MGMT 104 Midterm
Unemployment and Discouraged Workers Rate (U4)
(Unemployed + Discouraged)/ (Labor Force + Discouraged)
Unemployed and Marginally Attached Rate (U5)
(Unemployed + Marginally Attached)/ (Labor Force + Marginally Attached)
Unemployment, Marginally Attached, and Unemployed Rate (U6)
(Unemployment + Marginally Attached + Pte)/ (Labor Force + Marginally Attached) Pte: Part time for economic reasons (not by choice)
Reporter story
- - Application process = decrease human interactions - Less potential for employee discrimnation but put him at diadvantage because of age - had to dumb down application
6 Takeaways form Katz and Kreuger's Study on Freelancing
- 1) Alternative Work is a big growth sector 2) Women, minorities, and elderly are turning to alternative work 3) Offline alternative work (Contractors, freelancers, temps) is under compensated 4) Alternative work is growing for a lot of reasons, not all good - flexibility - recent recession - new tech = decreased jobs - outsourcing give others a cushion 5) Few studies agree on # of alt workers 6) alternative work has complicated labor protection issues
National Labor Relations Act (NRLA)
- 1935 - Established protections for organized labor - Increased pay, security, and better conditions for unionized workers - Encouraged non-union firms to upgrade conditions for workers - Increased pay and better working conditions for non-unionized firms - Established internal labor market practices (training and possible advancement in firms = worker commitment to the firm and motivation to work hard)
National Labor Relations Act
- 1935 - Established the National Labor Relations Board (NLRB) - Protects most private sector workers - Key exceptions - Those who "act on behalf of the employer" (e.g., managers) - Independent contractors - Agricultural workers - Public-sector workers - Sets up rules for the organizing campaign - Establishes "bargaining unit" - If union wins a majority of the vote, it represents all the workers in the unit
Fair Labor Standards Act
- 1938 - Minimum wage, overtime pay
!980s decline of job security for managers
- 500 companies disappeared - Intensified competition and focus on shareholder value = reorganizing the corporation (afraid of hostile takeover so focus on shareholders) - Needed to rewrite expectations of long term employment
Dual Labor Market Theory
- AKA: Segmented labor market Theory - Sees differences on demand side - Not explained by workers skills and taste - Firms matter and institutions often play a critical role
Labor Relation Strategies
- Acceptance: Company doesn't challenge the union's right to represent employees, and accepts collective bargaining - Avoidance 1) Substitution: HR practices similar to or better than those at unionized firms 2) Suppression: Includes (threats of) relocation and outsourcing, dismissal, wage and benefit cuts, & use of strikebreakers
Triange Fire Aftermath
- After the fire, movement leaders found generating public support even easier - (Sadly,) Disasters are frequently the catalyst for change - Factory Investigating Commission: 36 New Laws from 1912-15
Measurments of income inequality
- Allocation of income throughout the distribution - Simple ratios (1%, bottom 10%) - Range ratios ( 50/10 percentiles) - Ratios less useful for understanding dynamics - Gini index = measures the extent to which income devitates from perfectly equal
Reasons for Professional Firms
- Allowed people to specialize and offer more services - Economies of scale (more clients for lower marginal costs) - Extract rents from the work of other partners ( Increase income) - Better professional development - Hierarchical division of labor (Increase wealth and gave young practitioners a stepping stone) - Joint referrals = clients
How might the changes we've witnessed in employment (e.g., breakdown of ILMs, contracting) exacerbate ascriptive inequality?
- Allows for more subjective criteria to influence wage setting, promotion decisions - Forces workers to be on the job market more often - Allows biases to affect hiring - Might have to rely on networks more = perpetuate stereotypes
AFL-CIO
- American federation of labor and congress of industrial organizations - seeks to advance interest of its members unions on a natural level
Economic Rents
- Amount by which one's wage exceeds one's reservation wage in a particular job
Union
- An organization which exists for the purpose of dealing with employers concerning grievances, labor disputes, wages, rates of pay, hours of employment, and conditions of work - Labor isn't a commodity so unions are necessary
Long Term Employee Relations
- Anticipate long relationship - Quitting imposes cost to firm (unlike competitive market assumption) - Career ladder probably expected (entry level jon = main point of contact between ILM and external job market)
1990s to 2000s: Team vs Family
- Apple Deal 1990s - goal is to teach you and help us, not lifetime employment - will train but probably lay off later but you can take skills with you Team Netflix - Pro sports team - Hire, develop stars in every position
Assumptions of Internal Labor Market
- At equilibrium wage, people don't care about which employee or employer - Firms can obtain maximum output from different combos of labor and input, independent of wage and specific workers
How do Firms with strong ILMs respond to recessions/ increases in labor supply?
- Avoid: - Decreasing wages (sticky floor) = very rare - Decreasing employment levels = less rare (early retirement is a less disruptive method) - Layoffs are problematic, lose knowledge, and signal lack of stability Because: - Work is interdependent - Required learn by doing training - Changing wage and employment levels can decrease motivation and productivity So instead they: - Alter their hiring standards (job vs wage competition) Ex) need more experience - Change work hours (less common in US) - Use non-standard workers to supplement labor force (before recession, employ a lot of temp/ contract workers alongside workers protected by ILM to have a buffer)
Benefit and cost of Contracting (MBA data)
- Better work-life balance BUT - Pay penalties and lower levels of managerial responsibility in later regular employment - Lower career satisfaction
Racial Discrimnation in Job offers
- Black workers less compensated - Point of hire assumptions = low wages - On job = quality revealed over time - See greater returns to tenure on the job - Quality is revealed over time - Workers prove their value as individuals not stereotypes - White ex-cons favored over blacks
Union Strategies
- Call or visit employees at home - Associate union memberships with discount on insurance and credit cards - Corporate companies = bring pressure on employees during negotiations and organization
Wage Inequality
- Captures the distribution of wage across participants in a collective, be it an organization, a region, or a country - Measured in a number of ways 1) Simple ratios (e.g., top 1% of earnings) 2) Range ratios (e.g., 90/10 percentiles) 3) Full distribution measures (e.g., Gini, Atkinson indices) `Measures tend to be highly correlated with one another
Potential Benefits of alternative labor organizations
- Certifying a union is a difficult, long-term process - Potentially allows orgs to accomplish goals outside of the formal structure of unions (Saves time, resources) - "Union" is a loaded term in some places ... maybe more effective in generating support (?)
