Unit 3 T EACHER’ S G UIDE Unit 3 Lesson 19 O BJECTIVES Students will: Earning an Income 1. Identify ways in which they can earn an income. I NTRODUCTION 2. Explain how wages are determined. Economics Earning an income is what enables 3. Predict the benefits of education in the labor market. most people to participate in the economy. To earn an income, many people sell their time for wages. In other 4. Describe the role of entrepreneurs in the market- words, they work. The labor market seeks out the most place. productive people willing to work for the lowest wage 5. Compare themselves to entrepreneurs, by reference rate. People also earn income by means of other income- to selected entrepreneurial traits. producing resources including land (rent), capital (inter- est), and entrepreneurship (profit). Market forces also channel these resources to their most productive uses. C ONTENT S TANDARDS Most young people who earn an income do so by • People respond predictably to positive and negative supplying their labor for some productive purpose. incentives. (NCEE Content Standard 4) After-school and weekend jobs are common; they often • Competition among sellers lowers costs and prices, pay a wage at or above the minimum wage. Some and encourages producers to produce more of what young people earn income from other sources — draw- consumers are willing and able to buy. Competition ing interest from savings, for example, or renting things among buyers increases prices and allocates goods they own to others, or running a small business such as and services to those people who are willing and a lawn service or babysitting service. Payments from all able to pay the most for them. (NCEE Content these sources can add to individual income. Standard 9) Reasoning Income-generating decisions are • Income for most people is determined by the market important to nearly everyone. In their underlying form value of the productive resources they sell. What — choosing to earn income now or later, responding to workers earn depends, primarily, on the market incentives, evaluating market forces, trading dollars for value of what they produce and how productive goods and services, and evaluating alternatives by refer- they are. (NCEE Content Standard 13) ence to future consequences — these decisions embody several important principles of economic reasoning. • Entrepreneurs are people who take the risks of Wages and profits are the rewards offered by our organizing productive resources to make goods and economy for productive work. services. Profit is an important incentive that leads entrepreneurs to accept risks of business failures. The value of productive resources, including labor (NCEE Content Standard 14) resources, changes as market conditions change. Employers hire workers based upon the perceived value workers bring to the business. The additional revenue a L ESSON D ESCRIPTION worker produces influences wage levels. In addition, Students examine the concept of income. They identify increased on-the-job training and increased levels of factors that generate income, including entrepreneurial formal education can increase the value of an employee traits and changing conditions in labor markets. In to a business. learning how income is generated, students plan and make choices to enhance their own income-generating capacity. C ONCEPTS • Capital Time Required: 75 minutes • Entrepreneurship • Human capital M ATERIALS • Income • Labor • Activity 1 (for half the students in the class) • Land • Activity 2 (for half the students in the class) • Profit • Transparencies of Visuals 1, 2, 3, and 4 C APSTONE: EXEMPLARY L ESSONS FOR H IGH S CHOOL E CONOMICS @ NATIONAL C OUNCIL ON E CONOMIC E DUCATION, NEW Y ORK, NY 119 E ARNING AN I NCOME P ROCEDURE C. What occupations are projected to grow more slowly? 1. Explain that the purpose of this lesson is to describe how people earn income. Ask for a show of hands (Office and administrative support occupations.) to determine how many students have a paying job. D. How are education and training important? Display Visual 1. Ask the students to indicate which of the pay ranges they fall into, given their current (Occupations that generally require a college degree jobs. Discuss the results: or other post-secondary training are projected to grow faster than the average across all sectors.) • Why are so many students bunched in the lower pay ranges? E. How is the labor force likely to change? (Part-time jobs often pay only the minimum wage or (The labor force is likely to become somewhat older as something close to it. Low pay among high school the baby boomers age; it is also likely to include more students probably reflects the students' lack of expe- women and more Asian, Hispanic, and African rience, education, or skills. Given their obligation to American workers.) attend school during most of the work week, low pay 