummeted

• The Great Depression of the 1930’s decreased union membership heavily

• Workers were just glad to have a job

Open v’ Closed Shops• Open shops were supported by business

owners• In an open shop workers have the option,

but were not required to join a union• Unions preferred closed shops which

allowed businesses to only hire workers that had already joined the union

• Internal disputes over the inclusion of unskilled workers seriously hurt the AFL in the 1930’s

Right-to Work Laws• Some states

have Right-to-Work Laws which prohibit workplaces that are closed to non-union workers

Congress of Industrial Organizations

• In 1937 a new labor organization called the Congress of Industrial Organizations (CIO) organized to include both skilled and unskilled workers and women and minorities from a variety of industries

• John L. Lewis was President of the CIO• Soon other large industrial unions merged

with the CIO-United Steel Workers, United Automobile Workers

Union Organizations• Local Unions are made up of people who

work for a particular company or in a particular area

• National Unions are larger in size and provide local chapters with leadership on national issues

• The AFL joined with the CIO in 1955 to form the AFL-CIO, the nations largest union

Challenges to Labor Unions• In recent years union

membership in the US has declined dramatically

• The three main reasons for the decline of unions are…

• …employer opposition• …changes in

employment patterns• …negative public

opinion

Union Membership Percentages• United States @ 11.3%• Highest State—New York @ 23.2%• Lowest State—North Carolina @ 2.9%• Texas @ 5.7%

Union Membership in Texas

Employer Opposition• Some companies have opposed the

development of unions because increased wages for workers mean lower profits for owners

• To lessen the influence of unions, companies have…

• …included workers on management teams• …placed a worker on their boards• …moved to other locations or out of the US

where pay is less & labor unions are not strong

Changes In Employment Patterns• The US economy has shifted from a

manufacturing based economy where union membership has been stronger to a service based economy where union membership has been weaker

• The workforce now includes larger numbers of women and teens who have traditionally not been as attracted to union membership

Negative Public Opinion• Negative public opinions have included the feeling

that…• …union demands for higher wages and increased

benefits have encouraged many companies to move their companies outside the US

• …union wages are too high for the skill level demanded for performing the work

• …union leaders have accepted political favors to get lowered union demands

• …opposition to violence and offensive tactics used by unions (Jimmy Hoffa)

Union Responses• The drop in union membership has caused unions

to change some of the ways they do things• …become more cooperative with management• …agreed to wage and benefit reductions to allow

companies to remain competitive• …concentrated more on quality of life issues such

as skill training, help with day care, etc.• …developed programs available to members

such as life and health plans, retirement accounts, low interest credit card programs & legal services

Government and Unions• The federal government has at times been

both favorable and unfavorable toward unions

• Recent years have see legislation that limits the powers of unions

• Let’s look at labor related legislation…

Major Labor Legislation

Sect. 3: Unions & Management• Unions have traditionally negotiated with

management in 5 major areas…• …wages and fringe benefits• …working conditions• …job security• …union security• …grievance procedures

Wages & Fringe Benefits• Wage concerns…• …higher wages for more experienced

workers• …overtime pay for hours worked over 40• …cost-of-living adjustments (COLA)• Fringe Benefits (non-wage payments)…• …paid sick days, holidays, vacation days,

health/life insurance, savings/retirement, profit sharing, etc

• …employee stock ownership plans (ESOP)

How Does a COLA work?

Working Conditions• Unions want to insure that workers have…• …clean workplaces• …safe workplaces• …clearly defined work responsibilities

Job Security• Encourage greater job security through a

seniority system, the system of the holding of privileges based on the number of years a worker has been employed by a firm

• When there are cutbacks those who have been with a company the least amount of time will be laid off first and those who have been with a company longer will remain employed

Union Security• The Wagner Act of 1934 gives employees

the right to organize and join unions and the right is enforced by the National Labor Relations Board (NLRB)

• 30% or more of a companies employees must sign a petition to hold an election about whether to unionize

• The election to unionize is then conducted by secret ballot

Grievance Procedures• When work related disputes arise, either

labor or management may try to resolve the issue through pre-set procedures

• Grievances, or formal complaints are usually resolved by committees made up of both the union and management

• Sometimes a NLRB sanctioned negotiator has to be used to resolve a problem

• The negotiator decides the outcome of the problem

Contract Negotiation Procedures• Collective bargaining is used to negotiate new

contracts between management and labor• Representatives from both sides meet to discuss

their goals and to find solutions• Sometimes collective bargaining negotiations

break down• They may have to call in a neutral third party,

called a mediator, to suggest ways to compromise

• In mediation the neutral third party listens to arguments of both sides and then suggests ways to reach an agreement

• Neither side is bound by suggestions of the mediator

Who is the mediator?• Mediation services can be obtained from

private citizens or a government representative

• The Taft-Hartley Act of 1947 gives the government the power to regulate relations between labor and management

• Taft-Hartley also established the Federal Mediation and Conciliation Service which mediates thousands of disputes every year

Mediation v’ Arbitration• When agreements cannot be negotiated

by using a mediator the next step is to bring in an arbitrator

• Arbitration brings in a neutral third party who listens to the arguments of both sides and then makes a decision to end the dispute

• The decision made during arbitration are binding on both management and labor

Union Tactics• When negotiations completely break down

between labor and management, unions will sometimes resort to a strike

• A strike is when unions call for their members to stop working until contract demands are met

• Strikes often involve more than the stoppage of work. They may also involve…

• …picketing• …boycotting• …coordinated campaigning

Picketing• Picketing involves parading in front of a

business while carrying signs which explain their grievances

• Picketing has 3 purposes…• …informs the public a strike is in progress• …uses signs to state grievances in hopes

of getting public support• …discourages non-strikers from entering

the business to work

Boycotts• Two kinds of boycotts…• …a primary boycott is an organized effort to stop

purchases of a firm’s products• …a secondary boycott is a refusal to buy the

goods or services of any firm that does business with the company whose employees are on strike

• Taft-Hartley makes secondary boycotts illegal if workers are attempting to get workers of the other companies to join their boycott

Coordinated Campaigning• Coordinated campaigning combines the

use of picketing and boycotts• Coordinated campaigning might also

involve the distribution of leaflets to the community or to other unions to try to gain support for their demands

Management Responses• Management might respond in a variety of

ways to a strike. Three common management actions are…

• …hiring replacement workers• …introducing a lockout• …asking for an injunction

Management Responses, cont.• Finding replacement workers may be difficult

because picketing workers will try to intimidate strikebreakers as they attempt to go to work

• Companies sometimes use a lockout, where a company closes it’s doors until a contract agreement is reached

• Lockouts are difficult for businesses because production stops and they loose money

• Businesses sometimes ask the government to issue an injunction which is a court order prohibiting striking

References• Holt Economics; Texas Edition: 2003, Holt, Rinehart and

Winston,