Population
- Civilian non-institutional population - Everyone 16 + years - AND Not inmates of institutions, - AND Not on active duty in the Armed Forces
Social movements can expedite the process of change
- Collective action = pull resources and put pressure - Collective action is a vehicle of power - Makes possible the coordination of economic and political resources Social movements allow direct targeting of the aggrieving party (rather than indirect through the political system) - Firms, universities, hospitals, professional organizations, can all be targets - These organization can also initiate or be allies in a movement
Industrial Unions
- Common industry with all occupations - The Industrial Workers of the World (IWW) - The Congress of Industrial Organizations (CIO) - United Auto Workers (UAW) - United Steelworkers (USW) - Changing employers is less common - Organize as many workers in a wide range of skills
Worker Centers
- Community-based social-movement organizations that organize and provide support to communities of low wage workers who are not already members of a union - Typically target immigrant worker populations Functions - Help workers file claims against firms (e.g., wage theft) - Work with government agencies to enforce laws - Raise awareness and directly campaign against firms - Education (language, personal finance, healthcare ...)
Checkoff provision
- Contract provision under which the employer on behalf of the union automatically deducts union dues from employee paychecks
Why do firms not try to determine reservation wage
- Costly - Easy for employees to manipulate - People don't want inequitable treatment
Transaction cost economics
- Deciding to produce in house or outsource
Title VII of the Civil Rights Act of 1964
- Discrimination on the basis of race, sex, religion, or national origin is prohibited - Covers all organizations with at least 15 workers who have been employed for a period of 20 weeks in a calendar year - Equal Employment Opportunity Commission (EEOC) administers and enforces the law - Later laws expanded coverage based on age, veteran status, disability, and "genetics" - States have their own anti-discrimination laws - Ex) 20 states have laws protecting against employment discrimination based on sexual orientation and gender identity * Shown to have an effect on employer behaviors (Tilcsik, 2010)
Factors leading to the creation/ maintenacne of ILMs
- Efficiency and Institutional
Bona Fide Occupational Qualification
- Employee justification for adverse impact - BFOQ is a narrow expense Ex) - Age: bus company can have age limit - Religion for religious organizations - Gender: for actors, models, restroom attendants (hooters, southwest airlines height restriction) - National origin: ethnic heritage fair
Business Necessity Defense
- Employer must show an overriding business purpose for the discriminatory practice - Mere inconvenience, or fostering efficiency, is not enough - Employers must show methods are valid and predict job performance - Tests: must predict job performance - Height/weight/physical characteristics (like strength) must be required for the performance of the job - Ex) Strength test for non-arduous jobs will not work
National Labor Relations Board
- Enforces NLRA - investiagtes unfair labor practives - elvtions
Neo-Classical Model of Labor Markets
- Envisions single labor market - Guided by same basic principles of supply and demand - Wage difference mostly explained on supply side - Ex) Differences in human capital (skill levels) and workers; preferences (tastes for difficult jobs)
Would you vote for a darker skin candidate? experiment
- Evolutionary explanation - Dark skin = night - Light skin = day - poltitical climate affects decision - unstable climate = lighter
Free Professionals as Contractors
- Ex) Doctor to community - Thrived in era where field knowledge grew relatively slowly - Problems/ solutions were routine - Most clients couldn't evaluate the quality of professionals - Finding clients was easy because everyone needed them - Long term economic stability - Subject to competitors = began to specialize = professional firms
Skill-Biased Tech Change
- Explanations for Rising Wage Inequality #1 - income inequality reflects changes in relative supply of skilled labor and technological change - Technology (usually the microcomputer) enhances the marginal productivity of skilled workers while leaving unchanged or lowering the marginal productivity of unskilled ones ISSUES: - Comparable levels of income inequality have not been observed in countries such as those in Continental Europe, Scandinavia, and Japan, despite the heavy adoption of computer technology (ICT) - Rates of inequality began climbing before the widespread introduction of ICTs and stabilized in the 1990s while ICTs were diffusing more widely
Globilization
- Explanations for Rising Wage Inequality #2 - as less-developed countries integrate into the world economy, the demand for and returns to unskilled labor increase in those countries, reducing income disparities. Conversely, the demand for skilled labor in developed countries increases while the demand for low-skilled labor declines, exacerbating disparities ISSUES: - Not much evidence that globalization affected income inequality in the US prior to 2001 (though globalization started decades prior) - Affects some countries more than others
Decline in Unions
- Explanations for Rising Wage Inequality #3 - Union rates are associated with higher wages, better benefits, and longer employment tenure - Wage premium higher for lower-skilled workers - Collective bargaining standardizes wages within firms and industries, thereby reducing differences between workers with similar characteristics ISSUES - Union coverage peaked in the US during the mid-1950s and abated at a mostly monotonic rate through the next four decades. - Rates of inequality declined through late 1960s and remained low through the mid-1970s before increasing considerably - Cross-national comparisons - Data from countries such as Finland, Sweden, Austria, and Italy suggest that high and increasing levels of union density have not necessarily prevented increases in inequality
Public Policy
- Explanations for Rising Wage Inequality #4 - Public policy: Most studied: minimum wage and tax rates ISSUES - Minimum wage cannot explain dynamic changes throughout income distribution - Many countries with low income inequality have no or low minimum wage rates - Must make some assumptions that tax law impacts gross income to explain much of the increase in income inequality ----ex) increases incentives to negotiate wages upward - Tax law is difficult to compare across countries
Efficiency
- Factor leading to ILM #1 - Skill specificity increases recruitment/ screening and training costs - Once learned, not easily transferable - Complex firm-specific technologies are difficult to document so ILM uniquely possesses necessary skills - Ex) Jimmy beans world - Sells yarn - Fulfillment = answer phones and take orders - but there is still an ILM because firm-specific knowledge/ culture - Probably paid more with opportunities to move up
Institutional
- Factor leading to ILM #2 - 1930: ILM spread with the rise of influence of industrial unions - WWII: Gov tacitly supports ILMs as part of wartime planning - A lot of people left market, so wages increased but demand Increased too, so lot of turnover - Gov needed a way to control it and policies stayed after war - 1960s: Firm responses to EEO legislation (ILMs more effective in response to curbing discrimination)
Drawbacks for Workers
- Fees (Vary, but $200 to $1,000 per year is a common range) - Unionized workers report experiencing lower collaboration and support from supervisors than do non-unionized workers (Gallup and Healthways poll) - In U.S., political climate makes workers a target for scorn - Seniority has its disadvantages as well ... Hard to reward exceptional talent Lay-offs/promotion systems disadvantage less tenured workers
Are Emily and Greg more employable than Lakisha and Jamal?
