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“ “ In those wretched countries where In those wretched countries where a man cannot call his tongue his a man cannot call his tongue his own, he can scarce call anything own, he can scarce call anything his own. Whoever would his own. Whoever would overthrow the liberty of a overthrow the liberty of a nation must begin by subduing nation must begin by subduing the freeness of speech.” the freeness of speech.” Ben Franklin Ben Franklin

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Page 1: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

““In those wretched countries where a In those wretched countries where a man cannot call his tongue his own, man cannot call his tongue his own, he can scarce call anything his own. he can scarce call anything his own. Whoever would overthrow the Whoever would overthrow the liberty of a nation must begin by liberty of a nation must begin by subduing the freeness of speech.”subduing the freeness of speech.”

Ben FranklinBen Franklin

Page 2: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a
Page 3: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

Econ in EuropeEcon in Europe

Marissa and Marissa and MalloryMallory

European CorrespondentsEuropean Correspondents

Page 4: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a
Page 5: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

Miranda ReportsMiranda Reports

Who is Who is Thomas Thomas Paine?Paine?

Page 6: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a
Page 7: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a
Page 8: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

Controlled Labor Controlled Labor MarketsMarkets

What is the main What is the main theme Dr. S is theme Dr. S is

driving at driving at

in this chapter?in this chapter?

Page 9: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

Controlled Labor Controlled Labor MarketsMarkets

Pay or working conditions can be Pay or working conditions can be controlled by law, custom, controlled by law, custom, organizations of employees or organizations of employees or employers, and/or government employers, and/or government officialsofficials

Page 10: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

Controlled Labor Controlled Labor MarketsMarkets

Pay or working conditions can be Pay or working conditions can be controlled by law, custom, controlled by law, custom, organizations of employees or organizations of employees or employers, and/or government employers, and/or government officialsofficials

As always, we’re not concerned with As always, we’re not concerned with goals or intent, but with the goals or intent, but with the ____________ to which these ____________ to which these incentives leadincentives lead

Page 11: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

Job SecurityJob Security

Many countries such as France, Many countries such as France, Germany and South Africa have very Germany and South Africa have very strict laws that make it difficult and strict laws that make it difficult and costly to fire anyonecostly to fire anyone

Page 12: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

Job SecurityJob Security

Many countries such as France, Many countries such as France, Germany and South Africa have very Germany and South Africa have very strict laws that make it difficult and strict laws that make it difficult and costly to fire anyonecostly to fire anyone

Does that lead to lower or higher Does that lead to lower or higher unemployment?unemployment?

Page 13: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

Job SecurityJob Security

Many countries such as France, Many countries such as France, Germany and South Africa has very Germany and South Africa has very strict laws that make it difficult and strict laws that make it difficult and costly to fire anyonecostly to fire anyone

Does that lead to lower or higher Does that lead to lower or higher unemployment?unemployment?

Always look for the unintended Always look for the unintended consequences!consequences!

Page 14: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

““Firing is such a costly Firing is such a costly headache that many headache that many prefer not to hire in the prefer not to hire in the first place” first place” the Economistthe Economist

Page 15: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

Minimum Wage LawsMinimum Wage Laws

Page 16: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

Minimum Wage LawsMinimum Wage Laws

Make it illegal to pay less than the Make it illegal to pay less than the minimum specified price for laborminimum specified price for labor

Page 17: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

Kara reportsKara reports

U.S. U.S. Minimum Minimum

Wage LawsWage Laws

Page 18: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

Minimum Wage LawsMinimum Wage Laws

Make it illegal to pay less than the Make it illegal to pay less than the minimum specified price for laborminimum specified price for labor

$7.25/hour nationally; many states $7.25/hour nationally; many states and cities also have such laws. and cities also have such laws. Employees get the higher of the twoEmployees get the higher of the two

Page 19: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

Minimum Wage LawsMinimum Wage Laws

Make it illegal to pay less than the Make it illegal to pay less than the minimum specified price for laborminimum specified price for labor

$7.25/hour nationally; many states $7.25/hour nationally; many states and cities also have such laws. and cities also have such laws. Employees get the higher of the twoEmployees get the higher of the two

Net effect? A price artificially raised Net effect? A price artificially raised causes more to be supplied (labor) causes more to be supplied (labor) and less to be demanded (labor)… and less to be demanded (labor)… therefore, more unemploymenttherefore, more unemployment

Page 20: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

““...the real minimum wage ...the real minimum wage is always zero regardless is always zero regardless of the laws and that is the of the laws and that is the wage that many workers wage that many workers receive... in the wake of receive... in the wake of minimum wage laws”minimum wage laws”

Page 21: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

Which Which demographic demographic group is most group is most

affected by affected by minimum wage minimum wage

laws?laws?

