Labor, Employment, and Wages

Warm Up:1. How many of you are interested in

the amount of money you will earn on a job?

2. Why is it that professional athletes and movie stars get paid so much?

What is

• The Civilian Labor Force?

• Men and women over the age of 16• Working or actively searching for work

Supply & Demand

• You’ve learned about Supply and Demand• How they affect prices of goods• Supply and Demand can also be used to

analyze how we determine price of a resource or factor of production (such as labor)

• People who demand labor = employers• People who supply labor = employees• We can create a supply and demand curve

showing the price of labor• The price of labor is called wages (wage rate)

Using Supply/Demand Concepts

• With a partner• Create 2 graphs– Supply curve for labor– Demand curve for labor

• Quantity = the number of your workers• Price = wage rate

Supply & Demand in the Labor Market

• Downward sloping demand curve for labor – Employers are willing and able to hire more

people at lower wages that at higher ones• Upward sloping supply curve for labor– More people are willing and able to work at higher

wages than at lower ones

Equilibrium

• Wage at which the quantity demanded of labor equals the quantity supplied

• It is the wage rate at which the number of people employers are willing and able to hire is the same as the number of people who are willing and able to work

Surplus? Shortage?

• Sure!• When the market has a surplus of labor, the

wage falls• When the market has a shortage of labor, the

wage rises

Why do some people earn more than others?

• Supply of different labor types is not the same• Demand for different labor types is not the same• 2003– Construction $18.95– Manufacturing $15.74– Financial Activities $17.13– Leisure and hospitality $8.76– Business and professionals $17.20

Are Money Benefits the only thing that matters?

• ???• What is important to you???

What will you earn?

• Depends on how much your field is demanded, how many people can do the same thing you can do, and how productive you are

• US Dept of Labor Occupational Outlook Handbook– Median salary, job growth, education required– Every 2 years

Occupation Growth rate 2002-2012

Medical Assistants 59%

Physician Assistants 49%

Social and Human Service Assistants 49%

Home Health Aides 48%

Medical Records and Health Information Technicians

47%

Physical Therapist Aids 46%

Computer Software Engineers 46%

Education Unemployment Rate Median WEEKLY earnings (2003)

Doctoral Degree 2.1 $1,349

Master’s Degree 2.9 $1,064

Bachelor’s Degree 3.3 $900

Associate’s Degree 4.0 $672

Some college, no degree 5.2 $622

High School graduate 5.5 $554

Some High School 8.8 $396

Two types of Wages

• Money or nominal wage ($7/hr)• Real – how much the way will buy• Consumer price index (CPI) – average costs of

goods• Real wage = money wage/CPI

Questions

• If the quantity demanded of labor is greater than the quantity supplied, what will happen to the wage?

• Rachel’s money wage increased by 10% and prices increased by 13%. Has Rachel’s real wage increased? Decreased? Stayed the same?