- Fictitious resumes - may lead to self-fulfilling process= if you know that payoff is not that great then won't try
Firms' role in wage inequality
- Firms determine the structure of rewards - How do individuals get paid (job evaluations vs market/performance pay) - Who ends up in what job? - External hiring (networks)
Competitive Labor Market Model: Employment Decision
- Firms max profits by choosing how many workers to hire (labor) and how much plant and equipment to invest (capital) - Profit maximization implies cost minimization - Keeping the output constant, the firm chooses a least cost combination of capital and labor - Ex) Optimal number of painters and paint guns - Market clearing wage when supply = demand
Solutions to firm inequality
- Focus on antitrust issues (promote competition) - Reframe policy debate - reframe hiring practices and corporate decsions - Invest in education - Boost low incomes through tax policy
Disparate Impact
- Focus on consequences not impact - employment practices that are facially neutral in their treatment of different groups, but in fact fall more harshly on one group than another and cannot be justified by business necessity - when they do not pertain to job skills or performance, screening tools are illegal * Employee must establish a prima facie case - then burden of proof shifts to the employer - Ex) hire Polo players = white
Importange of framing to success
- Frames identify and offer solutions to problems that the org is facing - Frames affect how an idea is received - Stories and images can be powerful - Different frames may be necessary to attract different audiences
1980s reorganizing the corporation and resetting employee expectations
- GE restructuring - Job security only if business is successful - favor performance over loyalty
Why hold on to so many contractors ina down turn?
- Give managers flexibility? - company took a big hit but still didn't get rid of all contractors - still need them, difficult to replace - won't give you flexibility if you still rely on them form firm-specific knowledge
Impact Unions have on workers
- Higher wages and benefits for members (premium greater for lower-skilled) - Constrains pay between groups; lowers inequality - Strong unions help set standards of pay that non-union employers follow - Safer, healthier working conditions - Removes from management the ability to make unilateral decisions about aspects of job (Seniority provisions) - Protect the interests of the "average" worker who is older, with more tenure/seniority - Overall employment might be constrained by unionization (Higher wages = lower demand)
Difference in Oppurtunity
- If gender or race affects opportunities, then these adjustments will underestimate the role of bias in wage outcomes - What looks like choice is a contrained choice
Why doesn't mandatory diversity training, testing, and grievance systems work?
- Incentives based on control seem to create backlash - discourages people from filling out grievances
ILMs less important
- Increased global competition = reduce affordability - Tech change = reduce importance of labor - New workers today expect career changes
Unintended consequences of contracting
- Increased tension due to "the necessary cooperation between but conflicting interests of regular and contract workers as well as other workplace actors." - More contract workers => "to greater union involvement, since another one of its consequences was that it required greater labor-management bargaining." - Ex) Hyundai - Ex) WeWork: hard to fire janitor contractors (company violating labor laws) and hire their own staff because not having control hurts the brand image
NLRA outlaws unfair labor practices
- Interfering with employee rights to form unions - Interfering with the administration of a union - Discriminating against union members - Discriminating against an employee who has filed charges under the act - Refusing to bargain with the union "in good faith"
Asset Specificity Matters
- Investing in relationship-specific assets can lower costs - Ex) Fisher Body factory next door to GM assembly plant (Scott & Davis, 2006 pg. 226) - Ex) Hiring internally, longer-term employment, etc. can lead to better performing workers, lower search costs, lower "training" costs (Bidwell, 2011) Will agree to make investment when: - They can write a contract (can be costly because of TCE reasons) - Investment could be protected by the firm's boundaries and its policies (ex: HR policies like ILM))
What is the firm-size wage premium (FSWP)? How has it changed?
- It is the premium workers receive for being employed in a large firm - If you take two otherwise equivalent workers and one is employed by a large firm and one by a small firm, the workers in the large firm will get paid more (on average) - Evidence has shown it has declined over time. But the declines have been exclusive to those in the 10-50th percentile of earnings
Taft-Hartley Act
- LMRA 1947 - Limits some union powers (no threatening employees, mass picketing, violent strikes, termanating contract without notifyinf employer_ - Unions could not preclude firms from hiring non-union members - Gave states right to pass 'Right-To-Work' - Managers and foremen explicitly excluded from ability to organize - Required union officers to sign non-communist affidavits - Unions must give 60 days notice in order to strike - Outlawed wildcat, political and solidarity strikes as well as secondary boycotts
Landrum Griffin Act
- LMRDA 1959 - Regulates unions with financial disclosure and elections - Union accountability to members - Bill of rights for union members - Unions must have a constitution - Union must file financial statements with the Department of Labor which are open to the public - Elections are regulated by the government - Fiduciary responsibility of union leaders
Employment Trends
- Labor force participation rate has declined considerably Why: - About 2/3 contributing to aging workforce/retirement - Decline in low skill demand - Unemployment, disability insurance - (video games) price of leisure has gone up and it is not as stigmatizing to live with your parents - U3, U5, U6 are highly correlated - Gap between U6 and U3 seem to have grown over time - Because more contract work instead of full time
Why might external hiring increase discrimination on some salient characteristics>
- Less information on candidates, rely on observable characteristics - Candidates less able to detect discrimination than employees (don't know who else they considered)
Impacts of wage inequality
- Life expectancies and health outcomes - Economic mobility, educational attainment - Bank failures - People taking on debt *mostly correlational Beliefs: - beliefs of opportunity - trust in political system
Critisim about TCE
- Little regard for social connections (source of friction) - Firms basically buy everything so there is no "inside" - other possible explanations
Key organizational practives around low wage work
- Low pay; few (affordable) benefits - Involuntary part-time hours - Lack of set schedule - NY retail workers: 17% reported they had a set schedule. 30% they knew their schedule a week in advance - Workers on call (Keep "flex staff" on call; send staff home when slow) - Use of technology for staffing( Peak versus slow times) - "Time skimming" - Monitor communication with coworkers "Loss prevention - Can't take on another job or commit to other things like family
Who are the working poor?
