3. Learning Objectives
14.1 Explain the major differences and critiques
of capitalism and socialism.
14.2 Describe the transformation of the U.S.
economy from industrialized to an
information/service economy.
14.3 Understand how the structure of work is a
major source of social problems.
5. LO 14.1 - Capitalism
• Four conditions must be present for
pure capitalism:
– Private ownership of property
– Personal profit
– Competition
– Laissez-faire government
6. LO 14.1 - Socialism
• Five principles:
– Democratism
– Egalitarianism
– Community
– Public ownership of production
– Planning for common purposes
7. LO 14.1
For socialism to operate in its ideal form, the
government needs to be __________.
A. laissez-faire
B. totalitarian
C. democratic
D. authoritarian
8. LO 14.1
For socialism to operate in its ideal form, the
government needs to be __________.
A. laissez-faire
B. totalitarian
C. democratic
D. authoritarian
9. LO 14.1
The United States is purely capitalistic.
A. True
B. False
10. LO 14.1
The United States is purely capitalistic.
A. True
B. False
11. 14.2 - Mega Economic Trends
• Globalization
• The Transformation of the Economy:
From Manufacturing to Services
• The Changing Nature of Jobs
• The Great Recession (2007–2010 and
Beyond)
12. LO 14.2 - Globalization
• The processes by which people are increasingly
interconnected economically, politically,
culturally, and environmentally
• Global Trade
• Capital Flight
13. Container ships enter U.S.
ports with goods
produced elsewhere to be
sold here. The
merchandise is relatively
cheap, but there is
a high cost in fewer jobs
for U.S. workers.
LO 14.2
14. LO 14.2 -The Transformation of the Economy:
From Manufacturing to Services
• Structural transformation of the economy
– From agricultural to manufacturing
– From manufacturing to a service and
information
• Offshoring
• Outsourcing
15. LO 14.2 - The Changing Nature of Jobs
• Rapid adjustment
• “Creative destruction”
• Sunset Industries
• Contingent work
• Homeshoring/homesourcing
• Sunrise industries
16. LO 14.2 - Explorer Activity: Work and the
Economy: Stanford and the Silicon Valley
http://www.socialexplorer.com/pearson/plink.
aspx?dest=http%3a%2f%2fwww.socialexp
lorer.com%2fSpiceMap%2f%3fv%3d6fe42
0b8f0144079
Please log into MySocLab with your
username and password before accessing
this link.
17. LO 14.2 - Video: ABC 20/20: The Ultimate
Rags to Riches Story
http://abavtooldev.pearsoncmg.com/sbx_vid
eoplayer_v2/simpleviewer.php?projectID=M
SocL_ABC2008&clipID=The_Ultimate_Rags
_To_Riches_Story.flv&ui=2
19. LO 14.2 - The Great Recession (2007-2010
and Beyond)
• Prelude to the Economic Crisis
• The Ensuing Economic Crisis
– Unemployment
– Housing woes
– Financial decline
– Personal bankruptcies
– Downward social mobility
– Poverty
– Hunger
– The new homeless
21. LO 14.2
Some areas of the U.S.
experienced serious
declines in housing
values during the Great
Recession, resulting
in distress sales,
foreclosures, and owners
walking away from their
mortgages.
22. LO 14.2
In any economic shift, there will be
__________, but the most recent shift was
rapid and did not allow people to adjust to
the new economy.
A. displaced workers
B. decreased unemployment
C. housing changes
D. job security
23. LO 14.2
In any economic shift, there will be
__________, but the most recent shift was
rapid and did not allow people to adjust to
the new economy.
A. displaced workers
B. decreased unemployment
C. housing changes
D. job security
24. LO 14.2
The unemployment rate underestimates the
problems of a changing economy.
A. True
B. False
25. LO 14.2
The unemployment rate underestimates the
problems of a changing economy.
