Labor and the Factor Market

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					Labor and the Factor Market
                  Factor Market
   The factor market includes
    Land, Labor, and Capital.
    – Land: The space needed to do
      work, as well as the natural
      resources of the Earth.
    – Labor: This is the work
      produced by people, as opposed
      to the work produced by robots
      or other means.
    – Capital: Money resources, as
      well as machines, buildings,
      and other assets (cars,
      computers, etc.)
            Capital and Labor
   When you hear the phrase “Capital and
    Labor” or “Capital vs. Labor” what does
    this mean to you?
    – Labor is one of the three main factors of
      production, along with capital, and resources
      (including land).
    – Discussions of labor take many forms, from
      employment numbers to wages, education
      levels and union membership.
            Labor: Employment
   Employment is the measure of how many people are
    participating as a legal worker in the United States. This
    means that people who are employed work for a wage(at
    least 1 hour a week), or are employed by family (as on a
    farm), and are at least 16 years old, while obeying the laws
    of employment for their area.
   This is not as straightforward as it may sound. Many
    people work two or more jobs, and that gets counted as
    separate employed people. Part time workers are counted
    the same as full time employees in terms of total number
    employed. Even more complicated are the statistics for the
    unemployed, and those who are not participating in the
    workforce.
                  Labor: Unemployment
   Unemployed workers are those who are
    collecting unemployment benefits, and are
    still looking for work.
   So for a person to be counted as
    unemployed, they need to be actively
    getting benefits from an unemployment
    office.
   Many people do not, and people whose
    benefits expire (usually about 6 months) are
    not counted on the unemployment rolls.
   This means there can be a great many
    people looking for work who are not
    counted as being unemployed. Instead they
    are called discouraged workers, or simply
    not participating in the workforce.
   Because of this, unemployment statistics do
    not accurately reflect the number of people
    who are not gainfully employed who simply
    have not found a job yet.
         Labor: Unemployment Statistics

   Unemployment statistics are an important
    measure of how well the economy is doing.
   If these numbers are not reflective of the actual
    situation, this can then affect how government
    responds to periods or prolonged
    unemployment.
   Employment in the United States goes through
    many different phases. Seasonal employment
    can vary considerably, especially around the
    holidays (Thanksgiving and Christmas).
   Layoffs by big companies can number in the
    tens of thousands, and can devastate
    communities dependant on a particular
    employer (such as GM).
    Labor: Wages and Benefits
 The concepts of supply and demand work just as
  well for labor as they do for other products in a
  society.
 Wages are heavily dependant on the type of work,
  and the education and skill levels of the worker.
 Benefits vary from company to company, and
  might not be available for some types of jobs.
 Wages and Benefits in the Labor
            Market
 Typically when labor is abundant, wages and benefits are decreased. These
  kinds of situations are called surpluses of labor.
 When the labor market tightens, companies have to compete to get labor, so
  wages and benefits increase in order to attract workers.
 Since businesses tend to like labor surpluses (because they lower wages), a
  labor surplus is generally thought of as good within business circles.
 Globalization has this effect on the labor supply, and this is used to push down
  labor costs.


                                                             Percentage of Wages
                                                             Paid During
                                                             Maternity Leave
                                                             around the World
             Labor: Benefits
 Benefits are a tricky issue, since the cost of some
  benefits, especially medical insurance, has gone
  up so radically, it becomes very difficult for
  businesses to continue to offer these benefits.
 As costs go up, it is becoming common for
  employers to reduce benefits to workers, in order
  to keep total costs down and remain competitive
  on the market.
            Minimum Wages
 Minimum wages do have an effect of how
  employers decide on their workforce levels.
 When a company is faced with difficult choices,
  usually it is difficult to see the larger benefits of
  having these wages increased throughout an area.
 This is because when people have more to spend,
  the demand curve shift out, increasing revenues.
 This can be difficult for some businesses to
  anticipate, and therefore most businesses are
  against minimum wages.
 Some of the most contentious debates throughout
  the late 19th and through the 20th century have
  been the roles of capital and labor in the larger
  economic world.
 Karl Marx, the idealist who came up with
  communism, believed that labor was the source of
  all wealth, and therefore labor should be in charge
  of the distribution of wealth.
 On the other hand, capital (money) is the symbolic
  trade unit of goods and labor, and without it, it
  becomes very difficult to start and keep businesses
  going.
 The debate is what respective roles capital and
  labor should have in society with respect to the
  economic situation.
 Who should be rewarded, those who work (labor)
  or those who invest (capital).
 For most of the western world, the answer has
  been capital.
 While workers do receive some benefits, typically
  the investors gain most of the benefits of
  capitalism.
 As a result, usually “capital” dictates to “labor”
  the terms of employment, wages, and benefits.
 This balance (or imbalance) of power has led to
  many confrontations, some of them deadly.
 To counterbalance the power of capital in the
  society, labor uses collective action, or unions, to
  bargain for better wages, working conditions, or
  benefits.
 Because of the growing tilt in society against labor
  unions, collective bargaining is becoming more
  difficult, especially with respect to globalization.
 With a large labor supply, it is difficult for
  workers to collectively bargain for better pay,
  when workers from other countries will do the
  same work (or more) for far lower wages.

				
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