1980 to 14.3 percent in 1997.
By the 1990s, the women and baby boomers who first entered the job market in the 1970s had acquired more experience and training. Therefore, the aging of the labor force was not affecting entry-level jobs as it once did, and starting salaries for college graduates were rising rapidly again. There will be, however, other kinds of labor market and public policy issues to face when the baby boomers begin to retire in the early decades of the 21st century.
Immigration
Labor markets in the United States have also been significantly affected by the immigration of families and workers from other nations. Most families and workers in the United States can trace their heritage to immigrants. In fact, before the 20th century, while the United States was trying to settle its frontiers, it allowed essentially unlimited immigration. see Immigration: A Nation of Immigrants. In these periods the U.S. economy had more land and other natural resources than it was able to use, because labor was so scarce. Immigration served as one of the main remedies for this shortage of labor.
Generally, immigration raises national output and income levels. These
changes occur because immigration increases the number of workers in the
economy, which allows employers to produce more goods and services.
Capital resources in the economy may also become more valuable as
immigration increases. The number of workers available to work with
machines and tools increases, as does the number of consumers who want to
buy goods and services. However, wages for jobs that are filled by large
numbers of immigrants may decrease. This wage decline stems from greater
competition for these jobs and from the fact that many immigrants are
willing to work for lower wages than other U.S. workers.
Immigration into the United States is now regulated by a system of quotas
that limits the number of immigrants who can legally enter the country
each year. In 1964 Congress changed immigration policies to give
preference to those with families already in the United States, to
refugees facing political persecution, and to individuals with other
humanitarian concerns. Before that time, more weight had been placed on
immigrants’ labor-market skills. Although this change in policy helped
reunite families, it also increased the supply of unskilled labor in the
nation, especially in the states of California, Florida, and New York. In
1990 Congress modified the immigration legislation to set a separate
annual quota for immigrants with job skills needed in the United States.
But people with family members who are already U.S. citizens remain the
largest category of immigrants, and U.S. immigration law still puts less
focus on job skills than do immigration laws in many other market
economies, including Canada and many of the nations of Western Europe.
Discrimination
Women and many minorities have long faced discrimination in U.S. labor
markets. Employed women earn less, on average, than men with similar
levels of education. In part this wage disparity reflects different
educational choices that women and men have made. In the past, women have
been less likely to study engineering, sciences, and other technical
fields that generally pay more. In part, the wage differences result from
women leaving the job market for a period of years to raise children.
Another reason for the disparity in wages between men and women is that
there is still a considerable degree of occupational segregation between
males and females—for example, nurses are much more likely to be females
and dentists males. But even after allowing for those factors, studies
have generally found that, on average, women earn roughly 10 percent less
than men even in comparable jobs, with equal levels of education,
training, and experience.
Analysis of wage discrimination against black Americans leads to similar conclusions. Specifically, after controlling for differences in age, education, hours worked, experience, occupation, and region of the country, wages for black men are roughly 10 percent lower than for white men, though occupational segregation appears to be less common by race than by gender. Issues other than wage discrimination are also important to note for black workers. In particular, unemployment rates for black workers are about twice as high as they are for white workers. Partly because of that, a much lower percentage of the U.S. black population is employed than the white population.
Hispanic workers generally receive wages about 5 percent lower than white
workers, after adjusting for differences in education, training,
experience, and other characteristics that affect workers’ productivity.
Some studies suggest that differences in the ability to speak English are
particularly important in understanding wage differences for Hispanic
workers.
The differences between the earnings of white males and earnings of
females and minorities slowly decreased in the closing decades of the
20th century. Some laws and regulations prohibiting discrimination seem
to have helped in this process. A large part of those gains occurred
shortly after the adoption of the 1964 Civil Rights Act, which among
other things, outlawed discrimination by employers and unions. Many
economists worry that the discrimination that remains may be more
difficult to identify and eliminate through legislation.
Discrimination in competitive labor markets is economically inefficient as well as unfair. When workers are not paid based on the value of what they add to employers’ production and profit levels, society loses opportunities to use labor resources in their most valuable ways. As a result, fewer goods and services are produced. If employers discriminate against certain groups of workers, they will pay for that behavior in competitive markets by earning lower profits. Similarly, if workers refuse to work with (or for) coworkers of a different gender, race, or ethnic background, they will have to accept lower wages in competitive markets because their discrimination makes it more costly for employers to run their businesses. And if customers refuse to be served by workers of a certain gender, race, or ethnicity in certain kinds of jobs, they will have to pay higher prices in competitive markets because their discrimination raises the costs of providing these goods and services.
Those who are discriminated against receive lower wages and often experience other forms of economic hardship, such as more frequent and longer periods of unemployment. Beyond that, the lower wage rates and restricted career opportunities they face will naturally affect their decisions about how much education and training to acquire and what kinds of careers to pursue. For that reason, some of the costs of discrimination are paid over very long periods of time, sometimes for a worker’s entire life.
It is clear that there is still discrimination in the U.S. economy. What is not always so clear is how much that discrimination costs the economy as a whole, and that it costs not only those who are discriminated against, but also those who practice discrimination.
Unions
Many U.S. workers belong to unions or to professional associations (such
as the National Education Association for teachers) that act like unions.
These unions and associations represent groups of workers in collective
bargaining with employers to agree on contracts. During this bargaining,
workers and employers establish wages and fringe benefits, such as health
care and pension benefits, for different types of jobs. They also set
grievance procedures to resolve labor disputes during the life of the
contract and often address many other issues, such as procedures for job
transfers and promotions of workers.
Many studies indicate that wages for union workers in the United States are 10 to 15 percent higher than for nonunion workers in similar jobs and that fringe benefits for union workers also tend to be higher. That compensation difference is an important consideration both for workers thinking about joining unions, and for employers who are concerned about paying higher wages and benefits than their competitors. In some cases, it appears that the higher wages and benefits are paid because union workers are more productive than nonunion workers are. But in other cases unions have been found to decrease productivity, sometimes by limiting the kinds of work that certain employees can do, or by requiring more workers in some jobs than employers would otherwise hire. Economists have not reached definite conclusions on some of these issues, but it is evident that there are many other broad effects of unions on the economy.
Unions and collective bargaining in the United States are markedly different from such organizations and procedures in other industrialized nations. U.S. unions generally practice what is often described as business unionism, which focuses mainly on the direct economic interests of their members. In contrast, unions in Europe and South America focus more on influencing national policy agendas and political parties.
The different focus by U.S. unions partly reflects the special history of unions in the United States, where the first sustained successes were achieved by craft unions representing skilled workers such as carpenters, printers, and plumbers. These skilled workers had more bargaining power and were more difficult for employers to replace or do without than workers with less training. Unions representing these skilled workers were also able to provide special services to employers that allowed both the unions and employers to operate more efficiently. For example, craft unions in large cities often ran apprenticeship programs to train young workers in these occupations. And many craft unions operated hiring halls that employers could call to find trained workers on short notice or for short periods of time.
Most of these craft unions were members of the American Federation of
Labor (AFL), founded in 1886. The strong bargaining position of these
skilled workers, and the fact that these workers typically earned much
higher wages than most other workers, led the AFL unions to focus on
wages and other financial benefits for their members. Samuel Gompers, the
president of the AFL for nearly all of its first 38 years, once
summarized his philosophy of unions by saying, “What do we want? More.
When do we want it? Now.”
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