Chapter 5: The American Worker

The Employment Situation
Industries and Jobs
Labor Unions
Compensation of American Workers
Nontraditional Work Arrangements
Foreign Workers in the United States
U.S. Jobs Going to Foreign Countries
Protecting American Workers

When we are all in the business working together, we all ought to have some share in the profits—by way of a good wage, or salary, or added compensation.

—Henry Ford, My Life and Work (1922)

The American workforce plays a major role in the U.S. economy. Workers produce goods and provide services, the consumption of which drives the nation's gross domestic product (the total market value of final goods and services produced within an economy in a given year) growth. However, there is an age-old struggle between employers and employees over compensation. Businesses must compensate workers with pay and benefits that are high enough to attract and keep motivated employees, but not so high as to damage the profitability and growth of the business itself. On a macroeconomic scale, gainful employment of large numbers of workers is important to the overall health of the U.S. economy.

The Employment Situation

The Bureau of Labor Statistics (BLS; April 25, 2008, http://www.bls.gov/ces/) conducts a monthly survey of approximately 150,000 nonfarm businesses and government agencies with around 390,000 worksites around the country. Detailed information on employment, work hours, and payroll are obtained as part of the Current Employment Statistics program. These data are published monthly by the BLS in the news release “The Employment Situation.” Also included are data collected by the U.S. Census Bureau from approximately sixty thousand households as part of the Current Population Survey.

The BLS defines the civilian labor force as including all civilian noninstitutionalized people aged sixteen years and older who have a job or are actively looking for a job. People are considered to be employed during a given week if they meet any of the following criteria:

• They performed any work that week for pay or profit
• They worked without pay for at least fifteen hours that week in a family operated enterprise
• They had a job but could not work that week due to illness, vacation, personal obligations, leave of absence, bad weather, or labor disputes

People considered not to be in the labor force are those who do not have a job and are not looking for a job. This category includes many students, retirees, stay-at-home moms and dads, the mentally and physically challenged, and people in prison and other institutions, as well as those who are not employed but have become discouraged from looking for work. The unemployed are counted as those who do not have a job but have actively looked for a job during the previous four weeks and are available for work. Also included are people who did not work during a given week due to temporary layoffs.

Table 5.1 lists the major findings from the Current Population Survey and the Current Employment Statistics program for the first quarter of 2008. The civilian labor force averaged nearly 153.7 million people at that time. Another seventy-nine million people were considered to not be in the labor force. Nearly 7.6 million people were counted as unemployed, giving an overall unemployment rate of 4.9%. The unemployment rates were much higher than this for minorities and teenagers. Of the 137.9 million people employed in nonfarm occupations, 116.1 million (84%) held service-providing jobs. The remaining 21.8 million (16%) employees worked at goods-producing jobs, primarily in manufacturing. The average earnings for private-sector production or nonsupervisory workers during the quarter were $17.81 per hour, or $600.80 per week.

Employment and Unemployment as of April 2008

The BLS reports that in April 2008, 146 million people were employed in the United States. (See Table 5.1.)

Nonfarm payroll employment totaled 137.9 million people (based on preliminary estimates). This value has steadily increased from May 2005, when it stood at around 133 million people. (See Figure 5.1.) Figure 5.2 indicates that the unemployment rate declined from just above 5% in mid-2005 to around 4.5% in early 2007. Since that time the rate has steadily climbed, reaching 5% in April 2008.

The unemployment rate varied widely according to certain demographic factors in April 2008. (See Figure 5.3.) Teenagers were unemployed at a rate of 15.4%. Racial and ethnic differences were significant; African-American workers had an unemployment rate of 8.6%, and those of Hispanic or Latino ethnicity had a rate of 6.9%. These values were higher than the 4.4% unemployment rate reported for white workers. There was little difference by sex among adults; for adult men the rate was 4.6% and for adult women it was 4.3%.

Table 5.2 provides a breakdown on duration of unemployment as of April 2008. Nearly 2.5 million people had been unemployed for less than five weeks at that time. This represents 32.7% of all the unemployed. Another 2.5 million (32.8%) people had been unemployed for five to fourteen weeks, and nearly 1.3 million (16.7%) had been unemployed for fifteen to twenty-six weeks. Lastly, more than 1.3 million (17.8%) people had been unemployed for at least twenty-seven weeks.

A poll conducted by the Gallup Organization in April 2008 found that only 20% of those asked felt it was a “good time to find a quality job.” (See Figure 5.4.) This

compares to 75% who believed that it was a “bad time to find a quality job.” Optimism about job prospects generally grew from late 2003 through January 2007 and then plummeted over the following sixteen months.

Industries and Jobs

The federal government broadly characterizes jobs as being in the goods-providing or services-providing categories. Goods-providing industries include businesses engaged in manufacturing, construction, mining, and natural resources. The service industry includes businesses whose main function is to provide a professional or trade service, rather than a product. Service-providing industries are extremely diverse and include businesses involved in retail and wholesale trade, professional and business services, education and health services, leisure and hospitality, government, and many other services.

Since the mid-twentieth century the service-providing industries have grown to dominate the U.S. economy. (See Figure 5.5.) In 1960 goods-producing industries employed around nineteen million people. This value rose and fell over time, and was at twenty-two million in 2007. By comparison, the number of people employed in service-providing industries skyrocketed from around thirty-five million in 1960 to more than 116 million in 2007.

Industry Supersectors

The government categorizes jobs by using the North American Industry Classification System (NAICS). Adopted in 1997, the NAICS was devised by the U.S. Economic Classification Policy Committee in conjunction with Statistics Canada and the Instituto Nacional de Estadı´stica, Geografia e Informa´tica of Mexico and is the standard classification system for businesses throughout North America. There are eleven major so-called supersectors tracked by the BLS that encompass all private and public jobs within the United States and businesses owned by U.S.-based companies operating in other countries.