A. True
B. False
26. 14.3 - Work and Social Problems
• Control of Workers
• Alienation
• Dangerous Working Conditions
• Sweatshops
• Unions and Their Decline
• Discrimination in the Workplace: Perpetuation of
Inequality
• Job Insecurity
• Benefits Insecurity
• Increased Workload
• Worker Compensation
• The Problem: Workers or Jobs?
27. LO 14.3 - Control of Workers
• Adverse working conditions
• Scientific management
• Bureaucratic control
• Monitoring
• Extortion
28. LO 14.3 - Alienation
• Separation of human beings from each
other, from themselves, and from the
products they create
• Karl Marx
– Worker alienation = unfulfilled personal
satisfaction
29. LO 14.3 - Dangerous Working Conditions
• Occupational Safety and Health
Administration (OSHA)
• Occupational dangers
30. LO 14.3 - Sweatshops
• Substandard work environment
• Most likely in the garment industry
– Modern-day slavery
• Use of children
31. LO 14.3 - Unions and Their Decline
• In the past, labor unions have been
extremely important in changing
management–labor relations.
• 1950s membership: 35 percent
• 2010 membership: 11.9 percent
32. LO 14.3 - Discrimination in the Workplace:
Perpetuation of Inequality
• Equal Employment Opportunity
Commission
– Handles charges of discrimination
– 50,000 complaints filed annually
• Segmented Labor Market
• Male Dominance at Work
33. LO 14.3 - Job Insecurity
• Official unemployment rate is misleading
– Discouraged workers
• Reserve army of the unemployed
36. LO 14.3 - Benefits Insecurity
• U.S. corporations have been reducing
benefits to workers
– Bankruptcy
– Two-tiered system
37. LO 14.3 - Increased Workload
• Three reasons for increased workload:
– Wage gap creates incentive to work more
– Lower wages and increased expense of
housing, transportation
– Businesses require more hours to offset costs
of hiring new employees
38. LO 14.3 - Worker Compensation
• Median income fell 9.8 percent from the
beginning of the Great Recession
– Healthcare costs rose
– College tuition increased
– Worker productivity rose
40. LO 14.3 - The Problem: Workers or Jobs?
• Jobs have been replaced by machines
• Available jobs pay minimum wage or
slightly above with few if any benefits
• The problem is structural
41. LO 14.3
As corporations move overseas and
machines replace workers, wages are
__________.
A. increasing
B. depressed
C. equalizing
D. unionize
42. LO 14.3
As corporations move overseas and
machines replace workers, wages are
__________.
A. increasing
B. depressed
C. equalizing
D. unionize
43. LO 14.3
The wage gap creates incentive to work
more.
A. True
B. False
44. LO 14.3
The wage gap creates incentive to work
more.
A. True
B. False
45. LO 14.3
Question for Discussion
Discuss the changing economic structure of
the United States and how it will impact
workers over the next couple generations.
Editor's Notes
The type of economic system (capitalist/socialist) as well as the shift from industry to service are both sources of problems in our culture.
Industrialized societies organize their economic activities according to one of two fundamental forms: capitalism or socialism.
Although no society has a purely capitalist or socialist economy, the ideal types provide opposite extremes on a scale that helps us measure the U.S. economy more accurately.
Individuals are encouraged to own not only private possessions but, most important, also the capital necessary to produce and distribute goods and services.
Seeking individual gain through personal profit is considered morally acceptable and socially desirable..
The market forces of supply and demand ensure that capitalists produce the goods and services wanted by the public, that the goods and services are high in quality, and that they are sold at the lowest possible price.
Capitalists argue that any government intervention in the marketplace distorts the economy by negatively affecting incentives and freedom of individual choice.
The economy of the U.S. is not purely capitalistic.
Taxes are levied on the population to raise monies for the common good.
The government regulates the safety, sales, and licensing of products (among other things).
Critique of capitalism:
Promotes inequality
Produces social problems because the object is profit, not social justice
The goal is to run the economy for the good of the society.
Society must direct social activities to meet common goals.
Representatives of a socialist state must be answerable and responsive to the wishes of the public they serve.
