THE LABOR MARKET

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THE LABOR MARKET

• Principle 7 Peoples skills influence their
  income.
• Standards 12.4 Students analyze the elements of
  the U.S. labor market in a global setting
• Section 2. Describe the current economy and labor
  market, including the types of skills workers
  need, the effects of rapid technological change,
  and the impact of international competition.

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Relative income why?
5 million
40,000
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What determines a persons income?
SUPPLY of and DEMAND for their HUMAN CAPITAL
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High or Low Incomes

• High demand, low supply, high income
• Low demand, high supply, low income
• Wage is the measurement of relative scarcity of
  particular types of workers.
• If you want a high income, develop skills and
  knowledge in high demand with low supply. Make
  yourself stand out in the crowd.

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MAKE YOURSELF SCARCE!!!!
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THE NEW LABOR MARKETThat was then, this is now

NOW
THEN
BASIC SKILLS REQUIRED ASSEMBLY LINE
GLOBAL COMPETITON, RAPIDLY CHANGING TECHNOLOGY
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The U.S. Economy
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The Demand for Labor is a Derived Demand

• Business managers hire workers to produce a good
  or service that can be sold for a profit.
• Product demand changes so particular jobs change.
• Transferable skills are useful.
• Education and training are ongoing.

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Table I Then and now
The Information/ Knowledge Age
The Industrial Age
Technology change
Months, weeks to accomplish
Competition
Global
Type of production
Service, info, knowledge
Role of workers
Designer, engineer, manager
Skill requirements
Scans (see Table II)
Change jobs at least six times, careers three
times
Employment
Learning span
Lifetime
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The Demand for Labor is a Derived Demand

• Employers hire workers to help them produce goods
  and services.
• If the value of what they produce is greater than
  the wage they are being paid, employers will keep
  them. If not, they wont.

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The Principle of Exchange

• Employers will hire workers if they gain more
  from hiring them than they give up.

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All other things being equal

• higher education
• leads to higher income

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Dreams Deferred Average Earnings and Education
for Adults, 1992
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Dreams Deferred Average Earnings and Education
for Adults, 2002
Source U.S. Census Bureau, Statistical Abstract
of the United States 2004 - 2005
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If you want a good income, make yourself scarce.

• Develop marketable skills through
• more education
• more training
• What skills are likely to be marketable?

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Table II SCANS 2000
Skills
Descriptions
Basics
Reading, writing, mathematics, listening, speaking
Thinking
Creative thinking, decision making, problem
solving, knowing how to learn, reasoning
Personal
Responsibility, self-esteem, sociability, self
management, integrity
Resources
Planning, organizing, monitoring, assessing,
evaluating, adjusting
Teamwork, teaching, serving clients/customers,
leadership, negotiating, working with people of
diverse cultural backgrounds
Understand social, organizational and
technological systems monitor and correct systems
Acquiring and evaluating, organizing and
maintaining, interpreting and communicating,
using computers to process information
Selecting equipment and tools, applying
technology to specific tasks, maintaining and
troubleshooting technologies, learning new
technologies
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Basic Skills

• reading
• writing
• mathematics
• listening
• speaking

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Thinking Skills

• creative thinking
• decision-making
• problem solving
• visualizing
• knowing how to learn
• reasoning

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Personal Qualities

• responsibility
• self--esteem
• sociability
• self-management
• integrity

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Resource Allocation

• planning
• organizing
• monitoring
• assessing
• evaluating
• adjusting

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Interpersonal Skills

• team skills
• teaching
• serving clients/customers
• leadership
• negotiating
• working with people of diverse cultural
  backgrounds

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Systems - Social, organizational, and
technological

• understanding
• monitoring
• correcting

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Information

• acquiring and evaluating
• organizing and maintaining
• interpreting and communicating
• using computers to process

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Technology

• selecting
• applying to specific tasks
• maintaining and troubleshooting
• keeping up to date
• learning

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To compete in a global economy, you will need
these skills
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The Mirror An Incredibly Powerful Package of
Human Capital!
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You are the only one who can develop your human
capital.. not your teachers, not your parents,
YOU
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The Labor Market(Assume a wage of 100 per day)
Marginal Revenue Product
Marginal Product
Product Price
Workers
Total Product
3
18
15
4
30
12
15
180
5
40
15
6
48
15
7
54
15
8
58
15
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The Labor Market(Assume a wage of 100 per day)
Marginal Revenue Product
Marginal Product
Product Price
Workers
Total Product
3
18
15
4
30
12
15
180
5
40
10
15
150
6
48
8
15
120
7
54
6
15
90
8
58
4
15
60
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The Marginal Principlein the Labor Market

• A firm will hire workers up to the point where
  their wage is equal to their marginal revenue
  product
• W MRP
• If they gain more than they give up, employers
  will hire workers.

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The hiring decision and the constant search for
substitutes

• Hire you?
• Hire a different worker?
• Hire a machine?

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Main Points

• Relative wage is the measure of the relative
  scarcity of particular workers.
• Relative wages are not a matter of fair or moral
  value.
• The labor market of the 21st century is
  characterized by rapid technological change,
  global competition, demand for highly skilled
  workers, numerous job and career changes, and
  constant upgrades of skills and knowledge.
• The demand for labor is a derived demand.

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Main Points

• Education and training improve human capital and
  increase peoples expected income.
• Relative wages are determined by supply and
  demand.
• High wages are earned by workers with very scarce
  human capital --- high demand and low supply.
• Low wages are earned by workers whose human
  capital is not so scarce --- high supply of
  workers with similar human capital.
• Employers hire workers as long as they expect to
  gain more than they give --- as long as the
  expected marginal revenue product of the worker
  is greater than the wage.

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MAKE YOURSELF SCARCE!!!!