The eleven supersectors are:

• Construction
• Education and health services
• Financial activities
• Government
• Information
• Leisure and hospitality
• Manufacturing
• Natural resources and mining
• Other services
• Professional and business services
• Trade, transportation, and utilities

Virtually every job can be placed into one of these categories. It should be noted that industry tracking focuses on the core mission of the business rather than on the particular tasks performed by employees. For example, jobs in public schools and government-owned hospitals are considered part of the government sector rather than education and health services.

General industry information in the following sections was obtained from the BLS sources Career Guide to Industries, 2008–09 Edition (http://www.bls.gov/oco/cg/home.htm) and Industry at a Glance (http://stats.bls.gov/iag/iaghome.htm), which profiles U.S. businesses.

CONSTRUCTION. The construction supersector includes all businesses that contribute to the development of land, roads, utilities, buildings and houses, and structures such as bridges and dams. Included are firms that build new projects and those that provide maintenance, repairs, and alterations to existing structures. For the most part, such enterprises are managed from a central location with work performed elsewhere. Construction employment often fluctuates throughout the year, especially in areas of the country that experience severe winter weather.

Robyn J. Richards of the BLS indicates in “Payroll Employment in 2007: Job Growth Slows” (Monthly Labor Review, vol. 131, no. 3, March 2008) that construction employment increased by 5.9% from 2004 to 2005 and by 2% from 2005 to 2006. (See Table 5.3.) The number of construction jobs fell by 3% in 2007. The largest losses were in residential building (down 9.2%) and residential specialty trade contractors (down 6.3%). These losses reflect the overall downturn in the housing industry.

This supersector employed nearly 7.3 million people in April 2008, down by 5% from the previous year. (See Table 5.4.) The construction unemployment rate in April 2008 was 11.1%, which was higher than the overall nonfarm unemployment rate of 5%. (See Table 5.5.) The BLS (December 18, 2007, http://www.bls.gov/oco/cg/cgs003.htm) predicts that construction employment will increase by 10.2% between 2006 and 2016. This is slightly lower than the 11% growth rate projected for industry overall.

EDUCATION AND HEALTH SERVICES. The education and health services supersector includes all instructional and training facilities, including private schools and universities, that are not funded by the government. Nongovernmental organizations that provide child day care, medical care, and social assistance are also included. Businesses of this type that are government owned (e.g., public schools and hospitals) are considered part of the government sector.

Educational services employment increased by 2.2% from 2004 to 2005 and by 1.7% from 2005 to 2006. (See Table 5.3.) The number of educational jobs increased by 2.6% from 2006 to 2007. This sector employed more than three million people in April 2008, up by 3.4% from the previous year. (See Table 5.4.)

According to Richards, employment in health care and social services grew steadily between 2004 and 2007 by 2.6% to 3% per year. (See Table 5.3.) The greatest gains during 2007 were in home health care services (up 5.1%) and social assistance (up 4.3%). As of April 2008, more than 15.7 million people were employed in this sector, up 2.9% from the year before. (See Table 5.4.)

The unemployment rate for the education and health services supersector in April 2008 was 2.8%, lower than the overall nonfarm unemployment rate of 5%. (See Table 5.5.) The BLS (December 18, 2007, http://www.bls.gov/oco/cg/cg1008.htm) projects employment in this supersector from 2006 to 2016 as follows:

• Educational services—10.7% increase
• Health care services—21.7% increase
• Child day care services—33.7% increase
• Social assistance (excluding child day care)—54.8% increase

As noted earlier, the BLS predicts an 11% growth rate for industry overall.

FINANCIAL ACTIVITIES. The financial activities supersector includes the banking, insurance, and real estate industries, including businesses that, according to Industry at a Glance, facilitate “transactions involving the creation, liquidation, or change in ownership of financial assets.”

The real estate sector includes businesses that manage properties for others, appraise real estate, and facilitate property buying, selling, and leasing.

Richards explains that financial activities employment increased by 2.1% from 2004 to 2005 and by 1.3% from 2005 to 2006. (See Table 5.3.) The number of jobs in this supersector fell by 1.2% from 2006 to 2007. The largest losses were in credit intermediation and related activities (down 3.5%) and monetary authorities—central bank (down 2.8%). These losses correspond with the economic problems associated with the subprime loan crisis.

The financial activities supersector employed over 8.2 million people in April 2008, down by 1% from the previous year. (See Table 5.4.) The unemployment rate in April 2008 was 3.4%, lower than the overall nonfarm unemployment rate of 5%. (See Table 5.5.) According to the BLS (December 18, 2007, http://www.bls.gov/oco/cg/cg1006.htm), employment projections for the financial industries between 2006 and 2016 are:

• Banking—4% increase
• Insurance—7.4% increase
• Securities, commodities, and other investments— 46.1% increase

Projected growth rates in banking and insurance employment are lower than the overall expected average of 11%. The enormous increase projected for the investment job sector is tied to the aging U.S. population and associated management of retirement portfolios.

GOVERNMENT. The government sector encompasses all local, state, and federal government agencies as well as public schools and public hospitals. This includes law enforcement agencies, courts, and legislative assemblies, but, for the purposes of industry tracking, it does not include military personnel.

Richards notes that government employment increased by 0.8% to 1.1% per year between 2004 and 2007. (See Table 5.3.) Slight gains were spread across all three government sectors: local, state, and federal. The U.S. Postal Service reported the only employment losses (down 0.3 to 0.9% per year).

This supersector employed nearly 22.4 million people in April 2008, up 1% from the previous year. (See Table 5.4.) The government was the largest employer among all the supersectors in 2008. The government unemployment rate in April 2008 was 1.7%, which was much lower than the overall nonfarm unemployment rate of 5%. (See Table 5.5.) The BLS (December 18, 2007, http://www.bls.gov/oco/cg/cg10010.htm) predicts that federal government employment (excluding the U.S. Postal Service) will decrease by 4.6% between 2006 and 2016. Employment in state and local government (excluding hospitals and educational services) is expected to increase by 7.7% over the same period. These rates compare poorly to the 11% growth rate projected for industry overall.

