Labor Force & Wages

Not in the labor force

Includes students, retirees, stay at home parents/guardians, military personnel, people institutionalized, and those unable to work

Screening effect

Theory that the completion of college indicates to employers that a job applicant is intelligent and hard working. College Degree=Good Employee, perseverance and skills.

Learning effect

Theory that education increases efficiency of production, which results in higher wages. College Degree=More efficiency

Reasons for rise of temporary workers

Flexible work arrangements allow companies to adjust based on changing demand and output
Temporary workers are paid less and given fewer benefits
Discharging temporary workers is easier and less costly

History of changing labor force

Shift from agriculture and manufacturing to service sector

Impact of foreign-born workers

Foreign-born workers filling jobs in various industries

Shift to service production

Labor market moving from goods production to service production

Effects of education and college

Higher wages, lower unemployment, and improved skills

Supply and demand of labor

Employers hiring workers to produce goods and services

Labor demand

Derived from demand for goods and services

Labor supply

Number of people willing and able to work at a given wage

Equilibrium wage

Wage rate where labor demanded equals labor supplied

Employer response to wage levels

Hiring fewer workers, investing in technology, or relocating

Derived demand

the demand for a good or service that results from the demand for a different, or related, good or service.

Real wages

Earnings adjusted for inflation, down over the past 50 years.

Equilibrium wage

Wage rate where labor demanded equals labor supplied