CH. 10. Work and The Economy

Question 1

Work and The Labor Force

Answer 1

WORK AND THE LABOR FORCE:

• WAGE – Sum of money paid on an hourly basis.
• SALARY – Paid on a monthly or bimonthly basis and not directly tied to the number of hours worked.
• BENEFITS – Addition to their wages or salaries. Many salaried workers were entitled to insurance and pensions after they retired.
• DEFINED BENEFITS – Plans that paid a stipulated sum of money in retirement on a regular basis.
• TOTAL COMPENSATION – A wage or salary along with benefits add up to an employee’s.

Employer-provided health insurance – United States has relied much more heavily on employers to provide health insurance than other countries do, creating a number of social and economic problems, especially for workers whose insurance is terminated when they lose their jobs.

• LABOR FORCE – All persons in the civilian noninstitutional population who are either employed or unemployed but actively seeking work.

NONINSTITUTIONAL POPULATION – “Persons 16 years of age and older residing in the 50 states and the District of Columbia, who are not inmates of institutions, and who are not on active duty in the Armed Forces.”

• Jobs of employed men and women fall into one of three broad sectors of the economy.
  
  • 2,982,100 workers were employed in the PRIMARY SECTOR, mostly Farming and Mining.
  • 18,326,700 worked in the SECONDARY SECTOR, including Construction and Manufacturing.
  • 120,641,100—or more than 80% of employed workers—in the TERTIARY or SERVICE SECTOR, includes health care, education, financial services, utilities, retail and wholesale trade, leisure and hospitality, transportation, and all levels of government.

Question 2

Patterns and Trends

Answer 2

PATTERNS AND TRENDS:

• The shift of the majority of the labor force into the service sector has been one of the most important long-term changes in human history.
  
  • Very few people now produce tangible goods any more.
  • Our livelihoods are based on the work we do in the service sector.
• UNDEREMPLOYMENT – ​Working part-time when a full-time job is preferred.
• PERCENTAGE OF UNEMPLOYED (UNEMPLOYMENT RATE) – Dividing the number of jobless people by the number of individuals in the labor force.
  
  • The unemployment rate is a snapshot, and as such, it does not adequately capture the situations of many workers who have experienced periods of joblessness during a given year.
    
    • In 2015, 16.9 million men and women were unemployed at some point during the year, more than 10% of the total labor force.
  • The unemployment rate also does not take into account individuals who have jobs but work only part-time, even though they would prefer a full-time job.
    
    • In late 2015, there were 5.8 million involuntary part-time workers.
• DISCOURAGED WORKERS – People formerly in the labor force who had quit looking for jobs and were therefore no longer counted as unemployed.
  
  • The shrinking pool of potential workers obscures the true extent of joblessness because those who aren’t actively looking for a job are NOT counted in the calculation of the unemployment rate.
    
    • So a smaller official workforce will lower the unemployment rate because even if the number of people employed stays the same, that number will be divided by a smaller workforce, showing a larger percentage of the workforce employed.
    • Similarly, with the same extent of employment, a larger workforce results in a higher rate of unemployment.
      
      • This leads to the paradoxical situation whereby official tabulations of unemployment may actually go up in the early months of an economic recovery as more job seekers cease being discouraged workers when they return to the labor force.

UNDERGROUND ECONOMY(SHADOW ECONOMY) – A substantial number of workers elude the statistical net by working in the Underground Economy – the portion of the economy not overseen by regulators and taxation.

• Some work done in this sector is clearly illegal in all or most parts of the country—drug manufacture and dealing, prostitution, bookmaking, and bootlegging, for example.
  
  • A considerable amount of work also occurs in legitimate areas but is done “off the books,” including repair work, gardening, and personal services performed on a cash basis to avoid sales and income taxes (also illegal).
• Employment in the underground economy is difficult to measure, but according to one careful study, it accounts for an average of 12% of gross national income in industrially developed economies and much more in underdeveloped ones.
  
  • Including these workers in official statistics would decrease the unemployment rate by a significant margin.

Question 3

Consequences of Unemployment

Answer 3

CONSEQUENCES OF UNEMPLOYMENT – Periods of high unemployment do not affect all members of the labor force in the same way.

