WED 466 unit 2

1. WED 466: Unit 2
Economic and Labor Market
Foundations
of Workforce Education
Fall, 2008 WED 466 – Unit 2 1

2. General Objective
2. Understands the economic and labor
market foundations of workforce
education.
Fall, 2008 WED 466 – Unit 2 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 3

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 4

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 5

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 6

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 7

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 8

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 9

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 10

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 11

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 12

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 13

14. Other Units of Analysis
• Trade Associations – organizations of
firms within the same industry
Fall, 2008 WED 466 – Unit 2 14

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 15

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 16

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 17

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 18

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 19

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 20

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 21

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 22

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 23

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 24

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 25

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 26

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 27

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 28

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 29

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 30

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.
Fall, 2008 WED 466 – Unit 2 31