Page 22: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

Youth and Youth and minoritiesminorities

33.4% 33.4% unemployment unemployment

for blacks 16-24!for blacks 16-24!

16.1% for whites!16.1% for whites!

Page 23: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

Minimum Wage Laws, Minimum Wage Laws, reduxredux

Mandated benefits (sick leave, Mandated benefits (sick leave, family leave, medical benefits, etc.) family leave, medical benefits, etc.) have same resultshave same results

Page 24: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

Minimum Wage Laws, Minimum Wage Laws, reduxredux

Mandated benefits (sick leave, Mandated benefits (sick leave, family leave, medical benefits, etc.) family leave, medical benefits, etc.) have same resultshave same results

Family and Medical Leave Act of Family and Medical Leave Act of 1993: mandates 12 weeks of unpaid 1993: mandates 12 weeks of unpaid leave from the job for things like leave from the job for things like birth, family illness, adoptionbirth, family illness, adoption

Page 25: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a
Page 26: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

Minimum Wage Laws, Minimum Wage Laws, reduxredux

Mandated benefits (sick leave, family Mandated benefits (sick leave, family leave, medical benefits, etc.) have same leave, medical benefits, etc.) have same resultsresults

Family and Medical Leave Act of 1993: Family and Medical Leave Act of 1993: mandates 12 weeks of unpaid leave from mandates 12 weeks of unpaid leave from the job for things like birth, family illness, the job for things like birth, family illness, adoptionadoption

At least 15 states have jumped aboard to At least 15 states have jumped aboard to include domestic partners, application to include domestic partners, application to smaller companies, etc.smaller companies, etc.

Page 27: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

More Minimum Wage More Minimum Wage LawsLaws

What about Third World wages by What about Third World wages by companies such as Nike, Hanes, companies such as Nike, Hanes, Mattel?Mattel?

Page 28: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

More about Minimum More about Minimum WagesWages

What about Third World wages by What about Third World wages by companies such as Nike, Hanes, companies such as Nike, Hanes, Mattel?Mattel?

Not clear that overall Third World Not clear that overall Third World countries benefit when artificially countries benefit when artificially high wages are put in place… better high wages are put in place… better for those employed, not for those for those employed, not for those looking in without jobslooking in without jobs

Page 29: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a
Page 30: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

Labor UnionsLabor Unions

A A trade uniontrade union or or labor unionlabor union is an is an organization of workers who have organization of workers who have banded together to achieve common banded together to achieve common goals in key areas such as wages, goals in key areas such as wages, hours, and working conditions. The hours, and working conditions. The trade union, through its leadership, trade union, through its leadership, bargains with the employer on bargains with the employer on behalf of union members and behalf of union members and negotiates contracts with employers. negotiates contracts with employers.

Page 31: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

Labor UnionsLabor Unions

Key Point: where unions have driven Key Point: where unions have driven wages higher than the free-market wages higher than the free-market level (i.e., UAW and the Big Three), level (i.e., UAW and the Big Three), it reduces employment in that it reduces employment in that industry and can make the unionized industry and can make the unionized companies less competitivecompanies less competitive

Page 32: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

Labor UnionsLabor Unions

Key Point: where unions have driven Key Point: where unions have driven wages higher than the free-market wages higher than the free-market level (i.e., UAW and the Big Three), level (i.e., UAW and the Big Three), it reduces employment in that it reduces employment in that industry and can make the unionized industry and can make the unionized companies less competitivecompanies less competitive

Because people are SRTHAU, Because people are SRTHAU, society as a whole suffers because society as a whole suffers because less total wealth is producedless total wealth is produced

Page 33: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

Decline of Unions in U.S.Decline of Unions in U.S.

In the mid 1900s, about 50% of all In the mid 1900s, about 50% of all workers belonged to unionsworkers belonged to unions

Page 34: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

Decline of Unions in U.S.Decline of Unions in U.S.