• Unemployment is negatively correlated with educational levels.
• Non-whites suffer the most.
  
  • The worst unemployment situation is that of black teenagers, who had an unemployment rate of 28% toward the end of 2016. While the overall unemployment rate for white, black, Hispanic, and Asians were 4.3, 8.9, 5.2, and 3.6%, respectively.
• Medical problems have pushed many Americans into bankruptcy.
• Joblessness itself can be hazardous to physical and psychological health.
  
  • Unemployment is associated with poor health habits that increase the risk of diabetes and heart disease.
  • Unemployment is accompanied by increased levels of stress, which can be the source of a multitude of physical ailments.

Question 4

Finding a Job (Networking)

Answer 4

FINDING A JOB:

• Crucial for the majority of successful job searches was membership in a social network that included people connected in some way to employers with openings to fill.
• Though counterintuitive, Weak ties were much more important than strong ones.
  
  • Weak ties connected acquaintances rather than close friends, customers, merchants, and second-order relationships such as “a friend of my aunt Beatrice.” – because connecting with a less intimate social network considerably expands the sources of information about where work can be found.

Question 5

Jobs, Secure and Insecure

Answer 5

JOBS, SECURE AND INSECURE – Job security is one of the most important features a job can offer.

• Employers also are prevented from firing workers for trying to organize a union or for WHISTLE-BLOWING—that is, drawing public attention to malfeasance within the firm.
• Civil rights laws forbid dismissals based on race, color, gender, creed, age, or national origin.
• EMPLOYMENT AT-WILL – Unless there is a specific agreement or discrimination of some sort has occurred, an employee can be summarily fired for any reason or for no reason at all.
• 70% of temporary workers are employed in only three industries:
  
  • transportation and materials handling
  • production
  • office and administrative support

(See image below)

• Temporary workers
  
  • tend to be younger
  • are less likely to be high school or college graduates
  • are more likely to be female, black, or Hispanic.
  • earn less per hour than regular employees
  • usually lack health insurance and pension plans
  • usually given the most routine tasks
  • sometimes experience social isolation and poor self-image from being “just a temp”

Question 6

Employment and Technological Change

Answer 6

Employment and Technological Change:

• FRICTIONAL UNEMPLOYMENT – Some portion of the workforce will always be unemployed because they have moved or voluntarily left their jobs. In good economic times, this is not problematic because workers readily find new jobs.
• CYCLICAL UNEMPLOYMENT – during periods of weak economic growth, jobs are lost due to cutbacks from companies suffering economically. This cyclical downturn in the economy (and employment with it) seem to be an inevitable feature of a modern economy.
  
  • These cyclical downturns can be eased through government actions to stimulate the economy.
• STRUCTURAL UNEMPLOYMENT – Joblessness resulting from major changes in the basic structure of the economy such as the rise and fall of entire industries and a reordering of the occupational structure.
  
  • A major cause of structural change is the introduction of new technologies, accompanied by the obsolescence of established ones. Technological advances create new work opportunities even as they destroy old ones.
    
    • EX: The demise of video stores like Blockbuster and the rise of streaming services like Netflix.
• LUMP OF LABOR FALLACY – The incorrect assumption that there is only so much work to be done and hence only a fixed number of jobs, so when labor-saving technologies take over some of the work, some workers necessarily lose their jobs.
  
  • There is no shortage of essential tasks to be done, now or in the future.
  • The paradox of unemployment coexisting with unmet needs for workers suggests:
    
    1. That workers’ skills are not matched to the kinds of jobs they require
    2. That governments and their citizens are unable or unwilling to pay for these jobs.
• And as technological change alters the mix of jobs, it can substantially affect the distribution of income (CONFLICT THEORY).

Question 7

Globalization

Answer 7

GLOBALIZATION – Innovations from containerized freight traffic to e-mail to trade pacts between nations have allowed firms today to treat the whole world as a market for their products and services.

• Allows firms to use the cheapest labor worldwide to make their products and code their software.
• This can result in lower production costs and result in some combination of lower prices, higher wages and salaries (for executives), and greater profits for the company.
• That should lead to greater spendable income (in the home country), increasing the demand for goods and services.
  
