List and discuss the five important labor market trends How do these trends either support or qualify the proposition that increasing labor productivity leads to higher standards of living?
Trends: Trends in Real Wages
1. Real wages have gone up rather steadily for decades allowing working class wage earners to enjoy a larger and larger piece of the GDP pie. Today’s families can purchase more things than a family could purchase in earlier years.
2. Since the 1970s, the rate of growth in real wages has slowed. (This follows the productivity slowdown discussed in Chapter 20.) The Bureau of Economic Analysis reports labor’s share of GDP in nominal terms. These data show that labor’s share has been decreasing over the last three decades. The return to capital and management (entrepreneurship) has grown at the expense of labor. This is a complex issue that can lead to frustrating class discussions unless the instructor and the students are well prepared.
3. Inequality in wages and incomes has increased in recent years. The Census Bureau provides tables that show the relationship between education and income as well as between job classifications and income.
Trends in Employment and Unemployment
4. The number of people who have jobs has grown in recent decades. The number and the proportion of women in the labor force have grown demonstrably in the past 30 years. The Bureau of Labor Statistics reports that in 1950, about one in three women participated in the labor force. By 1998, nearly three of every five women of working age (16 to 65 years of age) were in the labor force. Among women age 16 and over, the labor force participation rate was 33.9 percent in 1950, compared with 59.8 percent in 1998.
5. In addition to the increased number of women in the labor force, approximately 30 percent of the increase in the population – about 3 million per year – will join the active labor force. These new entrants come from immigration as well as from the natural increase in the population. Regardless of source, additions to the population mean more workers to help produce more things.