Unit 5

Labor and Business Unit

I. Business Organizations

A. Sole Proprietorship- Description

1. Form of business in which individual owns firm.

2. 75% of all firms.

3. Advantages

a. Easy to start.

b. Little government involvement.

c. All profit goes to owner.

d. Complete control.

e. Taxes are generally lower.

4. Disadvantages

a. Unlimited Liability – Responsible for all debts.

b. Difficult to raise capital

c. Limited Managerial experience is necessary

d. Difficulty in finding qualified employees

B. Partnerships - Description

1. General - A business jointly owned by two or more people.

2. Limited – one partner only invests money

3. Advantagesa. Simple to establish and manage

b. No special taxes

c. Easier to gain capital (bank loans)

d. Slightly larger size allows for better efficiency.

e. Easier to attract top talent (law firms, accounting firms).

4. Disadvantages

a. Liabilityi. General Partnership - Each partner is fully

responsible for the acts of other partners. ii. Limited Partnership - Investing partner loses

only the original investment if it fails, but cannot be involved indecisions

b. All partners share the profitsc. Limited Life -If a partner dies, business

ceases to exist.

C. Corporation1. A business organization recognized by

law as a separate legal entity.

2. It can buy and sell property, enter into contracts, sue, and be sued.

3. 20% of all businesses.

4. 90% of all products sold in USA.

5. Advantages

a. Ease in raising capital through sale of stock.

b. Board of Directors (elected by stockholders) can hire the best management available to run the company

c. Limited Liability --If corporation goes bankrupt. Owners lose original investment.

d. Unlimited Life --The business continues to exist even when ownership changes.

6. Disadvantages

a. Corporate charter may be difficult or expensive to obtain.

i. name of company ii. Address, purpose of the business

b. Investors (owners) have little say in how the business is run.

c. It must pay taxes since it is a separate legal entity.

d. Subject to more government regulation—Securities and Exchange Commission

II. Labor Market

A. Labor Force

1. Employed

2. unemployed

3. not a. young children

b. adults over 65

c. Military

d. Prisoners

e. other institutionalized persons.

B. Employed

1.Work at least one hour of pay within the past week

2.Worked 15 hours or more without pay in family business.

3.Held jobs but did not work due to illness, vacations, labor disputes, or bad weather.

C. Unemployed

1. Without work, but has searched for job over the last four weeks.

2.Waiting to be called back to work from a job they have been laid off from.

3.Waiting to start a new job in thirty days.

D. Supply and Demand

1.Labor Supply – Households provide labor supply

2.Labor Demand – Businesses and government provide demand.

a.Productivity – value of output.

b.Many workers are paid by output, but this is hard to measure in some cases.

E. High Wages

Firms respond by replacing workers with…

1. Cheaper labor elsewhere.

2. Machinery.

3. Employees respond by…

4. Looking elsewhere for a job in a good economy.

5. Forming a union.

F. Equilibrium Wage

G. Levels of Skill

1. unskilled -no specialized training, work mainly with their hands

2. semi-skilled -operate electric machinery that requires minimum training

3. skilled- trained to operate complex equipment and can work without direct supervision

4. professional -high level skills, usually resulting from extensive education

III. Unions

A. Why unions are important:

1. Responsible for safety, pay laws.

2. Present in vital industries.

3. 2008, = 21 million workers.

4. Becoming more diverse.

B. Early Union Development

1. Immigrants and unskilled workers attempted unionization in mid-1800's.

2. Law and public were against formation.

3. After Civil War, industry expanded

4. Immigrants assimilated.

5. Labor force became more unified.

6. Types of Unions

a. craft (trade) union - skilled workers who do same work (guilds)

b. industrial union -all workers in a given industry regardless

C. Union Activities

1. Negotiated for:a. pay

b. working conditions

c. job security

2. strike –work stoppage

3. picket -parade in front of business boycott- don’t buy products

D. Employer Resistance

1. lockout – don’t let employees in workplace

2. Scabs – Hired to replace those on strike

3. Company Unions –organized by employers

E. Attitude of the Law

1.Pre Great Depression – law is anti-union

2.Workers united them behind labor unions during Great Depression.

3.Pro-Union Legislation allowed peaceful strikes, pickets, and boycotts

4.Can bargain collectively

F. 1938- Fair Labor Standards Act

1. minimum wage

2. 40 hour work week

3. time and a half pay

4. ended child labor

G. Post WWII

1. Grows unpopular, too many strikes.2. Taft-Hartley Act passed

a. Unions can’t donate to partiesb. Right to work – can’t be forced to join

unions.

3. American Federation of Labor (trade)4. Congress of Industrial Organizations

(industrial)5. Merged AFL-CIO

4. No Agreement:

a. Mediation.

b. Arbitration

c. Fact finding – 3rd party gathers info.

d. Government Involvement

1. injunction -court order to stop

2. seizure -when gov’t takes over and runs the business

E. Trends in Labor

1. Union Membership declined to 12%

2. Reasons for Decline:

a. Women & teenagers less likely to join.

b. New types of work -service industry & technology replaces manufacturing