  • This increased demand will create new jobs somewhere.
• Globalization, as well as technological change, has contributed to widening disparities in wealth and income around the world.
• CHINA – China has experienced massive economic growth in recent years by using its huge labor supply for the production of exported goods bearing the labels of foreign firms.
• Many Chinese labor-intensive enterprises face serious workplace problems:
  
  • Workers’ pay was inadequate to meet ordinary expenses, and overtime work of more than 100 hours a month was necessary just to get by.
  • Work proceeded at a very fast pace.
  • Rest breaks were few and far between.
  • Workplace deaths through accident and suicide were common.

Question 8

The North American Free Trade Agreement (NAFTA)

Answer 8

THE NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA) – 1994, an agreement between Mexico, Canada, and the USA which eliminated tariff barriers, allowing the free flow of goods among the nations.

• Impact of NAFTA:
  
  • In the USA – Studies show a net gain between zero and one million US Jobs.
  • In Mexico – NAFTA did NOT transform the Mexican economy as hoped. Nor did it slow the flow of undocumented immigration to the United States.
• MAQUILADORES – Foreign-owned factories along the Mexican side of the border.
  
  • Thousands of maquiladoras operate in Mexico today, many manufacturing products once made in the United States.
  • U.S. workers have lost jobs due to factories relocating to Mexico and elsewhere, a form of globalization that has devastated entire communities unable to compete with workers in Mexico earning roughly $2 per hour.

Question 9

Stakeholders

Answer 9

STAKEHOLDERS – A person’s wage or salary is likely to reflect:

• when he or she entered the labor force
• prior access to education
• the extent of unionization
• the extent of discriminatory behavior by employers

Question 10

Wages and Salaries

Answer 10

WAGES AND SALARIES – Today’s income and wealth gaps are greater than they have been for many decades, and there appear to be fewer opportunities to move up economically.

• In the past, people were willing to accept a fair amount of economic inequality because they or their children would be able to improve their financial circumstances.
  
  • But as economic mobility decreases, people are becoming less tolerant of inequality.
    
    • In the past (1970) 90% of 30-year-olds were earning more money than their parents when they were the same age. In 2014, only half did so.

Question 11

Unions

Answer 11

UNIONS – A united organization of workers in a specific industry or function that band together in order to gain power that allows them to negotiate pay benefits and working conditions from a position of power with employers.

• Workers who belong to unions are paid more, on average, than non-union workers.
• Unions have been in decline over the past couple of decades.
  
  • This is one reason for the increase in Income Inequality over the same period.
• In the private sector, only about 7% of employees were in unions.
  
  • In contrast, unionization rates for federal, state, and local government workers are 27.3%, 30.2%, and 41.3%, respectively
• Union workers:
  
  • Earn wages 14.1% higher than those not in unions
  • Receive 15–25% more benefits, such as health insurance.
  • More workplace training.
• Black and Hispanic workers have benefited from unionization more than white workers.
  
  • Benefits are particularly evident among low-skilled workers.
    
    • Unions typically exist for occupations with low-skill or low-education levels. (Exceptions include teachers, engineers, and electricians).

Question 12

Human Capital

Answer 12

HUMAN CAPITAL – The cognitive, physical, and social skills of individual workers. – What is needed now is an accelerated development of human capital.

• However, this is a challenge because technological advances and outsourcing to foreign lands have eliminated many manufacturing jobs in the United States, which have historically paid a good wage to low-educated workers.
  
  • Without these decent-paying jobs, the unskilled are left with low-paying jobs that barely keep them above the poverty line.
• So improving workers’ skills and attitudes is critical to creating a powerful workforce.

Training and Education are critical:

• Over a working life, college graduates, on average, earn much more than high school graduates.
  
  • Challenge: It’s difficult, however, for the United States to develop a well-educated workforce when one-fifth of the children in the nation are living in poverty.
• On-the-job training is also important, but most companies offer little in terms of structured skills training and development.
  
  • Even when they do, race and ethnicity have had a more difficult time accessing these programs.
• MENTORSHIP – A process in which more experienced workers guide less experienced employees to develop their skills and abilities.
  
  • Young women have fewer opportunities to find mentors than do their male counterparts – presumably because there are fewer female mentors for them to attach to.
• GLOBALIZATION – Work today is being transformed by globalization and technological change.
  