- Low wage jobs - Fast food - Home care - Childcare - Hotel - Retail - Auto manufacturing - Demographics: Black, Hispanic, slightly more women, 21-30, not educated
Impact of Unions on Society
- Lower wage inequality - Low-income children rise higher in the income rankings when they grow up in areas with high-union membership - Union density is one of the strongest predictors of an area's mobility (About the same as high school dropout rate) - Children of non-college-educated fathers earn 28 percent more if their father was in a labor union
Right to Work Laws
- Make union shops, agency shops, and maintenance of membership provisions illegal - Allow "free-riding", thereby - Making it "less efficient" to organize bargaining units as well as negotiate and administer contracts in states
Make or Buy Decision Continnum
- Make: Internal Employment: stable Internal Employment: less stable Long-term contract (2+yrs) Repeated contract (come shovel snow everytime it snows and I'll pay you) Spot Transaction (Every time it snows, you knock on my door) - Buy:
Income Volatility
- Many poor people earn more each year than they spend, but due to volatility may not be able to pay expenses when due Consequences: - Payday loans - Pawn shops - Credit cards - Overdraft fees - All of which cut into savings ...
Alternatives to work stoppages
- Mediation - Fact finder = 3rd part that recommends - Arbitration = 3rd party that determines bidning settlement
Putting it all together
- Mobilization necessitates grievances, resources, political opportunities and framing efforts - Movements are often set in motion by social changes that render the political environment vulnerable/receptive to change - But organization (informal/formal) and resources are necessary to seize opportunities - Framing is necessary for motivating collective action Grievance [ Framing ------------Opp Structure - > Resource mobilization]
Rational people more sensititve to racism
- Most swayed by incidental exposure -More trained to reason thinking
Wagner Act
- NLRA 1935
Differences in Quality of Networks
- Networks are key to finding a job - They are powerfully influenced by homophily (we like people like us) = Because women and minorities have historically lacked access to high-paying jobs, network-based hiring permits inequality to persist (Mouw, 2002) - Minorities have less difficulty getting hired in organizations where minorities are already present (Fernandez et al., 2006)= Suggest networks perpetuate existing demographics at work - Part of problem and solution - if you can get enough people in (mentoring programs)
Marginally attached
- Not in Labor Force, but want to and are available to work AND - Have looked for a job in the last 12 months AND - Did not look for a job in the past 4 weeks - Have a variety of reasons to stop looking for work - DIscouraged workers are part of the marginally attached (Believe that there are no jobs available)
Line between Contractor and employee
- Ongoing debate - Joint liabilities - McD is a franchise = who is sued when employee takes action? owner of store or McD?
Janitor Story
- Oppurtunities are very different = COntracting = increase inequality and no stability/benefits - Transmissions (long term relationship) vs staples (find cheapest_
Craft Union
- Organized around occupation - United Brotherhood of Carpenters (UBC) - International Association of Machinists (IAM) - responsible for training or supplying employees to employers - Power depends on control over supply of workers
Who is left out of employment calculations?
- People not in labor force - Discouraged workers - "Under-employed" - Students, retired
Triange fire Strike: Grievance
- Poor working conditions - Wages - Rampant, visible inequality and lack of opportunity - Mgmt treatment - No voice
Preference for Internal hiring
- Practice commonly associated with ILMs #1 - Jobs filled by those already in organization - Seniority - Internal promotion is more efficient than outside hiring - External workers in IB performed worse but paid more - Paid more because need to induce them to leave current job - External workers may be better when firm needs skills/ ideas not in the current workforce - Moving firms was a great way to increase your pay but internal hiring is the best way to be promoted (firms hire workers externally who have already done the job before)
Wage Rules
- Practice commonly associated with ILMs #2 - Wages attached to job rather than individual - Pay set so that jobs in same category get paid similarly and that as you move up in job difficulty pay increases at a set percentage - Internal equity an overriding goal - ex) gov wages - raising the wage for low skill means raising the wage for high skill - bands (looks like box plots)
On the Job Training
- Practice commonly associated with ILMs #3 - informal (learning by doing) or formal (classes) - For workers to be willing to invest in (or train others in) firm-specific skills, need some ind=surance of job stability/ upward mobility - Because they don't want people they train to replace them
Practices commonly associated with ILMs
- Preference for internal hiring - Wages attached to jobs, not workers - On the job training
External Labor Markets
- Pricing, allocation, and training of labor market determined directly by competitive forces - Jobs fulfilled by workers outside the firm (temps) - Open employment relationship - Ex) Amazon warehouse worker - External and internal labor markets works on a continuum
Internal Labor Market
- Pricing, allocation, and training of workers determined by administrative rules - Jobs filled by promotion and transfer = Shielded from the direct influences of competitive forces (buffer but still feels effects of S&D) - Closed employment relationship - based on mutual (implied) commitments between firms and workers
Why/Which workers choose contracting
- Push factors: (why it is a backup) - Little job experience - Lost / unable to obtain permanent employment * lower job security: laid off workers, new entrants to labor market - Pull factors: (why it is attractive) - Maintain/ enhance particular skills - Higher pay (only at higher end) - More flexibility - Avoid office politics, bureaucracy * lower job security: single men * Less employer provided skills development: more experienced workers, more skilled workers
What would happen to wages and employment levels of engineers is government expenditures on R&D programs fall?