INFORMATION. The production and distribution of information falls under the information supersector of the U.S. economy. This supersector includes book and software publishing, Internet service providers, and television broadcasting, as well as the motion picture and sound recording industries.

According to Richards,information employment decreased slightly by 0.5% to 0.8% per year between 2004 and 2007. (See Table 5.3.) Job losses in 2007 were most severe in non-Internet broadcasting (down 1.9%), non-Internet publishing (down 1.4%), and telecommunications (down 1.4%). By contrast, employment was up 3.4% for jobs in data processing, hosting, and related services and up 6.5% for other information services.

This supersector employed over three million people in April 2008, down by 0.8% from the previous year. (See Table 5.4.) The information unemployment rate in April 2008 was 4.4%, which was slightly lower than the overall nonfarm unemployment rate of 5%. (See Table 5.5.) According to the BLS (December 18, 2007, http://www.bls.gov/oco/cg/cg1005.htm), employment predictions from 2006 to 2016 for jobs within this supersector are:

• Broadcasting (excluding Internet)—9.4% increase
• Data Internet service providers, Web search portals, and data processing services—14% increase
• Motion picture and video industries—10.9% increase
• Publishing, except software—7.5% decrease
• Software publishing—32% increase
• Telecommunications—5% increase

LEISURE AND HOSPITALITY. The leisure and hospitality supersector contains businesses in the arts, entertainment, recreation, spectator sports, accommodation, and food service industries. This includes performance venues, gambling outlets, golf courses, amusement parks, arcades, hotels and other lodging sites, food service establishments, and privately funded exhibit spaces and historic sites.

Richards states that leisure and hospitality employment increased by 2.2% to 3% per year between 2004 and 2007. (See Table 5.3.) The largest gains in 2007 were in jobs in performing arts and spectator sports (up 6.5%) and museums, historical sites, zoos, and parks (up 4.1%). Employment at food services and drinking places was up by 3.1%.

This supersector employed nearly 13.7 million people in April 2008, up 2.4% from the previous year. (See Table 5.4.) The leisure and hospitality unemployment rate in April 2008 was 6.9%, which was higher than the overall nonfarm unemployment rate of 5%. (See Table 5.5.) The BLS (December 18, 2007, http://www.bls.gov/oco/cg/cg1009.htm) projects that employment in leisure and hospitality is anticipated to grow at or above the 11% growth rate for industry overall.

The projected employment growth rates for particular job sectors are:

• Arts, entertainment, and recreation—30.9% increase
• Food services and drinking places—10.9% increase
• Hotels and other accommodations—13.9% increase

MANUFACTURING. An organization is considered part of the manufacturing supersector if its primary business is to transform raw materials into new products through mechanical, physical, or chemical processes. Manufacturing covers many separate industries, including aerospace, apparel, computers, automobiles, pharmaceuticals, printing, steel, and textiles, among others, and provides products that contribute and support all other economic sectors.

According to Richards, manufacturing employment decreased by 0.6% from 2004 to 2005 and by 1.2% from 2005 to 2006. (See Table 5.3.) The number of manufacturing jobs fell by 1.9% from 2006 to 2007. The largest losses were in textile mills (down 11.3%), apparel (down 8.9%), and motor vehicles and parts (down 7.6%). Only two sectors—machinery (up 0.3%) and food manufacturing (up 0.9%)—posted job gains in 2007.

This supersector employed nearly 13.6 million people in April 2008, down by 2.3% from the previous year. (See Table 5.4.) The manufacturing unemployment rate in April 2008 was 4.8%, which was slightly lower than the overall nonfarm unemployment rate of 5%. (See Table 5.5.) According to the BLS (December 18, 2007, http://www.bls.gov/oco/cg/cg1002.htm), employment projections for various manufacturing sectors from 2006 to 2016 are as follows:

• Aerospace product and parts manufacturing—5.4% increase
• Chemical manufacturing, except pharmaceutical and medicine manufacturing—15.7% decrease
• Computer and electronic product manufacturing—12% decrease
• Food manufacturing—0.3% increase
• Machinery manufacturing—12.3% decrease
• Motor vehicle and parts manufacturing—14.3% decrease
• Pharmaceutical and medicine manufacturing—23.7% increase
• Printing—21.8% decrease
• Steel manufacturing—25.1% decrease
• Textile, textile product, and apparel manufacturing— 35.4% decrease

Employment is expected to decrease dramatically or, at best, increase modestly for most sectors. The one exception is pharmaceutical and medicine manufacturing, which is expected to undergo tremendous job growth by 2016. This positive outlook is due in large part to the aging of the U.S. population and the associated need for more pharmaceutical goods.

NATURAL RESOURCES AND MINING. The natural resources and mining supersector includes all agriculture, forestry, fishing, hunting, and mining enterprises. Farms engaged in growing crops and raising animals are included in this sector, as are lumber and fishing operations, coal mining, petroleum and natural gas extraction, and other mining and quarrying activities.

Richards states that natural resources and mining employment (excluding farming) increased by 8.3% per year from 2004 to 2006 and by 4.7% from 2006 to 2007. (See Table 5.3.) Results were mixed across individual sectors during 2007—logging employment decreased by 2.9%, whereas oil and gas extraction and mining support activities were up 9.5% and 6.1%, respectively.

About 747,000 people were employed in natural resources and mining (excluding farming) in April 2008, a 4% increase from the previous year (See Table 5.4.) In April 2008 the unemployment rate for the mining industry was 3.6%, and for agricultural workers it was 8.6%. (See Table 5.5.) The overall nonfarm unemployment rate at that time was 5%.

The BLS (December 18, 2007, http://www.bls.gov/oco/cg/cg1001.htm) projects negative employment rates for industries in this supersector between 2006 and 2016. Mining employment is expected to fall by 1.6% and agriculture, forestry, and fishing employment by 8.6%. These rates compare poorly to the 11% growth rate expected for overall employment.