  • Under these circumstances, worker skills can quickly become obsolete and irrelevant.
    
    • Yet despite an obvious need for retraining, the proportion of workers receiving on-the-job retraining has actually fallen in recent years.
    • Making matters worse, training programs have been disproportionately aimed at well-educated, highly skilled workers, largely ignoring those with the greatest need to upgrade their job skills

Question 13

Discrimination in the Workplace

Answer 13

DISCRIMINATION IN THE WORKPLACE – Passage of the Civil Rights Act and other legislation has not eliminated disparities based on race, ethnicity, and gender,

AFFIRMATIVE ACTION – Policies enacted by governments and private organizations to increase work and educational opportunities for women and members of certain minority groups.

• Why only “certain minorities”? Why not ALL minorities?

Question 14

Women in the Workforce

Answer 14

WOMEN IN THE WORKFORCE – Women have always worked (at home), but until the past few decades most were not paid members of the working population.

OCCUPATIONAL SEGREGATION – Women and men tend to be segregated by occupations – the tendency of certain jobs to be predominantly filled on the basis of gender or according to race and ethnicity.

• Men – Doctors, Engineers, Science, Finance
• Women – Teachers, Nurses
  
  • Gender-based occupational segregation is partially reflected in the different interests and abilities of men and women.
  • HOWEVER, it is believed that the differences in interests and abilities are the result of society’s implementation of GENDER ROLES. So the way girls or boys grew up largely determined the types of things that they were interested in, which led them to different occupational choices.
    
    • And the occupational choices of women are typically paid less – valued less by society.
• In 2014, full-time women workers received an average of 83 cents for every dollar earned by male workers.
  
  • This represents an improvement over the recent past; in 1979, the ratio was 62 cents to the dollar.
• Occupations in which there are high proportions of women workers almost always have lower wages and salaries than do male-dominated occupations.
• The division between “men’s jobs” and “women’s jobs” contributes substantially to the lower average earnings of women workers – accounting for about 20% of the male-female wage gap.
• Gender-based occupational segregation diminishes women’s wages in several ways:
  
  • Supply-and-demand economics. When large numbers of women are confined to a few occupations, the supply of workers there will be large relative to the demand, keeping wages and salaries low.
  • Some employers believe that by its very nature the kind of work women perform is of less value than the work done by men.
• Pediatric medicine, which has a relatively high number of female practitioners, is also one of the lowest-paid medical specialties.
• Women are now more likely than men to get a college degree.
• 47.6% of medical school graduates were women.
• Law school graduates who were women were almost identical.
• Men, Women, and the continuity of careers.
  
  • The period considered the “make-or-break” phase of careers is also when many women bear and raise children, interrupting their careers, making advancement more difficult.
• The women’s earnings gap has been narrowing in recent years.
  
  • But the gap has widened for the “college-educated” portion of workers.
    
    • This is because women’s wages have not risen as rapidly as men’s.

Question 15

Workplace Hazards

Answer 15

WORKPLACE HAZARDS:

• Workplace fatalities are rare, but on-the-job injuries are fairly common.
  
  • 3 million U.S. workers suffered nonfatal injuries on the job in 2015 or 3 injuries for every 100 full-time workers.

Question 16

Workplace Stress

Answer 16

WORKPLACE STRESS – Stressful work situations are not always offset by higher wages or salaries, nor does a well-paid position high in the organizational hierarchy necessarily result in elevated stress levels.

• In fact, the opposite seems to be the case. Low-wage occupations that afford little control over the work environment are associated with elevated risks of hypertension, cardiovascular disease, and mental illness.
  
  • Clearly, monotonous, unskilled jobs can also be quite stressful because they are tedious, meaningless, unfulfilling, and without an accompanying sense of accomplishment.
  • In general, workers who are able to control the demands of their working environments are less likely to experience stress than are those with little of this ability.

Question 17

Job Satisfaction and Dissatisfaction

Answer 17

JOB SATISFACTION AND DISSATISFACTION:

• The most significant contributors to job satisfaction:
  
  1. Topping the list was “respectful treatment of all employees at all levels.”
  2. Wages, salaries, and benefits were important. (But came in second)
  3. Job security came in next
  4. Followed by interactions with supervisors and opportunities to use skills and abilities.
• Women generally exhibit the same levels of job satisfaction as male workers, even though their jobs pay less.
  