- R& D output levels would drop as firms try to max profits - Scale effect would decrease the demand for engineers at any wage - Demand curve shifts to the left - Wages and employment level drops
Characteristics of Primary Labor Market
- Relatively high wages, fringe benefits, agreeable working conditions, and employment security - Job ladders: possibilities for raises and promotions - Jobs often require higher levels of skills and education - Can include significant amounts of on the job training - Workers more likely to be protected by internal labor markets - Ex) Engineers and white collar jobs
Employment Protection Regulation
- Restrictions on the availability of firms to dismiss workers 1) Just case provision, severance pay, and financial penalties for termination 2) additional procedural requirements for mass layoffs or closing 3) restrictions on use of temporary employment
Statistical discrimination
- Results from treating an individual on the basis of membership in a group and knowledge of that group's history - Statistical discrimination is based on group differences in ... - mean or variance in productivity - reliability of screening devices (a big one is education quality) - "This is perfectly rational and economically efficient even if it is morally unjustified and harmful" (Norton, 2010) - Ex) excluding women from occupations that require physical strength is justified because men tend to be stronger than women
History of Transaction Cost Economics (TCE)
- Ronald Coase (1937) - Not all independent contractors because friction in markets - Transaction cost: searching, bargaining, monitoring cost (may be easier for firm to just do it themselves) - Economic explanation for the existence of firms - Williamson gave idea a twist in the 60s - Simon developed the idea of bounded rationality
2 Effects that happen when Wages drop
- Scale Effect: Firms take advantage of lower price of labor by expanding production (Cheaper to produce so they produce more) - Substitution Effect: Firms take advantage of the wage change by rearranging its mix of inputs while holding output constant - more labor in place of capital (labor cheaper so increase # of workers)
Do Judges vary in their treatment of race? experiment
- Similar racial gap in sentencing - Can't tell if discrimination or reverse discrimination - Can't tell race of judge
When do people mobilize: Deprivation/grievance theories
- Social movements are founded among people who are deprived of a good or resource or have some grievance that is not being ameliorated - Doesn't explain why some aggrieved groups mobilize and others don't - However, most social movement theories accept the idea that grievances matter - they aren't enough to lead to mobilization (Pre-condition)
Framing theories
- Social movements arise from the strategic efforts of groups of people to fashion shared understandings of the world that legitimate and motivate collective action - Typically starts with smalle group and expands - Movement leaders develop frames to provide internal and external constituents a better understanding of the problem the movement seeks to address and its proposed solution - Frames help determine whether a movement garners support - Ex) Abolitionists were unsuccessful in generating support for their rights to assembly and free speech when framed as a concern about the power of slaveholding southerners or a broader argument regarding race. - ex) Framing these same demands as maintaining civil liberty, however, proved successful (Ellingson, 1995)
Resource mobilization
- Social movements develop when groups of individuals with grievances are able to mobilize sufficient resources Resources include - Tangible: money, infrastructure, people - Intangible: legitimacy, knowledge, publicity - Membership occurs through networks
When do people mobilize: Political opportunity theories
- Social movements develop when groups of individuals with grievances are confronted with a political system that is receptive (or vulnerable) to change - Resources matter, but more emphasis placed on vulnerability of political institutions Vulnerability occurs: - Political divisions/upheaval - Repression tactics grow ineffective - Elites are unable/unwilling to unite - Support for cause by elites - Sometimes a movement helps create a more vulnerable opportunity structure
Sharecropping theory for employment
- Squeeze everything out of employees - Loss of productivity and turn over eventually?
Why Changing status quo is hard..
- Successful mobilization => coordination of economic and political resources ( As individuals, most people have few resources) - Change via the state (through politics) is tough and typically slow (designed for stability) - The electoral system (at least in U.S.) is not designed for rapid change (Meyer, 2007) - Designed to ensure a single "faction" could not wrest control (through checks and balances) - Voting leaders in and out of office is not sufficient to handle many grievances
Remedies for discrimnation that work
- Successful programs promote: - Engagement - Contact - Social accountability *need to be in core of business, not just something they can drop when markets are down - Ex) Voluntary training self-managed teams, cross training, college recruiting targeting women/ minorities, mentoring, task forces, diversity managers - College recruitment = managers find good candidates = become converts - Mentoring = anyone i mentor is deserving (need to assign because white men hesitant to reach out, but minority/women are the first to sign up for the program) - Self managed teams = see for yourself - Diversity managers & task forces - know people are watching = act appropriately - Cross training = do various task = see for yourself
If philly implemented new regulations on daycares requiring permit, only 80% have it so other would have to obtain in a year. What would happen to wages of daycare centers in Philly in the short term
- Supply of daycare workers would decline - Supply curve shifts to the left - Wages increase and employment levels drop
Social accountability for change
- Teachers grading bias improved when they were told that students would discuss grades with each other - Exposing raise gaps
Reservation Wage
- The wage below which the worker would refuse (or quit) the job in question - min wage willing to work
Unemployed
- Those in P who... - Had no employment during the survey week AND - Were available for work AND - Make an effort to find employment during the previous 4 weeks
Employed
- Those in population who... - Did any work as paid employee OR - Worked in their own business OR - Worked 15+ hours unpaid in a family business OR - Not working bu temporarily absent
Working Poor Rate (WPR) and factors leading to it
- Those who spent 27+ weeks in the labor force (E or U) but whose incomes fell below the poverty line - Main factors that lead to being working poor: - Low-wage work - Unemployment - Involuntary part-time labor - Cyclical= correlated to economy - people in secondary markets more succeptible
Labor Supply Curve
- Top of bend = income effect dominates (leisure > work) - Bend = individual preferences shift - Bottom of bend = substitution effect dominates ( work > leisure)
Union shop
- USA requires employees to join union within a certain amount to time after employed
Growth of secondary labor markets impact
- Undermines the wellbeing of workers - Increase demand for gov assistance - Facilitate oppression of minorities - Attempt to undermine unions
What drives unions impact on society
- Unions => higher wages (for non-unionized workers too) Better education; more stable home life - Unions => better benefits E.g., Health insurance - Unions advocate for opportunity-advancing public policies Higher minimum wage; expanded public services Among national lobbying/interest groups, unions are the most likely to support "middle-class" initiatives
Reasons why workers might want to join a union
- Unions provide collective power - Also provide an institutionalized system for dealing with workplace issues and concerns - ex) grievance procedures; pay negotiations -Common worker concerns: - Wages & benefits - Working conditions; health and safety standards - Job security - Inconsistent managerial decision-making (e.g., favoritism)
Public Sector Unions
- Vary from state to state - Teachers, fire fighters, letter carriers, etc.