OTHER SERVICES. This supersector includes jobs such as repairing equipment and machinery, promoting or administering religious activities, operating dry cleaning and laundry services, conducting personal care, death care, and pet care services, and supplying photo processing services, temporary parking, and dating services. People who work in grant making and advocacy are also included in this category.

Employment in other services increased by 0.1% from 2004 to 2005 and by 1.1% from 2005 to 2006. (See Table 5.3.) From 2006 to 2007 employment increased by 0.8%.

This supersector employed more than 5.5 million people in April 2008, up by 0.7% from the previous year. (See Table 5.4.) The unemployment rate in April 2008 was 4%, which was lower than the overall nonfarm unemployment rate of 5%. (See Table 5.5.) The BLS (March 12, 2008, http://www.bls.gov/oco/cg/cgs054.htm#outlook) projects for only one job sector in other services: advocacy, grant making, and civic organizations. Employment in this sector is expected to grow by 12.8% between 2006 and 2016.

PROFESSIONAL AND BUSINESS SERVICES. Professional and business services include legal, accounting, architectural, engineering, advertising, marketing, translation, and veterinary services. This sector also includes those who manage companies and all the administrative support needed for a business to operate. In addition, security, surveillance, cleaning, and waste disposal services are tracked in this sector.

According to Richards, employment in this supersector increased by 4.1% from 2004 to 2005 and by 3.2% from 2005 to 2006. (See Table 5.3.) The number of jobs increased by 1.7% from 2006 to 2007. The largest gains were in management and technical consulting services (up 8.7%) and accounting and bookkeeping services (8.3% increase). The largest losses were in employment services (down 3.5%) and business support services (down 1.1%).

This supersector employed over eighteen million people in April 2008, up by 0.9% from the previous year (See Table 5.4.) The unemployment rate in April 2008 was 5.3%, only slightly higher than the overall nonfarm unemployment rate of 5%. (See Table 5.5.) The BLS (December 18, 2007, http://www.bls.gov/oco/cg/cg1007.htm) predicts that employment will increase for all job sectors in this supersector between 2006 and 2016:

• Advertising and public relations services—13.6% increase
• Computer systems design and related services— 38.3% increase
• Employment services—18.9% increase
• Management, scientific, and technical consulting services—77.9% increase
• Scientific research and development services—9.4% increase

TRANSPORTATION, WAREHOUSING, AND UTILITIES. The transportation, warehousing, and utilities supersector includes businesses that transport passengers or cargo by air, rail, water, road, or pipeline. The sector also includes businesses that provide storage of goods and that support transportation activities. Also tracked in this sector are private enterprises that generate, transmit, or distribute utilities such as electric power, natural gas, and water.

Richards explains that transportation and warehousing employment increased between 0.3% and 2.8% per year from 2004 to 2007. The largest gains in 2007 were in scenic and sightseeing transportation (up 16.8%) and pipeline transportation (up 4.6%). The only losses were in truck transportation (down 1.8%) and couriers and messengers (down 0.4%). More than 4.5 million people were employed in transportation and warehousing in April 2008, up by 0.2% from the previous year. (See Table 5.4.)

Utilities employment decreased by 0.3% and 0.9% per year from 2004 to 2006, and increased by 1.5% from 2006 to 2007. (See Table 5.3.) Over 557,000 people were employed in this job sector in April 2008, up 1.1% from the previous year.

The unemployment rate for transportation and utilities in April 2008 was 4%, which was less than the overall nonfarm unemployment rate of 5%. (See Table 5.5.) The BLS (March 12, 2008, http://www.bls.gov/oco/cg/cg1004.htm) predicts that between 2006 and 2016 employment in air transportation will increase by 7.3% and in truck transportation and warehousing by 14.8%. For utilities employment, the BLS (March 4, 2008, http://www.bls.gov/oco/cg/cgs018.htm#outlook) projects that it will decrease by 5.7%. As noted earlier, the BLS projects an 11% growth rate over this period for industry overall.

WHOLESALE AND RETAIL TRADE. The wholesale and retail supersector encompasses private businesses that trade in products that they do not produce. Wholesalers buy large quantities of finished goods from manufacturers and sell the goods in smaller lots to businesses engaged in retail trade. Retailers then offer the goods for sale to consumers at an increased price, usually figured as a percentage of the wholesale cost. Goods in this sector are classified as durable (expected to last longer than three years) or nondurable (expected to need replacement within three years). Consumer goods in the durable sector include motor vehicles, furniture, household appliances, sporting goods, and toys. Durable goods are also sold to other businesses—for example, to the manufacturing or construction sector, including items such as machinery, equipment, metals, and construction materials. Examples of nondurable goods include paper products, drugs, apparel, groceries, books, flowers, and tobacco products. Even though the traditional notion of a retail establishment includes at least one store location, many retailers in the early twenty-first century operate via Internet and/or catalog sales without stores.

Wholesale trade employment increased by 1.7% to 2.5% per year from 2004 to 2007. (See Table 5.3.) Employment growth in 2007 was roughly even between durable and nondurable goods. More than six million people were employed in wholesale trade in April 2008, up 0.7% from the previous year. (See Table 5.4.)

Richards states that retail trade employment increased by 1.5% between 2004 and 2005 and then by only 0.4% to 0.5% per year over the following two years. (See Table 5.3.) The largest employment gains in 2007 were posted by health and personal care stores (up 2.7%) and sporting goods, hobby, book, and music stores (up 2%). The largest employment losses were in building material and garden supply stores (down 3.5%) and gasoline stations (down 1.4%). Nearly 15.4 million people were employed in retail trade in April 2008, down 0.7% from the previous year. (See Table 5.4.)

The unemployment rate for the wholesale and retail trade supersector was 4.5% in April 2008, which was slightly below the overall nonfarm unemployment rate of 5%. (See Table 5.5.) The BLS (December 18, 2007, http://www.bls.gov/oco/cg/cg1003.htm) indicates that employment within the wholesale and retail trade between 2006 and 2016 is positive:

• Automobile dealers—11.3% increase
• Clothing, accessory, and general merchandise stores—7.5% increase
• Grocery stores—0.7% increase
• Wholesale trade—7.3% increase

These values are at or below the 11% increase projected by the BLS for employment growth overall over this period.