Nations that claim to be socialist but are totalitarian violate this fundamental aspect of socialism.
Equality of opportunity for the self-fulfillment of all, equality rather than hierarchy in decision making, and equality in sharing the benefits of society.
Socialist sense of the collective is evidenced by a relatively high taxation rate to provide for the common good—universal healthcare, paid maternity leave, subsidized childcare, universal preschool programs, and generous retirement.
The people own basic industries, financial institutions, utilities, transportation, and communications companies.
The critique:
Minimizes individual freedom
Government monopoly is inefficient
High taxes
Reduces motivation to succeed
The structure of contemporary society shapes families and individuals within them.
Trends of great magnitude especially affect our jobs, incomes, and our futures.
The Internet, movies, deforestation, polluted air, and pandemics bring the people of the globe much closer together.
The instant communication, learning about other cultures, spread of disease, and destruction of the environment mean we have much more in common with people around the globe than ever before.
In addition, what we do impacts them and vice versa.
Global trade.
Increasingly countries are turning to capitalism.
The flow of goods across borders is a main part of economic systems.
NAFTA (North American Free Trade Agreement) and other trade agreements removed tariffs from international trade.
Capital flight.
Corporate decisions regarding the movement of corporate money from one investment to another.
Global trade is not neutral.
Decisions are made that benefit the capitalists, not necessarily the workers.
The goal is to maximize profit, which means finding the locations with the lowest-paid workers and cheapest overhead.
An effect of globalization is the importation of goods for sale produced in countries where workers work for lower wages.
One dominated by agriculture, the U.S. economy has shifted from agrarian jobs to manufacturing jobs to service and information jobs.
Offshoring occurs when transnational corporations shift manufacturing to low-wage economies.
Manufacturers moved offshore because profits are greater when wages and costs are low.
Giant retailers (e.g., Walmart) have compelled manufacturers to move offshore in search of lower prices for consumers and higher profits.
Outsourcing is the shifting of specific tasks (transcribing, research, call centers, etc.).
Internet allows for worldwide communication.
Supply of qualified English-speaking workers in other nations.
These workers will work for 1/5 or less of the salary of U.S. workers.
Three negative effects on U.S. workers:
Job loss
Wage reduction
Weak labor unions
Every new era poses new problems of adjustment.
The earlier transformations were gradual enough for adaptation to take place over several decades.
The rate of change now is phenomenal and unprecedented.
In the 1950s the process inherent in capitalism was described as “creative destruction.”
When some sectors lose out others will gain.
U.S. Steel was replaced by corporate giants like Apple, Intel, and Merck.
Walmart is the largest employer today.
Sunset industries are sectors of the economy that fade in importance or will even die out completely (e.g., steel, tires, shoes, toys, film cameras, and textiles)
Good paying, unionized jobs were lost (in the millions) and not replaced.
Contingent work is temporary, contracted, self-employed, leased, part-time, and other “nonstandard” arrangements.
Homeshoring/homesourcing occurs when independent contractors work from home. They pay for their own benefits. The advantage is saving on childcare and transportation.
Sunrise industries are those industries characterized by increased output and employment.
Computers, software, medical instruments, bioengineering, robotics
Lower-end service jobs such as sales clerks, restaurant workers, janitors, and security guards are relatively plentiful (and have the advantage of being immune to outsourcing).
The important point for workers is that these new industries pay less and have fewer benefits than the old ones
Homeshoring or homesourcing is more common today. Because much of our economy is service based and completed on computers, workers are able to work out of their homes.
Prelude to the Crisis
Displaced workers from the shift from manufacturing to service/information
Families in credit debt
Wages declined and people had to work more and use credit to make ends meet
Subprime housing loans sold to people with questionable credit
Wall Street’s irresponsible deal making (subprime loans sold to third parties)
Non-interference by government (thought the players would police themselves)
The Crisis
Unemployment rose as 8.8 million American workers lost their jobs from late 2007 to January 2012.
The unemployment rate does not measure underemployment so misses a big part of the picture.