Implication of ILM on Labor Analysis
- Wage determination (internal increases less due to supply and demand) - Collective bargaining (possibly pricing people out) - Unemployment (loyalty over cheap hire) - Labor market segmentation (not all labor same= primary and secondary markets)
Characteristics of Secondary Labor Market
- Wages are low and benefits minimal or non-existent - Less desirable work conditions - Jobs require low skill levels - Social prestige is low ('food and filth') - Often part-time work - Lay-offs and periods of unemployment more common - Turnover on these jobs is often high * Standard economic models are more useful in studying Ex) Gardeners, Fast food, nurses
Flaws in Cobbs' Research
- We don't know how much of this change is due to changing employment practices vs. changes in the types of firms that are now large - We also don't examine directly what is driving these changes - Globalization? Technology? Competition? Financial market pressures? Declining unionization?
Women and Negotiations
- Women tend to not engage in self-focused negotiations - are equally effective negotiators - are superior to men in winning gains for others in a negotiation (Riley & Babcock, 2002) - Men initiate negotiations more frequently than do women - A common explanation is that women value relationships over the self - Another is the (real & perceived) costs of negotiating (Konnikova, 2014)
Where collective bargaining breaks down
- Work stoppages (strikes and lockouts)
Local Unions
- Work w/ national unions - Union Steward = an employee elected by union members to represent them in ensuring that the terms of labor are enforced
Hours of Work Decision (2 effects)
- Workers trade-off between consumption of goods and leisure trying to maximize their overall satisfaction (utility) under budget constraints - Substitution effect: increase wage = increase reward for work = increase opportunity cost of leisure = work more = hours of work increase - Income effect: increase wage = increase wealth = workers can afford more leisure = work less as increase wealth makes leisure more affordable = hours of work decrease
Closed shop union
- all workers must be part of union before hiring
Implicit Bias
- bias in judgment and/or behavior that results from subtle cognitive processes (e.g., implicit attitudes and implicit stereotypes) that often operate at a level below conscious awareness - ex) How people associate words differently depending on gender of speaker - When confronted with counter-stereotypical exemplars of success, people are significantly less likely to acknowledge racism exists (Risen and Critcher) = Showed them successful people and asked if racism still exists - Women and minority presence in positions of status and authority may lead others to not view ascriptive inequality as a problem - One marker of success is not enough
Trends in union membership
- decline in union membership due to 1) change in structure of economy (more service, blue collar was unions) 2) mgmt efforts to control costs 3) better human resource practices 4) gov regulation (safer workplace = don't need them as much) - remains strong in the public sector
Why you can't just outlaw bias - diversity training - hiring test - performance ratings - grievance procedures
- diversity training = forget afterwards and poor training - hiring test = may ignore, amplifies bias rather than reduce - performance ratings = litigation shield and lowballs women or gives others high marks to keep promotion options open - Grievance procedures = managers trys to get even, see it isn;t working = less likely to speak up, leads people to drop guard because no one is reporting them
Maintenance of Membership
- doesnt require membership - but requires people who join stay a member for a period of time
New, different rules for ILMs
- firms leaving ILMs behind in varying degrees - less on the job training in many firms/ sectors - less job security, especially for managers, and declining union influence - more external hiring - Declining job tenure - More pay for performance = Fears for more workers stuck in secondary labor markets - BUT continued influence on how firms are organized (allocation of jobs, training, and compensation) - Still Strong in other countries: Australia, Korea
Make or Buy decision
- in terms of employment - e.g., whether to employ a worker or use a contractor (short- or long-term) - e.g., whether to employ a worker in a longer-term, stable relationship (e.g., ILM) or in a shorter-term, less stable relationship (e.g., part-time work) - e.g., whether to hire internally or externally
Low Wage work growing
- more people than before
How conducting transactions inside firms affect TCE assumptions
1) Bounded Rationality - Individuals can specialize and information more easily aggregated (hierarchical/ distributed decision making) - Won't be at loss if contract broken - Communication more efficient 2) Opportunism - Firms provide both incentives and control techniques to curb this - Can fire employees 3) Uncertainty - Firms allow interdependent units to adapt to unforeseen contingencies in a coordinated way 4) Small numbers - Firms allow issues of small numbers bargaining to be resolved by authoritative decree - Boss says to do X - Basically can solve these by making internal workers instead of hiring out
TCE Behavioral assumptions
1) Bounded rationality: Intendedly rational but limited so - Irrational because of cognitive limits (satisficing decisions) - If this wasn't true = could write perfect contracts 2) Opportunism: Self- interest seeking with guile - Willing to lie, cheat, cut corners, use info - Not everyone has to be opportunistic, just can't tell who will be and who will not be in advance - If this wasn't true = wouldn't need contracts, parties would just figure it out on the fly, gentlemen's agreement, will just renegotiate
Reason behing Gender Gap In Earnings (MBA)
1) Differences in training prior to MBA graduation 2) Differences in career interruptions 3) Differences in weekly hours -2&3 mainly due to presence of children (not as severe for lawyers and doctors (can work offline) but hard for managers)
Rise of Non-Standard Work
1) Disproportionate about of employment growth in last decade is in alternative work - Mostly not "online" jobs (e.g., Uber) but more traditional contracting jobs (e.g., through contracting firms like Kelly Temps) 2) Women, minorities, and the elderly are increasingly likely to hold these jobs 3) Pay is worse for these workers than for comparable workers in traditional employment - Exceptions include high-skill contractors (IT) 4) Alternative work is being driven, in large part, by cost-cutting, not changes in worker preference 5) It is hard to know exactly how many people work in these arrangements because the definitions are fuzzy - Evidence of a bigger issue where our understanding of "work" is based on outdated models of jobs and workers. This also has implications for the final point as well ... 6) Labor protections for these workers are weak; the law is in flux
Reason behind wage gaps
1) Educational disparities - differ greatly by race - women have higher education attainment than do men in US 2) Occupational and Industry distribution disparities - White and Asian men concentrated in more professional occupations - Male dominated industries 3) Labor Force Experiences - Time off from work disadvantages workers
Triangle fire strike: Framing
1) Framed around "fairness" and "equality" - Viewed by many as cornerstones of American ideology 2) The press also used personal accounts to humanize the women in these factories ... 3) Some also made the case that female workers deserved special protection - A bit paternalistic and perhaps quite sexist, but they argued that as future mothers and wives, harsh working conditions would lead the workers to lose some feminine virtue
Impact of Low wage Work on People
1) Health and well-being (lack of medical care) 2) Decision making - Scarcity trap - When in a state of scarcity, you make decisions which, in the short-term, help manage scarcity but in the long term make it worse - Urgent > important; which increases scarcity in the future - A person preoccupied with money problems exhibit drops in cognitive functioning (~13 point IQ drop) (Shafir & Zhou) "Cognitive tunneling"
What are the two main arguments made in the Cobb and Lin (2016) article about the role the FSWP played, historically and contemporaneously, in affecting inequality in the labor market?