Labor Unions

Even though many historians trace the origins of labor unions to medieval guilds (organized groups of tradespeople and artisans in the Middle Ages), the modern labor movement is more directly linked to the trade unions of the early Industrial Revolution, when working conditions in factories and mines were barely tolerable and employees began to join to demand reasonable work hours, safe conditions, and decent wages. Unions have often had tense relationships with both employers and government; at times they have been banned altogether, and the struggle between labor and employers has sometimes resulted in violence.

Labor unions have had a significant impact on the U.S. workforce and labor policy. Unions are often able to secure higher wages and increased benefits for their members. The BLS reports in Union Members Summary (January 25, 2008, http://www.bls.gov/news.release/union2.nr0.htm) that 15.7 million wage and salary workers were union members in 2007. This represented 12.1% of all wage and salary workers. The percentage was up slightly from 12% in 2006, but it was significantly lower than the rate of 20.1% reported in 1983 (the first year the BLS tracked union membership). According to the BLS, more than a third (35.9%) of government workers were unionized in 2007, compared to only 7.5% of private industry workers. Local governments have the most highly unionized employees, particularly teachers, police officers, and firefighters. The highest rates of union membership in the private industries are found in the transportation and utilities, telecommunications, and construction sectors.

Despite their successes on behalf of American workers, contemporary labor unions continue to face opposition from employers, and often from employees, who question whether the benefits of being associated with a union are worth the cost. Union members are required to go on strike when the union has an unresolved grievance against an employer, and striking union members receive only a fraction of their income in strike pay. Workers who are part of a union may also find themselves facing fines for not abiding by the union bylaws.

For employers, unions can pose other problems. Business operations can be greatly interrupted by unresolved negotiations, whether or not they lead to a strike. Furthermore, because of the increased expenses associated with employing union members, a company's products or services might become less competitively priced in the marketplace. If sales are lost to foreign or nonunion competitors, companies may be forced to lay off employees or even go out of business.

Compensation of American Workers

Compensation has two components: pay and benefits. Pay includes wages (which is the term used primarily for pay made on an hourly, weekly, or monthly basis) and salaries (which is pay calculated yearly). Benefits provided by employers include paid time off from work, various insurance and retirement plans, and other programs designed to attract and keep employees.

Table 5.6 shows the wage and salary disbursements and supplements paid by employers in 2006, 2007, and calculated for 2008 based on first-quarter 2008 values. It is estimated that nearly $8.1 trillion was paid out in compensation in 2008, up from $7.4 trillion in 2006 and $7.9 trillion in 2007. In addition, more than $1.5 trillion in supplements was estimated to be contributed by

employers in 2008, primarily for employee pensions and insurance funds. In 2006 and 2007 these supplements totaled about $1.4 trillion and $1.5 trillion, respectively.

Income

In Income, Poverty, and Health Insurance Coverage in the United States: 2006 (August 2007, http://www.census.gov/prod/2007pubs/p60-233.pdf), Carmen DeNavas-Walt, Bernadette D. Proctor, and Jessica Smith of the U.S. Census Bureau note that the median U.S. household income in 2006 was $48,201. Even though this value is higher than the median of $47,845 reported in 2005, there is actually no difference when inflation is considered.

According to DeNavas-Walt, Proctor, and Smith, incomes differed by householder characteristics, such as age, education, work experience, and race or ethnic origin. For example, the median annual income of householders aged fifteen to twenty-four years in 2006 was $30,937, compared to $64,874 for those aged forty-five to fifty-four years. White non-Hispanic householders had a median annual income of $52,423 in 2006. This was less than the median income of Asian householders ($64,238) but greater than that of African-American householders ($31,969).

Benefits

To attract and keep the best employees and earn a level of loyalty from them, many U.S. employers offer benefits and incentives. As of March 2007, a large majority of employees in private industry had access to unpaid family leave (83%) and paid holidays and vacations (77%). (See Table 5.7.) These were the most commonly offered benefits. Other benefits available to more than two-thirds of the workforce were medical care plans (71%), paid jury duty leave (71%), paid funeral leave

(69%), and prescription drug plans (68%). More than half of employees also had access to retirement benefits, life insurance, and paid sick leave. Many other benefits were offered less frequently.

In general, employees working for larger companies— those with more than one hundred employees—and union members had the highest access to company benefits.

MEDICAL INSURANCE. Typically, the total cost of monthly health insurance coverage is split between employers and employees, with employers paying the largest portion. As shown in Figure 3.8 in Chapter 3, the price of medical care grew at a faster rate between 1998 and 2007 than the overall rate for the urban Consumer Price Index. Because of rising health-care costs, medical insurance has become a costly benefit for both employers and employees.

The BLS estimates that rising expenses for health insurance premiums are depressing wages. In other words, employers are paying lower wages than they otherwise would, because they are devoting so much money to

providing health-care coverage. Paid hourly wages have remained relatively flat since 2002, whereas the price of insurance benefits has increased. (See Figure 5.6.) As a result, a disparity has developed between actual wages and the wages that could have been paid if health insurance premiums had grown at the same rate as inflation during this period.

Nontraditional Work Arrangements

Working from Home

The BLS states in Work at Home Summary (September 22, 2005, http://www.bls.gov/news.release/homey.nr0.htm) that in May 2004, 20.7 million people worked from home at least once per week. This represented approximately 15% of the total nonagricultural workforce, a value virtually unchanged from May 2001. The data were collected as part of a special supplement to the monthly Current Population Survey. Nearly two-thirds of the at-home workers in 2004 were wage and salary earners. The remainder were self-employed.

With technological advances such as Internet access, e-mail, and teleconferencing, working at home has become a viable option for many types of jobs. As employees conduct much of their daily work from home offices, employers are able to save on operating costs. Many employers will pay for computers, additional telephone lines, and even utilities to allow their employees to work from home offices. This allows them to reduce office space, one of the higher costs for an employer, especially in large metropolitan markets.

