Ch.8 Wages, Rent, Profit, and Interest (Pgs 206-41)

Ch.8 Wages, Rent, Profit, and Interest (pgs 206-41)

WAGES - includes salaries and other forms of payment for labour

Wage Determinants 1. labour productivity – most important 2. education > ^ human capital – income earning potential 3. experience > seniority rights – privileges 4. job conditions > garbage collectors 5. regional disparities > Nfld. vs. Ont. 6. market power > labour unions – wages, benefits, working conditions 7. discrimination > job and segregation

LABOUR UNIONS - effect wages, working hours, workplace standards and employment > W ^ but Empl.

Types of Unions 1. industrial – all workers in an industry 2. craft – particular occupation (eg. plumbers)

Structure of Unions 1. locals a) closed shop – must be member b) union shop – must be member after a certain time c) open shop – membership not compulsory 2. national and international unions 3. federations and congresses – provide collective voice for unions – lobby gov’t

Collective Bargaining - union reps negotiating with employers over wages, benefits, working conditions & job security 1. mediation and arbitration – an outside party helps the two sides come to an agreement, but in the case of arbitration ruling is binding 2. work to rule – slowing work down by doing the just the minimum required 3. strikes – union members stop working to force their employers to agree to union demands - while striking union members will show they’re on strike by making signs and picketing their workplace 4. lockouts and replacement workers – employers lock employees out of the to force them to agree to employer’s demands - employers may hire replacement workers (scabs) for striking workers

Unions and the Canadian Economy -1930s 20% of Cdn. workers were unionized whereas today it is 40% - nonunionized workers get paid 10-25% less than unionized workers -2-

Unions and the Canadian Economy (cont’d) - nonunionized workers crowd into certain occupations causing the pay to be lower because ^ Ss.

DAVID RICARDO & THE THEORY OF RENT Rent = Total Revenue – Total Costs - rent goes to landowner for the use of his fixed (perfectly inelastic) supply of land - total costs include implicit costs like farmer’s normal profit - pop. ^ > wheat prices ^ > rent ^ - opposed Corn Laws which kept wheat prices high

PROFIT - TR – TC 1. Return on Risk-Taking 2. Measure of Effectiveness 3. Source of Funds

INTEREST - payment made for the use of money - calculated based upon a % of the principal (amount of money being borrowed) 1. Loan Funds Market - market for all monies available to lenders by borrowers - contracts detailing the terms of borrowing money are called bonds

2. Range of Interest Rates a) credit risk c) collateral b) loan period d) size of loan

SHARES OF TOTAL INCOME a) wages & salaries 75.3% c) proprietor’s income/rent 8.0% b) interest income 10.0% d) corporate profits 6.6%