1) Historically large, U.S. employers were likely to pay a greater wage premium to their low- and middle-wage workers as compared to their high-wage workers - This served to compress wage in the labor market - Think about ILMs and the desire to maintain a sense of equity ... 2) The breakdown of ILMs and the rise of non-standard work arrangements disproportionately hurt low- and middle-wage workers, such that the firm-size wage premium for these workers has likely declined at a greater rate as compared to high-wage workers - We assume, but cannot test, that these changes are due to things like increasing global competition, technological advancement, the decline of unions ... - Still interesting because it shows that these dynamics are affecting larger firms differently than smaller ones - In addition to rising wage inequality, the breakdown of ILMs and alternative work has implications for worker opportunity and mobility (Irwin)
Opportunity Structures
1) Learn the terrain - These things tend to change slowly ... - Strategy - Structure - Culture 2) Timing - Look for opportunities to enact change - Depends, in part, on your status/position/tenure in the org Examples of opportunities inside organizations: - Times of significant change: - Leadership - New products - New technologies - Public reports - Competitor behavior
Triangle fire strike: Resource Mobilization
1) Leveraging existing institutions and groups - Other social movement orgs (Suffragist movement) - Mobilized elites (e.g., Mink brigade) - Attracted (positive) press attention; mobilizing elites helped 2) Network ties - Family, friendship, community connections inside these firms created close ties among strikers - Facilitated trust 3) Able to organize workers in rival firms - Aided by connections due to ethnicity, national origin
Explanations for rising income inequality
1) Market Based Explanations: - Skilled-biased tech change - Globalization 2) Institutional Explanations - Unionization - Public Policy (Min wage rates and tax policies) - But these don't actually match with data - wage inequality is the consequence of a bunch of things that likely interact with one another in important ways - Ex) unions, technology, public policy, finance But the role firm strategy and structure has played has received little attention
How do employees get paid/ how much?
1) Market and performance-based pay - increases the influence of discrimination - performance based on subjective criteria 2) Job evaluation wage setting (ILM) - Firms assign wages to jobs (not individual people) - pay between jobs is not as extreme (good to create equity) - assign wages to jobs - gap might be lower)
Important Resources
1) Networks - key members in the organization to attract as allies (or avoid as potential adversaries)? - Mavens - give advice - Connectors - put you in touch with the right person - "Salespeople" - sell the idea - Evidence also shows that individuals are more likely to take part in (risky) movements when they have close connections also taking part (McAdam) 2) Existing institutions - Professional associations, organizational groups (e.g., clubs on campus), media 3) Collaborative platforms can be a key mobilizing structure - Allows for the ability to speak with a unified voice (i.e., facilitate voice)
Triangel fire strike: Opportunity structure
1) Repression tactics grew less effective - "Big stick" violence led to public outcry ... though in the Triangle case it took elite support to help motivate opposition to violence 2) Elite support for cause - E.g. Anne Morgan and the "Mink Brigade" - Largely reacted to the violence suggesting that the movement helped "expand" the opportunity (?) 3) Union activity in related industries and geographic areas 1- 880-1900 ~23,000 strikes affected more than 117,000 establishments - 3 strikes per day for 20 years - Average strike: 270 workers lasting 24 days - 149 million work days lost - Strikes in NY in related industries had been occurring in years prior 4) Timing - Seasonal nature of consumption motivated owners to settle 5) Ideological shifts in U.S. - Belief in "Social Darwinism" was on the wane in the U.S. - "Progressive" reforms had been bubbling up over the past 10 or so years - Government regulation of industry had begun (e.g., FDA) - Growth of "alternative" political parties (e.g., socialist, communist, populist). These parties made significant inroads in many local and state-wide elections during the early 1900s
Why low road might not be as profitable as assumed
1) Retention/ Turnover (training and hiring) - at one point Walmart has 40% turnover 2) Productivity - Understaffing - Unhappy workers= unhappy customers (health care, attention) - Predictable schedules = greater engagement and performance 3) Other: Spoilage, waste, shrinkage, negative publicity - Ex) Homedepot replacing expert employees
Explanations for Rising Wage Inequality
1) Skill-Biased Tech change 2) Globalization 3) Decline in Unions 4) Public Policy
TCE Market Assumptions
1) Uncertainty - If this wasn't true = contracts could be written to cover any expected outcome 2) "Small numbers" - Few potential contracting partners - Even if you start off with a lot, once selected it is harder to replace (lock-in effects) - Ex) Babysitter example with ernie, learn about kid, likes kid, no one else is a perfect substitute, has leverage, can ask for raise because you don't want to start over - Recurrent short-term contracting is risky when you have fewer alternative - opens door for opportunisim - can demand raises because other people got jobs
Social Movement Frame work for Organizational Innovation
1) When? (Opportunity Structures) What makes the time right for a movement? 2) Why? (Framing) What is the compelling case for an innovation/change? 3) Who? Who are potential allies and supporters? Emphasis on networks 4) How? What kinds of tools/platforms can help supporters collaborate to support the effort? Emphasis on "technologies" (Resource Mobilization) = Who and How * Politians act differently in size (Civil rights vs womens march)
Findings of Kellogs insight on Racial Discimination
1) black job seekers were offered significantly less compensation than whites by potential new employees 2) blacks were much more likely to accept the lower offers than white counterparts because they knew of discrimination 3) wage gap narrows as black workers stay at same job = see the value - Statistical discrimination = is a group is less productive - treat as average of the group
Attributes of matrix form
1) firm as set of projects (stll has skill development and job training, good for contractors because only need certain skills for certain projects) 2) occupations (not firms) become critical for accumulating, developing, and disseminating knowledge - Professional associations - Skill training outside of the firm (continuing edu) - Using networks to find job and build skills
Origins of firms