Self-Employment

Self-employed workers are not on the payroll of a company. They may own or operate small businesses or work under contract arrangements with companies. According to the BLS (April 14, 2008, http://www.bls.gov/cps/cpsaat12.pdf), 856,000 agricultural workers were self-employed in 2007, compared to approximately 1.2 million wage and salary workers in that field. Nearly 9.7 million people were self-employed in 2007 in nonagricultural industries, compared to 132.4 million wage and salary workers in that field.

Foreign Workers in the United States

Relatively high wages and favorable working conditions have attracted workers from around the world to the United States. There are two broad categories of foreign workers: those who have entered the country legally with the proper paperwork to pursue work and those who have entered illegally. Legal workers are tracked by the U.S. Citizenship and Immigration Service (USCIS), formerly the U.S. Immigration and Naturalization Service.

Legal Foreign Workers

The U.S. Department of Labor (January 6, 2006, http://www.doleta.gov/Business/gw/guestwkr/) issues a limited number of certifications to foreign workers to work in the United States on a temporary or permanent basis under the following programs:

• Permanent Labor Certification—allows a foreign worker to work permanently in the United States
• H-1B Specialty (Professional) Workers—temporary certification for workers in occupations requiring highly specialized knowledge with at least a bachelor's degree or equivalent
• H-2A Temporary Labor Certification (Seasonal Agricultural)—for workers engaged in agricultural labor or services of a temporary or seasonal nature working for employers anticipating a shortage of U.S. workers
• H-2B Temporary Labor Certification (Nonagricultural)— for nonagricultural laborers working for employers anticipating a shortage of U.S. workers; the need can be a one-time occurrence, seasonal, peak load, or intermittent
• D-1 Crewmembers Certification—for longshoremen hired to work at U.S. ports; there are many restrictions, one of which is that there cannot be a strike or lockout ongoing that keeps U.S. longshoremen from working

According to the Department of Labor, “certification may be obtained in cases where it can be demonstrated that there are insufficient qualified U.S. workers available and willing to perform the work at wages that meet or exceed the prevailing wage paid for that occupation in the area of intended employment.”

The U.S. Department of Homeland Security's Office of Immigration Statistics (OIS) tracks the number of foreign workers entering the United States and publishes related data in annual reports. The most recent report available on nonimmigrant (temporary) foreign workers is Temporary Admissions of Nonimmigrants to the United States: 2006 (July 2007 (http://www.dhs.gov/xlibrary/assets/statistics/publications/NI_FR_2006_508_final.pdf). The OIS notes that approximately 821,000 temporary workers and trainees were admitted into the United States in 2006. Legal permanent residents are foreigners who have obtained “green cards” and have been granted permanent residency in the United States. According to the OIS, in U.S. Legal Permanent Residents: 2007 (March 2008, http://www.dhs.gov/xlibrary/assets/statistics/publications/LPR _FR_2007.pdf), close to 162,000 foreigners were granted employment-based legal permanent residency during fiscal year 2007 (October 1, 2006 to September 30, 2007).

Temporary foreign workers maintain the citizenship of their native countries, and after fulfilling their contracts with U.S. employers they typically return to their own countries. Immigrant workers are people who have come to the United States through legal channels and intend to become citizens. They obtain jobs while waiting for their naturalization (the process of becoming a U.S. citizen) to be finalized.

Illegal Foreign Workers

The issue of illegal immigration has become a heated topic. Much of the debate centers on the economic effect of undocumented workers—foreign workers who have entered the United States illegally. Some people claim that undocumented workers take jobs away from Americans and place a large burden on government-provided social programs. Others believe that undocumented workers are willing to take jobs that Americans do not want—low paying, labor-intensive jobs with no benefits and little to no chance for advancement.

Jeffrey M. Jones of the Gallup Organization explains in Hispanics, Whites, Blacks Not in Complete Agreement on Illegal Immigration (July 10, 2006, http://www.gallup.com/poll/23620/Hispanics-Whites-Blacks-Complete-Agreement-Illegal-Immigration.aspx) that in 2006 nearly three-fourths (74%) of Americans believed illegal immigrants “mostly take low-paying jobs Americans don't want.” Only 17% said illegal immigrants “mostly take jobs that American workers want.”

Employers are required by law to verify that new hires are U.S. citizens or foreigners with legal working status who are eligible to work in the United States. Job applicants have to show identification and documentation, including a Social Security card. However, the authenticity of these documents cannot be verified immediately. Thus, well-meaning businesses may unknowingly hire and train illegal workers who use fake documentation to obtain jobs. According to the article “Jobs and Illegal Immigrants” (Christian Science Monitor, December 4, 2003), as of December 2003 the Social Security Administration had $374 billion in funds that could not be matched to valid Social Security numbers. It is believed that much of the money was paid into the system by illegal workers using fake Social Security numbers.

There is little doubt that some businesses purposely hire illegal workers or at least ignore questionable paperwork to get inexpensive labor. The article “Many Illegal Immigrants Have Jobs in U.S. before Crossing Border” (Associated Press, April 16, 2006) reports that there is “an underground employment network” in the United States that encourages and facilitates the employment of illegal immigrants from Mexico and Central and South America. The article notes that lax enforcement of laws prohibiting the hiring of illegal workers allows the network to flourish. Many critics maintain that the federal government's focus on terrorism and national security has diminished attention on issues related to undocumented workers. Others believe that businesses willing to hire the workers are to blame. Like many factors in the U.S. economy, the issue of undocumented workers is driven by supply and demand factors. As one analyst notes in the article, “It continues to become clear who controls immigration: It's not governments, but rather the market.”