  • Women may be comparing their job situations with those of other women.

Question 18

Work in the 21st Century

Answer 18

WORK IN THE 21st CENTURY – Factors that will shape work both today and in the future:

• Technological change
• Climate change
• Government policies
• Cultural shifts
• Slowdown in population growth and an aging society – This is the MOST IMPORTANT TREND
  
  • The labor force will grow at an annual rate of 0.5% –which is historically LOW.
    
    • Such a slow rate of growth will result in a labor force of about 164 million men and women in 2024, composed of:
      
      • Fewer younger workers, more older ones.
      • Relatively more Latinos and Asian Americans, and relatively fewer whites.
  • AGING WORKFORCE – The aging of a slowly growing labor force will pose a challenge for the US, but not nearly as severe as the ones confronting Japan and some other countries, which are facing both aging populations and smaller labor forces.
    
    • This is because the United States is fortunate that it has large numbers of immigrants, most of whom are in their prime working-age, to pick up the slack.
    • As society ages, taking care of elderly people and maintaining the financial integrity of private and government pensions becomes a difficult task.

Question 19

Functionalism

Answer 19

FUNCTIONALISM – Society is a system of interconnected parts that support and depend on one another. The functioning of society relies on these parts functioning properly in their roles.

• Regarding work: Functionalism focuses on the DIVISION OF LABOR, through which work is divided into many specialized occupational roles and tasks.
• Adam Smith’s classic 1776 work The Wealth of Nations – Showed that dividing pin-making into several specialized tasks resulted in great improvements in productivity (a process approach now known as a “production line”).
  
  • Where one pin-maker working alone might make 20 pins a day, 10 workers performing specialized tasks could produce 48,000 pins, an average of 4,800 pins per worker.
• Division of Labor in Society originally published in 1893, Émile Durkheim (1984) emphasized the role of a society’s values and norms in maintaining a strong economic and social order.
  
  • In short, culture provides the rules governing market exchanges (i.e. the transaction of business), without which these exchanges would not be possible.
  • Labor markets are made up of people strongly influenced by preexisting social rules.
    
    • Wages and salaries often reflect values regarding the value of the work being done.
  • Allocation of jobs may also reflect biases and prejudices reflected in the values and norms of the society.

POLICY IMPLICATIONS OF FUNCTIONALISM:

• A functionalist theorist would likely argue that lingering prejudices and discriminatory behavior hinder the effective interconnectedness of the various elements that contribute to a well-functioning society.
  
  • In particular, the jobs that people hold and the work they do should be a reflection of their abilities, and not of their race, ethnicity, and gender.
    
    • A society is not functioning well, for example, when a woman takes a job as a sales clerk because she is barred from studying to be a physician.
• Functionalists want Equal Opportunity to compete for unequal outcomes.
• Functionalists recognize, however, that despite their view, today’s society would be unlikely to align itself in such a way that existing values/norms will naturally result in the functionally optimal allocation of jobs.
  
  • Rather, they would agree that it may be necessary to pass and enforce employment laws that prevent discrimination on the basis of race, ethnicity, and gender.

Question 20

Conflict Theory

Answer 20

CONFLICT THEORY:

• The Power Elite (1956), C. Wright Mills portrayed U.S. society in the 1950s as dominated by three interlinked elites:
  
  • managers of large corporations
  • upper-level government officials
  • top military brass
    
    • Unlike Marxists, however, he did not expect class-conscious workers to challenge this triumvirate.
    • Instead, Mills saw the working class as simply seeking “immediate material improvements, not in any change in the system of work and life”
    • Mills didn’t see the blue-collar workers as smart or motivated enough to take the giant step toward greater political power.
• Mills connects what he called “private problems” and “public issues.” –“As individuals we tend to think our problems are unique to ourselves, failing to note that they are often produced by social forces beyond our control”.
  
  • For instance, we might view unemployment as a result of personal failings such as a lack of requisite skills or motivation – when it could actually be the result of much larger social structures that inhibit networking and opportunities to parts of the population.

POLICY IMPLICATIONS CONFLICT THEORY:

• Policy implications of his ideas are not evident when it comes to governmental actions, but they have some applicability to present-day labor unions.
  
