Fall, 2008 WED 466 – Unit 2 1

WED 466: Unit 2

Economic and Labor Market Foundations

of Workforce Education

Fall, 2008 WED 466 – Unit 2 2

General Objective

2. Understands the economic and labor market foundations of workforce education.

Fall, 2008 WED 466 – Unit 2 3

Topics

• Techniques of Analysis of Work• Units of Analysis of Work

– The Worker and the Labor Force– Industry– Occupation– Workplaces

• Problems in Studying Work• Labor Economics

– Supply and Demand• Labor Market Trends• Information Sources

Fall, 2008 WED 466 – Unit 2 4

Techniques of Analysis of Work

• The behavioral sciences need valid and reliable methods to study work, which is varied and important to human life.

• Methods:– Ethnographies– Case studies– Multiple methods

Fall, 2008 WED 466 – Unit 2 5

Units of Analysis

• Specific units of analysis are what and whom is studied – the individual worker, or groups of workers.

• Units:– The Worker and the Labor Force– Industry– Occupation– Workplaces– Other

Fall, 2008 WED 466 – Unit 2 6

The Worker and the Labor Force

• Ascribed characteristics – sex, race, gender, or age

• Achieved characteristics – education, work experience, skills

• Employed people in the labor force: those who in the week preceding the survey:– Worked at least 1 hour for pay or profit– Worked at least 15 hours without pay in a family

business– Were temporarily not working because of illness,

vacation, or similar issue.

Fall, 2008 WED 466 – Unit 2 7

The Worker and the Labor Force (cont’d)

• Not in the Labor Force (NILF) – does not fit any employed category.

• Labor force participation rate (LFPR) – the number of persons in the labor force divided by the number of persons eligible to be in it x 100

• Unemployment Rate (UR) – number of unemployed people divided by the number of people in the labor force x 100

Fall, 2008 WED 466 – Unit 2 8

The Worker and the Labor Force (cont’d)

• Questions to consider…– What does a rise in the unemployment rate

often indicate?– Why is the measure of unemployment

controversial?– Why are unemployment insurance benefits

used to estimate unemployment?

Fall, 2008 WED 466 – Unit 2 9

Industry

• Industry – a branch of economic activity devoted to the production of a particular good or service

• Knowing a worker’s industry is important:– Economic competition conditions are quite

specific to industries– Nature of production varies by industry –

automated production vs. hand labor

Fall, 2008 WED 466 – Unit 2 10

Industry (cont’d)

• Industrial Codes – enable researchers to contrast the characteristics of workers in different industries– North American Industry Classification

System (NAICS) – NAICS Website

http://www.census.gov/epcd/www/naics.html

• Table 2.1 – What industries will have the fastest growth in number of employees?

Fall, 2008 WED 466 – Unit 2 11

Occupation

• Occupation – is a cluster of job-related activities constituting a single economic role that is usually directed toward making a living.– White-Collar/Blue-Collar classification– Standard Occupational Classification Website

http://www.bls.gov/SOC/ – Occupational Prestige – how occupations are

perceived by others

Fall, 2008 WED 466 – Unit 2 12

Workplaces

• Establishment – where workers perform their daily tasks and interact with other workers

• Firm – the employing organization• Parent Company – firm that owns other

firms• Subsidiary – firms that are owned• Conglomerate – parent company of

subsidiaries in unrelated industries

Fall, 2008 WED 466 – Unit 2 13

Workplaces (cont’d)

• Multinational Company – establishments or firms are located in different countries

• Interlocking Directorates – a director of one corporation is also a director or officer of another corporation

Fall, 2008 WED 466 – Unit 2 14

Other Units of Analysis

• Trade Associations – organizations of firms within the same industry

Fall, 2008 WED 466 – Unit 2 15

Problems in Studying Work

• Lack of Information– Different definitions of the labor force used by the

world’s governments– Nonmarket work such as housekeeping, volunteers,

neighbors who exchange work– Some employment is hidden to avoid taxation

• Hard-to-Measure Characteristics– Job commitment– Underemployment– productivity

Fall, 2008 WED 466 – Unit 2 16

Basic Economic Concepts

• Scarcity – not enough resources to satisfy everyone’s wants

• Opportunity Cost – how to allocate scare resources so as to maximize well-being

• Economic Theories and Models– Outline a subject– Should be judged on the extend to which it enables us

to grasp the salient features of reality– Enable us to understand the present and correctly

predict the future

Fall, 2008 WED 466 – Unit 2 17

Example Economic Theory

• Human Capital Investment Theory– Investment in human capital will lead to

greater economic outputs.