4. Discuss the students' answers to the questions in might also reflect the students' restricted availability Activity 2. for long, steady work, or for flexible hours.) A. What traits to do entrepreneurs like Mr. Lam, • Still, some students earn more than others. Mr. Atick, and Ms. Guadarrama seem to have in Why is that? common? (These students might have special training, experi- (They provide new goods and services that are in high ence, or education. Stress the connection between demand by consumers. They work hard, are focused the wage rate and the value of the employee's contri- on their customers, and are willing to take risks.) bution to the products or services in question. Introduce the concept of human capital and explain B. How do entrepreneurs like Mr. Lam, Mr. Atick, that more human capital [training, experience, or and Ms. Guadarrama benefit our economy? education] ordinarily enhances a worker's ability to (They create jobs and supply new goods and services.) produce more and better things on the job.) C. How do entrepreneurs help other people to earn 2. Display Visual 2. Explain that most people obtain income? income primarily from wages. However, people who are successful financially often have multiple (They create jobs for themselves and for their income sources. employees.) 3. Divide the class into two research teams to explore 5. Stress the point that entrepreneurs are key players information related to earning income. The research in the economy, creating jobs and improving the information will be in two categories: information quality of life for many people. Display Visual 3. about changes in the labor market and information Ask the students whether the traits identified there about the characteristics of people who start their can be learned. They should take notes on the dis- own businesses. Direct half the students to Activity cussion, listing the traits discussed and marking an 1; direct the other half to Activity 2. After the asterisk next to the traits they think they possess. students have completed their research, discuss Give special emphasis to the entrepreneur’s ability their answers to the questions, beginning with to learn from failure. This will be an important Activity 1. concept for the next procedure. A. Is the manufacturing or service sector likely to 6. An important ability of the entrepreneur is to work expand more? aggressively with an idea in order to turn it into a business venture. Early on, the entrepreneur cannot (Employment in the service sector is likely to be sure that the venture will succeed. That determi- increase more than employment in manufacturing.) nation will be made in the market by consumers who B. What are some of the fastest-growing sectors? do or do not find the good or service worthwhile. (Health services, business services, social services, 7. Display Visual 4. Ask the students to comment on engineering, management, information technology, the slogans and explain why these are good descrip- professional and other service occupations.) tions of the entrepreneur. Ask them also to come up with new entrepreneurial slogans they think should be to be added to the list. 120 C APSTONE: EXEMPLARY L ESSONS FOR H IGH S CHOOL E CONOMICS @ NATIONAL C OUNCIL ON E CONOMIC E DUCATION, NEW Y ORK, NY Unit 3 T EACHER’ S G UIDE C LOSURE E SSAY Q UESTION Review the key points of the lesson. Ask: Assume it is now the year 2010. Explain how you earn income. Also, by listing and commenting on key deci- • What changes does the Bureau of Labor Statistics sions you have made over the past 10 years, explain predict will occur in the labor markets by 2010? how you have put yourself into this income-generating (Employment in services is expanding. Occupations position. requiring post-secondary education are projected to grow (Responses will vary, but students should stress that the faster on average across all sectors.) service-producing sector will continue to be the dominant • How might these changes influence people’s producer of employment in the economy. Jobs in manufactur- education and career plans? ing are expected to decline by 2010. Health services, business services, social services, engineering, and management and (People face incentives to seek careers in service related services are expected to account for growth. Education occupations and to go to school after high school.) beyond high school and including college will become • What are some of the key traits of entrepreneurs? increasingly important.) (Confidence, willingness to sacrifice, high level of energy, creativity, and so forth.) M ULTIPLE-CHOICE Q UESTIONS ( CORRECT ANSWERS SHOWN IN BOLD) 1 Which is not a trait of an entrepreneur? A. Self-confidence B. High level of energy C. Interested in long-term management D. Willingness to accept failure 2. Most people’s primary income source is: A. Wages. B. Interest. C. Rent. D. Profit.