Methods are to settle labor-management disputes if collective bargaining fails:
Economists divide labor into four (4) noncompeting labor grades-
Unskilled lack skills to operate specialized machines / equipment food service, janitors, ditch diggers, etc. factory workers.
Semiskilled operate equipment that requires a minimum of training dishwashers, vacuums, punch presses, etc.
Skilled operate complex equipment with little supervision needed programmers, secretaries, carpenters, mason, tradesmen
Professional Labor Workers with high level skills Doctors, Lawyers, Teachers, Executive.
Noncompeting Labor Grades people in one labor grade do not generally compete with those in another category.
Why do People not usually change labor categories. Education, Cost, Opportunity, Initiative, resistant to change.
1) Cost of Education and Training. May have the ability but not the money to pay for training.
What are resources needed for 4-7 years of college. Opportunity cost of working vs. education.
2). Lack of Opportunity. May live in area without educational training available. Schools may not have openings.
3). Lack of Initiative. Individual is not willing to forth the extra effort.
4). People Resist Change. People have a natural fear of change.
Wage Rate Standard amount of pay for work. Why is there a difference?
Wage Determination - Two (2) Theories:
Traditional Theory of Wage Determination Market forces of supply and demand explain wage rates
Equilibrium wage rate Intersection of supply and demand Neither a surplus or a shortage in the labor market.
Exceptions Family ties, Political influence. Low wage due to discrimination based on race, gender or location.
Lack of knowledge worker or employer not knowledgeable about the labor market. Higher or lower wages given.
Theory of Negotiated Wages The relative strength of unions and the collective bargaining process is the factor determining wages.
Union generally get higher wages for their workers
Seniority length of time a person has been on the job. Seniorityhigher wages, laid off last in cut backs.
Regional Wage differences
Labor Mobility the ability and willingness of workers to relocate in markets where wages are higher.
Cost of Living Why does it cost more to live in Alaska than Hawaii. Minnesota vs. Florida?
Clothing, shelter, heating, economies of scale.
Location location as so attractive that lower wages can be offered here.
Review How do the theories of wage determination differ?