POLITICAL DEBATE AND PUBLIC PROTEST. The Department of Homeland Security indicates in Estimates of the Unauthorized Immigrant Population Residing in the United States, January 2006 (August 2007, http://www.dhs.gov/xlibrary/assets/statistics/publications/ill_pe_2006.pdf) that there were around 11.6 million illegal immigrants in the United States at the beginning of 2006. Illegal immigration has become a politically charged and divisive issue. In late 2005 the U.S. House of Representatives and the U.S. Senate began drafting immigration reform bills designed to deal with the problem. Both bodies called for tighter border security. Some politicians advocated allowing many illegal immigrants already in the country the opportunity to obtain U.S. citizenship under certain conditions. This so-called amnesty provision has been harshly criticized, but it has been advocated by President George W. Bush (1946–).

In October 2007 Bush signed into law a bill calling for the building of a seven-hundred-mile fence along the U.S.-Mexican border. As of July 2008, more comprehensive legislation dealing with illegal immigration issues had not been finalized.

U.S. Jobs Going to Foreign Countries

One consequence of the globalization of U.S. business has been offshoring (the transfer of jobs from the United States to other countries). This can occur when an entire business establishment, such as a factory or service center, is relocated to another nation or when certain jobs within a business are transferred to a foreign company. The latter is also an example of outsourcing (a business practice in which certain tasks within a company are contracted out to another firm; outsourcing may or may not involve sending work to another country). During the 1990s outsourcing became a popular means of reducing costs for some companies. Noncore functions, such as payroll management or housekeeping, are common examples in which outsourcing can be cost effective. However, offshoring is controversial because jobs move outside of the United States, primarily to developing countries, where labor costs are much cheaper.

Critics say that offshoring harms the U.S. economy by putting Americans out of work. Others claim that relocation of some operations to foreign countries has a limited effect on domestic employment. They argue that offshoring leads to lower prices for consumer and investment goods, with the ultimate effect of raising real wages (wages that are adjusted for changes in the price of consumer goods) and living standards in the United States.

In 2004 the BLS published data on the relationship between extended mass layoffs and overseas job relocations. An extended mass layoff is defined as an event in which at least fifty initial claims for unemployment benefits are filed against an establishment during a five-week period. In the press release “Extended Mass Layoffs Associated with Domestic and Overseas Relocations, First Quarter 2004 Summary” (June 10, 2004, http://www.bls.gov/news.release/reloc.nr0.htm), the BLS notes that the layoffs of 4,633 workers during the first quarter of 2004 were associated with job relocations to other countries. This number represents just 1.9% of the total of 239,361 private-sector nonfarm workers who were separated from their jobs for at least thirty-one days during the quarter. Overseas relocations within the same company accounted for 2,976 lost jobs, and 1,657 jobs were lost to overseas workers employed by different companies.

The BLS states in Extended Mass Layoffs in 2006 (April 2008, http://www.bls.gov/mls/mlsreport1004.pdf) that more than 936,000 workers in private nonfarm jobs were subjected to mass layoffs in 4,885 layoff events during 2006. There were 252 layoff events due to movement of work to other locations within the United States or out of the country. Another 349 work relocations were associated with these layoff events. (Note that multiple work relocations can be associated with one layoff event.) According to the BLS, employers were able to provide detailed information on 232 of these work relocations.

In nearly two-thirds (64%) of reported cases domestic relocation (relocation within the United States) was cited as the reason for the mass layoff.

In the press release “Fortune 500 Reap Early Cost Benefits from Offshoring Initiatives” (December 10, 2004, http://www.fuqua.duke.edu/admin/extaff/news/fortune_offshore_dec_2004.htm), Duke University's Fuqua School of Business in conjunction with Archstone Consulting report that offshoring is cost effective for large U.S. companies. Researchers studied the offshoring experiences of ninety large companies with average annual revenues of $21 billion. A large majority (72%) of offshore implementations had met or bettered expected costs savings. As a result, companies indicated great willingness to pursue additional offshoring opportunities. The functions most often offshored were information technology (66%), finance and accounting (60%), engineering services (44%), and research (32%). Eighty percent of offshored operations had been transferred to India. A combination of relatively low costs and many well-educated workers who speak English has made India a popular location to offshore work.

The article “Don't Blame Trade for U.S. Job Losses” (McKinsey Quarterly, February 2005) estimates that approximately 274,000 software and business-process jobs were moved from the United States to India between 2000 and 2003. The article notes that “although the costs were substantial for the displaced employees, a job shift of this size is small compared with the 2.1 million service jobs created every year during the 1990s and minor compared even with the net annual job increase of about 327,000 from 2000 to 2003.”

Protecting American Workers

The United States has enacted comprehensive labor laws to ensure that workplaces are operated safely and that workers are treated fairly. These include relatively strict laws to protect American workers from discrimination on the basis of gender, age, race, ethnicity, religion, sexual orientation, and other factors.

The Fair Labor Standards Act

The Fair Labor Standards Act (FLSA) offers protection for full- and part-time workers in private and government jobs, covering minimum wages, overtime pay, employer record keeping, and child labor. The FLSA also established the standard forty-hour workweek. Local fire and police employees are typically not covered by the FLSA. It was passed in 1938 and has been amended many times over the years.

THE MINIMUM WAGE. The FLSA established a federal hourly minimum wage that U.S. employers must honor for many nonsupervisory, nonfarm, private-sector, and government employees. Most states have their own minimum wage as well. In states with minimum wages that differ from the federal minimum wage, the employer must pay the higher of the two. As of July 2008, the federal minimum wage was $6.55 per hour. Figure 5.7 shows previous minimum wages dating back to 1990 and the increase planned in 2009.

There are many exceptions to the minimum wage law. Employers may apply for subminimum wage certificates for disabled workers, full-time students, workers under age twenty who are in their first ninety days of employment, workers who receive tips, and student-learners (usually high school students). Lawmakers reason that exempting employers from paying the minimum wage to certain workers (e.g., the disabled and students) encourages them to hire more of those workers who may otherwise be at a disadvantage. Employers may not, however, displace other workers to hire those subject to the subminimum wage. Other workers exempt from the minimum wage include certain professional and administrative employees, certain workers in the fishing industry, certain seasonal employees, babysitters, and certain farm workers.

