0013 Elements of the U.S. Labor Market in a Global Setting (SMR 5.4)

Question 1

Labor is an important component of ______ cost

Answer 1

Variable

Question 2

How does low demand impact labor?

Answer 2

Lower demand means that there needs to be lowered production and therefore less labor

Question 3

The more labor that goes into a product, the _____ the price.

Answer 3

Higher

Question 4

What are the positive outcomes of division of labor?

Answer 4

Individual workers do fewer tasks and therefore become more proficient and the company can supply more of that product

This specialization in production can encourage trade

Question 5

Why is interdependence on labor important in global trade?

Answer 5

• International labor and cost competition leads to increased specialization
• Wage normalization can lead to price increase

Question 6

What have labor unions historically done for the economy?

Answer 6

Led the fight for minimum wage in the 1930’s causing an increase in the variable cost

Helped establish labor laws which limited the supply of labor (i.e. child labor laws)

Question 7

How do labor unions attempt to increase wages for their workes?

Answer 7

• Increasing the demand for labor (by increasing product demand, i.e. not cutting teachers)
• Decreasing the supply of labor (labor laws, immigration restrictions, etc.)
• Negotiating higher wages

Question 8

What are important labor issues that labor unions are concerned with?

Answer 8

Important labor issues include wages, fringe benefits (health insurance, sick days), working conditions and job security (i.e. tenure for teachers)

Question 9

What are common union strategies that labor unions use to negotiate with management?

Answer 9

strikes, boycotts, picketing and public relations campaigns

Question 10

When did Labor Unions begin to form in the US?

Answer 10

In the mid 1800’s (Gilded Age) in response to abuses of industrial workers by big businesses (long hours, dangerous working conditions, low wages)

Question 11

What was the first major labor union and who founded it?

Answer 11

The Knights of Labor founded by Terrance Powderly in the 1880’s

Question 12

When was the American Federation of Labor founded and who was it founded by?

Answer 12

The federation of craft unions that was founded in 1886

Samuel Gompers founded it, first supported cigar makers

Question 13

What was the CIO and what did they do?

Answer 13

The Congress of Industrial Organizations organized skilled and unskilled workers on an industry wide basis

Was founded in 1938 by John Lewis and later merged with AFL in 1955

Question 14

What is the AFL-CIO?

Answer 14

Largest labor union in the US today; formed in 1955

Question 15

What caused the 2008 Financial Crisis?

Answer 15

In 2008, the US housing market was booming and people were able to get loans with hardly any credit. Lax lending requirements and low interest rates would contribute to the housing bubble bursting because people couldn’t afford their mortgages and big lenders like Lehman Bros were declaring bankruptcy when nobody could buy foreclosed upon houses.

Question 16

What did the govt do to help the 2008 Financial Crisis?

Answer 16

They stepped in to provide bailouts to banks through TARP, and stimulus package in 2009, in 2010 Dodd-Frank set up to regulate and prevent future crises

The controversy here is that if banks know they’ll be bailed out by the govt, they keep taking risks (intro: Dodd-Frank Act)

Question 17

What did the Dodd Frank act do?

Answer 17

Promoted financial stability to the US by improving accountability and transparency, ending the “too big to fail” idea and ended bailouts to protect consumers