In the mid 1900s, about 50% of all In the mid 1900s, about 50% of all workers belonged to unionsworkers belonged to unions

According to Bureau of Labor According to Bureau of Labor Statistics, in 2007 only 12.1% Statistics, in 2007 only 12.1% belonged to unionsbelonged to unions

Page 35: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

Decline of Unions in U.S.Decline of Unions in U.S.

In the mid 1900s, about 50% of all In the mid 1900s, about 50% of all workers belonged to unionsworkers belonged to unions

According to Bureau of Labor According to Bureau of Labor Statistics, in 2007 only 12.1% Statistics, in 2007 only 12.1% belonged to unionsbelonged to unions

In 2009, just 7.2% of private sector In 2009, just 7.2% of private sector employees belonged to unionsemployees belonged to unions

Page 36: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

Decline of Unions in U.S.Decline of Unions in U.S.

In the mid 1900s, about 50% of all In the mid 1900s, about 50% of all workers belonged to unionsworkers belonged to unions

According to Bureau of Labor According to Bureau of Labor Statistics, in 2007 only 12.1% Statistics, in 2007 only 12.1% belonged to unionsbelonged to unions

In 2009, just 7.2% of private sector In 2009, just 7.2% of private sector employees belonged to unionsemployees belonged to unions

But where are unions booming??But where are unions booming??

Page 37: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

37.4% percent of 37.4% percent of government government

workers are now workers are now unionized.unionized.

Why?Why?

Page 38: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

What is largest What is largest union in the U.S.?union in the U.S.?

Page 39: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

National National Education Education

Association Association (NEA)(NEA)2.7 million 2.7 million

membersmembers

Page 40: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

In fact, top three are In fact, top three are public sector workerspublic sector workers

NEANEA Service Employees International Union Service Employees International Union

(SEIU)(SEIU) American Federation of State, County American Federation of State, County

and Municipal Workersand Municipal Workers International Brotherhood of TeamstersInternational Brotherhood of Teamsters United Food and Commercial Workers United Food and Commercial Workers

International UnionInternational Union American Federation of TeachersAmerican Federation of Teachers

Page 41: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

Working ConditionsWorking Conditions

Gov and unions regulate working Gov and unions regulate working conditions such as hours/week, conditions such as hours/week, safety rules, vacations, sick days, safety rules, vacations, sick days, medical benefits, even whether you medical benefits, even whether you can unplug a coffee makercan unplug a coffee maker

Page 42: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

Working ConditionsWorking Conditions

Gov and unions regulate working Gov and unions regulate working conditions such as hours/week, conditions such as hours/week, safety rules, vacations, sick days, safety rules, vacations, sick days, medical benefits, even whether you medical benefits, even whether you can unplug a coffee makercan unplug a coffee maker

Result: better working conditions Result: better working conditions and more restrictive conditions and more restrictive conditions mean less employmentmean less employment

Page 43: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

Working ConditionsWorking Conditions

Child labor lawsChild labor laws: unions want to : unions want to keep young out of the workplace as keep young out of the workplace as long as possible. “Child labor laws long as possible. “Child labor laws passed to protect children from passed to protect children from dangerous factories now keep dangerous factories now keep strapping teenagers out of air strapping teenagers out of air conditioned offices”conditioned offices”

Page 44: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

Working ConditionsWorking Conditions

Child labor lawsChild labor laws: unions want to keep : unions want to keep young out of the workplace as long as young out of the workplace as long as possible. “Child labor laws passed to possible. “Child labor laws passed to protect children from dangerous protect children from dangerous factories now keep strapping teenagers factories now keep strapping teenagers out of air conditioned offices”out of air conditioned offices”

Hours of workHours of work: French laws: 35/hours : French laws: 35/hours week, plus 25 days paid vacation… week, plus 25 days paid vacation… severe impact on society as a wholesevere impact on society as a whole

Page 45: “In those wretched countries where a man cannot call his tongue his own, he can scarce call anything his own. Whoever would overthrow the liberty of a

Assignment for Dec. 7Assignment for Dec. 7

Read and study Chapter 11 of Basic Read and study Chapter 11 of Basic Economics: “An Overview”Economics: “An Overview”

Review all materials from Chapters Review all materials from Chapters 9-119-11

There There will be a testwill be a test (combo of (combo of narrative and multiple choice) on narrative and multiple choice) on this sectionthis section


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