Housing woes occurred when homes lost value after peaking in 2006. The housing bubble burst and people went into foreclosure. In 2012, the rate of foreclosure began to decline.
Financial decline. Median household incomes dropped. Stock market plummeted. People lost healthcare and retirement savings.
Personal bankruptcies rose.
Downward social mobility as the American dream slips away.
Poverty increased as the official poverty rate increased by 27 percent.
Hunger increased.
The new homeless are the result of foreclosures, job loss, healthcare expenses and occurred in middle-class families.
Sympathy cards made specifically for the Great Recession. The comic may be humorous, but the reality for many Americans was not.
Home ownership seemed a dream in 2006, but the dream ended with the market crash.
More than one-fourth of homeowners were “under water” as home values fell (owed more than the home is worth).
Work is central to the human experience.
People everywhere engage in physical and mental activities that enhance the physical and social survival of themselves and others.
The world of work also has a dark side.
The structure of work is a major source of social problems.
Work is alienating for many people.
The organization of work sometimes exploits, does harm to workers, and often dehumanizes them.
The distribution of work and how it is rewarded are major sources of inequality in society.
Work in factories was sometimes difficult, sometimes dangerous, often tedious, and usually boring. There was always the threat of lowered productivity and worker unrest under these adverse conditions. The factory owners and their managers used several tactics to counteract these potential problems and especially to maintain high productivity.
Scientific management, also called Taylorization, is breaking down work into very specialized tasks, the standardization of tools and procedures, and the speeding up of repetitive work.
These efforts to increase worker efficiency and therefore to increase profits meant that workers developed a very limited range of skills.
Control through bureaucratic hierarchy helps control workers by holding out the possibility of advancing.
Employers used lie detectors, closed circuit cameras, taps, and more to monitor employees. The most common form is the computer, which can count key strokes, view browsing history, time phone calls, and even issue warnings if employees fall short.
Replacing people on strike with low-wage workers, moving to nonunion states, and more to avoid paying employees more.
In capitalism, worker alienation occurs
because the workers do not have any control over their labor
because they are manipulated by managers
because they tend to work in large, impersonal settings
because they work at specialized tasks
Under these circumstances, workers use only a fraction of their talents and have no pride in their own creativity and in the final product.
Marx thought the lack of personal satisfaction would lead workers to resentment and to unite to make changes.
For many, the lack of fulfillment remains at the personal level and workers turn to drugs, alcohol, high rates of absenteeism, and workplace disruption
Not limited to blue collar workers
In a capitalist economy, workers represent a cost to profit-seeking corporations.
Workers prior to labor movements and unions received very low wages, virtually no benefits, worked in dangerous conditions, and experienced abuse by employers.
Even with pressure from labor unions, companies were slow to change especially working conditions.
OSHA was founded over 30 years ago.
OSHA does not have the resources to meet the needs of workers.
One OSHA inspector for every 66,258 employees.
Some jobs carry great occupational dangers.
Those in poverty and minorities are more likely to work in these dangerous jobs.
Should profits supersede worker health and safety?
Substandard work environments:
where workers are paid less than the minimum wage
where workers are not paid overtime
where other labor laws are violated
Today, in the United States, as many as 50,000 people annually are trafficked to work in the sex industry, as domestic servants, as garment slaves, and as agricultural laborers.
Children abroad are employed in sweatshops that make toys, clothes, and other products sold on shelves around the United States.
Consider the following differences between union workers and unorganized workers:
The median yearly earnings of workers in 2010 were $47,684 for union workers, compared with $37,284 for employees not represented by unions.
Union members are more likely to have employer-provided health insurance, pensions, and paid sick leave.
Women union members earn 33 percent more than women nonunion workers.
African American union members earn 35 percent more than African American nonunion workers.
Latino union members earn 51 percent more than Latino nonunion workers.
There are fewer fatalities and injuries in underground coal mines that are unionized than at nonunion mines.
Despite benefits, labor union membership has declined due to:
Federal assault by presidents.
Public opinion of labor unions as undemocratic, scandal ridden, and too zealous.