1) free markets are not costless (transaction cost) 2) value added chain = value can be added at each step of the process 3) input-output system = chain leads to the end 4) vertical integration 5) transaction cost
3 Reasons for Firm inequality
1) outsourcing 2) It/automation 3) Winter take most competition
How large firms affect wages
1) raising avg wages - increases wages for all but the premium is higher for low and mid , when they decline wages = decrease premium exclusively for low and mid 2) reducing dispersion
Reasons for bias against women
1) women and men evalutated at different criterias (women already screened so that interview is about social skills) 2) assertive women seen more negatively = second generation feminisim = harder to say discrimination takes place 3) More men = award men because easier to get along with 4) not bias against women, but for men (men favor men)
Labor Force
= Employed + Unemployed - Left out of labor force = retired people, students, non-wage labor, discouraged workers
Ex) If Cobb made high quality, hand-made, one of kind shirts, sweaters, neckties, would he hire or contract? A) Artisans trained in making the clothes and accessories B) Designer of the company's semi-annual catalog C) Delivery personnel
A) Hire: asset specificity (high end one of kind brand), opportunism (need to be high quality and one of a kind so don't want them to cheat and ruin quality) B) Buy: not frequent (semi-annual) low asset specificity (catalog not unique), less uncertainty C) Buy: less uncertainty, not firm-specific, easy to write contract is things are lost, other firms have more experience
Benefits of non-stand work arrangements on firm strategy
Benefits: - Reduce cost (less expensive but still need to pay fees to contractor companies) - Find special skills (for a short time) - Gain flexibility - Less trouble: company deals with contractors for you Risks: - No security for workers= no commitment from them - Lack of control over contractors (efficiency and quality)
Social Movement
Collective challenges based on common purposes and social solidarities, in sustained interaction (with elites, opponents, and authorities - Not riot in street - How to deterine: - Necessitates collective (not just individual) action - Necessitates consistent and sustained action - Emerges from a grievance/dissatisfaction
How Transactions (Make Vs. Buy) are organized?
Depends on 3 things 1) Asset Specificity - The extent to which asset is redeployable - Human asset specificity: when workers have knowledge and skill unique to the firm - More firm specific = more long term hiring 2) Uncertainty - The more uncertain the environment, the less we know what to contract on, gives scope for opportunism - Relates to performance (what does high quality look like?) 3) Frequency - how often are these occurring - the more of these 3, the more likely it will be made by the firm rather than bought - Asset specificity is the most significant
Hardball union opposition tactics
Employers have increased their use of more punitive tactics ("sticks") such as plant closing threats and actual plant closings, discharges, harassment, disciplinary actions, surveillance, and alteration of benefits and conditions.
Employment Population Ratio (EPR)
Employment/ Population
Implications of Matriz economy for workers
Fewer Assurances about the ambiguity of career network - Careers span projects (and thus employers) - Fewer assurances about security/ stability (less employment benefits) - Development of interpersonal and professional networks are critical for success - Ambiguity about contractor's role in the firm affects contractors and perm workers alike * don't want contractors to feel at home = awk , can't come to party
Matrixed Economy (4 trends in way work is organized)
Flat Out Use of Projects 1) flatter, leaner organizations 2) outsourcing 3) use of alliances 4) organizing around projects
Why did Firms create the New New Deal
Girl Scouts C TB - heightened global competition - Tech and deregulation (shortened product cycles and lower barriers to entry) - Pressure to increase shareholder value - focus on core competence (only things you do well, outsource the rest) - changing firm boundaries ( organize work around projects, outsource, temp labor) *Still have ILM but buffer around it
Raising Minimum Wage good or Bad?
Good: - The dis-employment effects are either not present or are relatively minor - Raising the minimum wage affects other things (like disposable income; higher worker productivity) that may offset the negative effects - Lots of these jobs are in service-related occupations that are hard to replace Bad: - job loss (s&d) Empirical evidence: - Leans towards good
Labor Force Participation Rate (LFPR)
Labor force / Population
Positive and Negative Impact of Unions on Firm
Positive/no impact - Small differences in wages, employment, output - providing greater predictability - Not much large-scale evidence that unions hurt productivity, quality, or the rate of innovation (Walsorth, 2010) Negative: - reduces cumulative returns to investors 10% over 2 years (Reduces growth in assets (PPE), No real effect on profit, ROA) - negative effect on profits; and that this effect is larger in the U.S. - Ability to adapt to changing economic conditions can be more complex, particularly where labor management relationships are very combative (e.g., U.S.)
Pro and Cons of Contracting on Workers
Pro: No Free Dom - Free agents choose their reward - Demise of postwar employment compact = freedom for workers - no bosses, no orders, no bowing to authority * much of this research based on IT workers (annedotal = books) Con: Push Institutions that Undermine U - Contracting destroys institutions - Pushing people into secondary labor markets - Undermines security and stability; typically tied to permanent employment - Undermines unions, and the protection they provide * much of this research based on low skill workers (research)
Competitive Labor Market Model Assumptions
Spotted a Costless Homo so gave him a Monetary Wage - All labor hired in SPOT market ( No long-term contracts) - Current market wages are COSTLESS to determine (have a general feeling for average wage) - Firms are HOMOgenous (all jobs in market are identical and firms "bundle skills" similarly) and in simplest models = all workers homogenous - All compensation MONETARY - WAGES determined by supply and demand (workers' productive capacity)
U-Form vs M-Form
U form: - divided into departments - can become informational silos M form: - multidivisional form - each division has the characteristics of U form - Big firms do this better - Ex) GM divisions = chevorlet, Buic, pontiac
Unemployment Rate (UR, U3)
Unemployment/ Labor Force
The veil of ignorance
imagine a world where you could be born into any class, how could income be distributed - tax rate can incentivize / disincentivize - relative position is important to consider
Agency shop
requires payment of union dues but dont have to be a member
