Chapter 26 Presentations 2. Minimum Wage “Wage Floor” set to help less skilled workers earn enough money to escape poverty

Download Chapter 26 Presentations 2. Minimum Wage “Wage Floor” set to help less skilled workers earn enough money to escape poverty

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<ul><li><p>Chapter 26Presentations 2</p></li><li><p>Minimum WageWage Floor set to help less skilled workers earn enough money to escape poverty</p></li><li><p>2012 Ohio Minimum Wage</p><p>$7.70 per hour for non-tipped employees$3.85 per hour for tipped employees (plus tips)The Federal Wage is $7.25 per hour</p></li><li><p>Criticism of Minimum WageHigher wages often force employers to cut back and the low wage workers that the minimum wage was designed to help find themselves out of workPoorly targeted- many of the jobs go to teenagers instead of individuals in poverty</p></li><li><p>Pro Minimum WagePaying higher wages would increase productivity and thus justify the increase in payHigher pay would also keep turnover rates down in unskilled positions</p></li><li><p>Minimum Wage Graph</p></li><li><p>Poverty LevelsPersons in Income Level family/household1 $11,170 2 15,130 3 19,090 4 23,050 5 27,010 6 30,970 7 34,930 8 38,890</p></li><li><p>Wage DifferentialsThe difference between the wage received by one worker or group of workers and that received by another worker or group of workersEx- 1st year news anchor v. experienced anchor</p></li><li><p>Compensating DifferencesDifferences in the wages received by workers in different jobs to compensate for nonmonetary differences in jobsEx- construction workers often make more than sales clerks due to the physical rigors and seasonal employment of construction</p></li><li><p>Human CapitalPersonal stock of knowledge and skills that enables a person to be productive and thus to earn income</p></li><li><p>Barriers to Higher Wages1. lack of job information2. geographic immobility3. union and government restrictions4. Discrimination</p></li><li><p>Incentive Pay PlansTies worker compensation directly to performance </p></li><li><p>Ways to fight Ineffective Workers- Incentive Pay1. Piece Rates- pay per # output2. Commission or Royalties- based on value of sales3. Bonuses, Stock Options and Profit Sharing4. Efficiency Wages- pay above equilibrium wages</p></li><li><p>Are You Kidding Me?5 Highest Paid CEOs, 2011 (in millions)1. Lawrence Ellison, Oracle ($56.8)2. Carol Bartz, Yahoo ($47.2)3. Leslie Moonves, CBS Corp ($43.2)4. Marc Casper, Thermo Fisher ($34.3)5. John Hammergren, McKesson ($34.2)</p></li><li><p>Labor UnionsThese organizations have many goals including improved working conditions, hours, etc***Main objective is to increase wages***There are 3 union models in which they attempt to obtain better wages</p></li><li><p>1. Demand Enhancement ModelFrom a union viewpoint, the best way to raise wages is to increase the demand for laborThis increase in labor demand will create higher wages and more jobs 3 ways this can occur:A. Increase Product Demand (advertising)B. Increase Productivity (C. Alter the Price of Other Inputs (reduce tariffs on complementary goods or increase on substitutes)</p></li><li><p>Demand Enhancement ModelIncrease Product DemandIncrease ProductivityAlter the Price of Other InputsWage Rate (Dollars)Quantity of LaborWuQcQuWcD1D2SIncreaseIn Demand</p></li><li><p>2. Exclusive Union (Craft Union)Reduce the supply of labor to raise wagesOccupational Licensing that requires certain training to be part of the unionEx- American Medical Association, American Bar Association</p></li><li><p>3. Inclusive Union (Industrial Union)Try to make all available labor in an industry part of a union- skilled and unskilled workersStrengthens the threat of a strike so companies are much more likely to give higher wages</p></li><li><p>Bilateral MonopolyA monopoly v. a Monopsony1 supplier of labor (union) and 1 company hiring (monopoly)</p><p>***********</p></li></ul>