The BLS tracks the number of hourly wage earners in the United States based on the results of the Current Population Survey. In Characteristics of Minimum Wage Workers: 2007 (March 25, 2008, http://www.bls.gov/cps/minwage2007.htm), the BLS indicates that there were 267,000 workers paid the federal minimum wage during 2007. Nearly 1.5 million workers earned less than the minimum wage. The total number of workers earning minimum wage or less accounted for 2.3% of the 75.9 million people earning hourly wages that year.

Women, people under age twenty-five, part-time workers, and those without a college degree were the groups most likely to earn the minimum wage or less in 2007. Jobs in the service sector—particularly those related to food service—had the highest rate (about 7% of the total) of workers making the federal minimum wage. In some cases, however, those who work in food and beverage service jobs also earn tips, which supplement their hourly wages.

The minimum wage policy is not without controversy. Advocates for low-income workers believe the minimum wage should be increased regularly to keep up with the effects of inflation. Opponents of the minimum wage assert that wage levels should be determined by market conditions and supply and demand factors. They argue that forcing businesses to pay a higher minimum wage discourages the hiring of low-income workers.

CHILD LABOR LAWS. In an agricultural economy, children typically begin working on the family farm or are apprenticed out to other farms at early ages. During the colonial period in North America, children as young

as three whose parents could not afford to support them were apprenticed out to work. This was the case in the United States until the early nineteenth century, when the Industrial Revolution permanently changed the U.S. economy and way of life. Because they were considered easier to manage, less likely to unionize, and could be paid far less than adults, children became desirable as workers in the industrial economy, particularly in factories, mines, cotton fields, and the textile industry.

With no laws to regulate children's work, and no mandatory school attendance, the use of children as a cheap labor source became a widely accepted practice. Children as young as six worked thirteen-hour days, six days per week. They frequently suffered from hunger and malnutrition, work-related injuries, and diseases. Even though social reformers began to campaign for child labor laws in the mid-nineteenth century, and the National Child Labor Committee was formed in 1904, it was not until the passage of the FLSA in 1938 that child labor in the United States was finally regulated by the federal government.

The FLSA prohibits employers from hiring children under the age of sixteen, although fourteen- and fifteen-year-olds are allowed to work at nonmining, nonmanufacturing jobs as long as the hours worked do not interfere with time spent in school and are not hazardous to the young person's health and well-being. The FLSA also prohibits anyone under age eighteen from working at jobs considered dangerous. Babysitting, delivering newspapers, and working in the entertainment industry are all specifically exempted from the provisions of the FLSA, and children of migrant farm workers often are not protected by the legislation because of the transient nature of their family's life.

Occupational Safety and Health Administration

The Occupational Safety and Health Administration (OSHA) was formed in 1971 to institute and monitor safety regulations in the workplace. Focusing mainly on industries with high rates of work-related injuries and illnesses, OSHA works directly with employers and employees to ensure that health and safety standards are followed.

According to the BLS, in the press release “National Census of Fatal Occupational Injuries in 2006” (August 9, 2007, http://www.bls.gov/news.release/pdf/cfoi.pdf), there were 5,703 fatal work injuries during 2006, a slight decrease from the 5,734 fatalities reported in 2005. The most frequent events blamed for the deaths were highway incidents, falls, being struck by objects, and workplace homicides. The industries with the highest number of fatal work injuries were construction; transportation and warehousing; mining; agriculture, forestry, fishing, and hunting; professional and business services; and manufacturing.

In the press release “Workplace Injuries and Illnesses in 2006” (October 16, 2007, http://www.bls.gov/news.release/pdf/osh.pdf), the BLS reports that there were 4.1 million nonfatal work injuries and illnesses in the private sector in 2006, down slightly from 4.2 million in 2005. Illnesses accounted for 228,000 of the cases in 2006. The industry sectors with the largest number of nonfatal work injuries were manufacturing, health care and social assistance, professional and business services, retail trade, leisure and hospitality, construction, and transportation and warehousing.

Whistleblower Protection Laws

A whistleblower is a person who reports unlawful activity in the workplace to the authorities. At one time whistleblowers were subject to demotion, threats, harassment, and firing if their reports were discovered by their employers, who wanted to prevent public scandals and avoid facing criminal and civil charges. However, in 1989 the federal government passed the Whistleblower Protection Act to protect employees who report evidence of criminal wrongdoing in the workplace. In May 2002 President Bush signed the Notification and Federal Employee Antidiscrimination and Retaliation Act, which strengthened protections for whistleblowers by requiring federal agencies to be accountable for violations of whistleblower laws. Some states have their own additional whistleblower protection laws.

Equal Employment Opportunity Commission

The Equal Employment Opportunity Commission (EEOC) enforces federal workplace discrimination laws. It is composed of a general counsel and five commissioners who are appointed by the U.S. president and approved by the Senate. Besides its enforcement role, the EEOC has a training institute to educate employers on workplace discrimination and help them comply with the laws. According to the EEOC (January 15, 1997, http://www.eeoc.gov/policy/laws.html), it enforces six federal antidiscrimination laws:

• The Equal Pay Act of 1963, which protects men and women who perform approximately equal work in the same workplace from gender-based wage discrimination
• Title VII of the Civil Rights Act of 1964, which prohibits employment discrimination based on race, color, religion, sex, or national origin, including sexual harassment and discrimination against pregnant women
• The Age Discrimination in Employment Act of 1967, which protects individuals who are forty years of age or older; this act applies to both employees and job applicants
• Titles I and V of the Americans with Disabilities Act of 1990, which prohibit employment discrimination against qualified individuals with disabilities in the private sector and in state and local governments (the act applies to people with both physical and mental impairments)
• Sections 501 and 505 of the Rehabilitation Act of 1973, which prohibit discrimination against qualified individuals with disabilities who work in the federal government
• The Civil Rights Act of 1991, which, among other things, provides monetary damages in cases of intentional employment discrimination