• How?– Education and Training

Fall, 2008 WED 466 – Unit 2 18

The Scope of Economics

• What is the traditional scope of economics?

• Recently, on what have mainstream economics focused their attention?

• In a market economy, what forces determine both the jobs that will be available and how much workers will be paid for doing them?

Fall, 2008 WED 466 – Unit 2 19

The Scope of Economics (cont’d)

• Interaction of supply (of workers) and demand (of employers); employers demand is derived from the demand of consumers for its final product.– Effect of economic or social circumstances

• Terms– Family: 2+ people related by blood, marriage or

adoption living in the same household– Household: consists of 1+ people living in one

dwelling and sharing living expenses

Fall, 2008 WED 466 – Unit 2 20

Labor Market Supply & Demand

• Terms– Demand curve: represents the various

amounts of labor that would be hired at various prices by firms in this labor market over a given period of time

– Diminishing Marginal Productivity: additional units of labor provide progressively less additional output when combined with a fixed amount of capital

Fall, 2008 WED 466 – Unit 2 21

Labor Market Supply & Demand (cont’d)

• Terms– Substitution Effect: when the price of output

changes and the price of substitutes stays the same, profit-maximizing employers use cheaper input rather than more expensive input.

– Scale Effect: as wages increase, product prices to up, less will be purchased, and fewer workers will be employed.

Fall, 2008 WED 466 – Unit 2 22

Labor Market Supply & Demand (cont’d)

• Terms– Supply Curve: number of workers who would

be willing to do the work at all possible prices.– Stable equilibrium: all persons willing to work

at the going rate find work and all employers willing to hire someone at the going rate are able to find workers.

Fall, 2008 WED 466 – Unit 2 23

• What does upward slop of the supply curve (SS) indicate?

• What does the downward slope of the demand curve (DD) indicate?

• What does the intersection of SS and DD represent?

Fall, 2008 WED 466 – Unit 2 24

Question to Consider

• What would an “external shock” (i.e., changes in demand for the good produced or oversupply of skilled workers) do to a stable equilibrium?

Fall, 2008 WED 466 – Unit 2 25

Labor Market Trends

• Causes of long-term trends

• Causes of short-term trends

• Occupational world through 2012

• Sources of information on change and structure

Fall, 2008 WED 466 – Unit 2 26

Causes of Long-Term Trends

• Technology: can increase of reduce the demand for workers

• The Global Economy: impacted by imports/exports, multinational companies, placing service-providing and production operations abroad, and fierce competition among companies and countries

• Other Economic Factors: housing boom/bust, low interest rates, national debt, and the value of the dollar abroad

Fall, 2008 WED 466 – Unit 2 27

Causes of Long-Term Trends(cont’d)

• Population Factors: increased labor force participation of Hispanics, African Americans, illegal immigrants

• Size of Government: smaller vs. bigger government is a highly debated issue

Fall, 2008 WED 466 – Unit 2 28

Causes of Short-Term Trends

• Calamities, humanly caused or natural– Natural: earthquakes hurricanes, floods– Humanly caused: wars, threat of war

• New directions in fashion, recreation, and other activities– Unisex hair salons, changing hemlines and lapels

• Seasonal variations– Seaside resorts, ski resorts, holiday workers

• Economic factors– Strikes, unexpected surpluses or shortages of raw

materials, temporary market disruptions, fluctuations in access to capital

Fall, 2008 WED 466 – Unit 2 29

The Occupational World Through 2012

• Projections for the Future– Bureau of Labor Statistics regularly forecasts

various aspects of the labor force– What are the high growth jobs projections

through 2012? (see Table 2.6)

• What are the practical applications for– Career development professionals?– Education and training professionals

Fall, 2008 WED 466 – Unit 2 30

Sources of Information

• Occupational Outlook Handbook– http://www.bls.gov/oco

• U.S. Department of Labor– http://www.dol.gov

Fall, 2008 WED 466 – Unit 2 31

Summary

• Behavioral sciences seek valid and reliable information on the world of work.

• Important methods are ethnographies, case studies, and sample surveys.

• Researchers study individual workers or groups of workers.

• Labor markets are influenced by the balance of supply and demand.

• The occupational structure and labor force are dynamic in nature.