  • If unions took Mills seriously, they would remain concerned with the wages and salaries of their members, but they also would organize in support of their interests and press employers more aggressively for actions to benefit the working class.
  • Would also educate union members so they better understand how today’s society is structured, and who benefits the most from that structure.

Question 21

Symbolic Interactionism

Answer 21

SYMBOLIC INTERACTIONISM – Looks into the significance of symbols in structuring society and affecting individual behavior. Through our interactions, we assign meaning to the symbols around us. That meaning guides our society.

• Many symbols distinguish workers and workplaces.
• All companies have their distinctive logos.
  
  • Logos as old as Coca-Cola’s and as new as Twitter’s are burned vividly into our consciousness.
• Skyscrapers that loom over a city are often not justifiable in economic terms; instead, they are designed and built for their symbolic value.
• The way a building is divided and furnished also may say a lot about what goes on inside it.
  
  • The type and quality of office furnishings are often tied to employees’ positions in an organization.
• Uniforms are another symbol, an obvious occupational marker.
  
  • At one time, many manual workers wore blue work shirts or blue coveralls, hence the term blue-collar, still shorthand for manual work and generally low status.
    
    • In contrast, in some organizations, middle- or upper-level managers are derisively known as “suits.”

POLICY IMPLICATIONS OF SYMBOLIC INTERACTIONISM:

• Policeman-as-soldier uniform strongly connotes power.
  
  • Garb like this conveys the image of a powerful individual capable of bringing order and security to a harsh environment populated by dangerous people.
• Uniforms with a less military air may better convey the intended image.

Question 22

Max Weber’s Theoretical Approach to Bureaucracy

Answer 22

MAX WEBER”S THEORETICAL APPROACH TO BUREAUCRACY:

BUREAUCRACY – The necessary administration needed to give order and oversight to societies or processes. This often includes multiple steps with lots of documentation or paperwork.

• Although the word has strong connotations of inefficiency, waste, coldness, and petty rules, under the right circumstances bureaucracy can be the most effective way of getting things done.

Max Weber (1864–1920) – Said that organizations should have Key elements of Bureaucracy in order to function effectively. Though Bureaucracy is currently seen in a negative light, these ideas were ground-breaking and welcomed in the 19th Century. And even today, most organizations function on this approach.

• Max Weber’s Key elements of bureaucratic organization:
  
  • Specialized personnel
  • Division of labor
  • Hierarchical authority
  • Impersonality
  • Clearly articulated rules and regulations
  • Written records.
• RATIONALITY – For Weber, rational thought patterns were prime elements of a historical process he called “the disenchantment of the world.”
  
  • Weber saw rationality as crucial to the design and operation of modern organizations because this mode of thought provides the most effective and efficient way of attaining particular goals.
    
    • However, history has provided us with plenty of examples of rationality being used for barbaric ends.
    • Whether a bureaucratic organization is good or bad, effective or ineffective, depends to a great extent on the nature of the work to be done.

Question 23

Scientific Management

Answer 23

SCIENTIFIC MANAGEMENT – Frederick W. Taylor (1856–1915) – Believed that what was needed was a scientific approach to the management of workers.

• The fundamental assumption of scientific management was that both workers and traditional managers had failed to develop and use the most efficient production methods.
  
  • Much better results would follow through the development and application of precise time-and-motion studies.
  • When work was studied in this “scientific” manner, superfluous motions would be eliminated, and “the one best way” of doing things would prevail.
    
    • Essentially, Taylor looked at processes as simple as putting together an object on a production line. He would measure how long it took for something to be done, say, to move the hand from a bin of parts over to the object to which that part would be attached. He would find the most efficient route from the parts bin to the main object and that would be the scientifically determined optimal way to perform that exact movement. He did this with EVERY movement – and you can imagine how that would have driven workers insane after a very short amount of time. (But now robots do that).
• To compensate workers for their complete loss of on-the-job power, workers would be rewarded through a piece-rate wage system that would ensure they received their fair share of the financial gains that came with improved production methods.
• Under scientific management, production would be maximized, and workers and enterprise owners would share a much larger pie.
• HOWEVER, this assumed that making more money was sufficient to motivate workers to do this mind-numbing process.