Business blocking of unions.
Chapter 14, Activity 2
Student Labor Union
Have students work in small groups to design a student labor union and write a mission statement to share with the class. Have them decide what will be provided to students by the union and how much the union will cost each student. What will their demands be of the school administration? What resistance do they think they would face from the school administration if they wanted to start a union? Have them consider if they would join this union.
Complaints center on hiring policies, seniority rights, restricted job placement, limited opportunities for advancement, and lower pay for equal work.
Two mechanisms operating in the U.S. economy perpetuate inequalities in the job market by social class, race, and gender—the segmented labor market and male dominance.
Segmented labor market is the divided into two sectors.
The primary sector consists of stable jobs that pay relatively well and require skills. The primary sector is also divided into different sectors of high status and lower-tier jobs.
The secondary sector consists of unstable jobs at modest firms. Even full-time workers in this sector usually don’t earn enough to stay out of poverty.
This dominance is reflected in two ways—males tend to make the rules and enforce them, and males receive unequal (i.e., greater) rewards.
Chapter 14, Activity 1
Comparable Worth
Give the students a list of occupations (make sure to include a mixture of high-paying occupations and low-paying occupations, physical and mental work, male-dominated occupations and female occupations, etc. Note: it makes it very interesting to include categories such as actor or professional athlete).
Have the students work in small groups to come up with a realistic yearly salary for each occupation. They should consider the following:
Education it takes to do the work
Training it takes to do the work
Mental toll involved in doing the work
Overtime involved
Non-standard work hours involved
Physical toll involved
Value to society (i.e. product produced, service produced, etc.)
Go over their lists as a class. This should lead to a discussion of wages, comparable worth, and “value” to society. Which jobs have been historically “devalued?” Are they those associated with particular racial/ethnic groups or gender?
In the past, workers expected to spend entire careers working for one employer.
The official unemployment rate measured by the Bureau of Labor statistics is misleading.
It does not take into account the discouraged workers who stop looking for work after four weeks.
It does not take into account the underemployment felt by people who work and still can’t make ends meet.
The reserve army of the unemployed is generally thought to be good for capitalism by reducing inflationary pressures.
It is kept relatively high by capitalists because high unemployment deflates wages and therefore increases profits.
When there are unemployed people willing to work, workers will not make demands for higher wages for fear that they will be replaced by cheaper labor.
The unemployed who want to work are disproportionately composed of people of color, teenagers, and individuals in cities.
At one point in time, workers expected to remain with the same company for a lifetime.
Corporate America has been downsizing for 30 years. Replacing workers with automated machines or shipping jobs over seas.
The unemployment rates follow the same path, but Blacks are far more likely to be unemployed than Whites.
With relatively weak unions, high unemployment, and competition from low-wage economies, U.S. corporations have been reducing benefits to workers.
Corporations have declared bankruptcy to get out of promised benefits.
Other corporations have worked with labor unions to set up a two-tier system where those already hired keep benefits, but no new benefits are offered to new employees.
Americans work more hours per week than workers in any other country in the advanced industrialized world.
Few vacations
Lots of overtime
American workers, on average, work 1,804 hours a year.
135 hours more than a British worker
240 more than a French worker
370 hours more than the typical German worker
A main reasons for the increased workload has to do with the wage gap.
Wage gap makes people work harder to earn more.
Wage gap also highlights the fact that low-wage jobs don’t go far, given the increased expense of other things.
Wages declined during the Great Recession. At the same time, costly things like healthcare and college tuition increased.
Ironically, worker productivity rose as wages declined.
Factors that depress the wages of workers:
Declined union membership
Competition from low-wage countries
Corporation movement (overseas or nonunion)
Worker replacement by machines
Minimum wage
Many Americans are not making it financially.
A look at the discrepancy between compensation and output.
Workers are doing more for the virtually the same amount earned in the 1970s.
The source is not in unmotivated or unwilling or undereducated workers.
To understand the work setting in our society, we must understand globalization and the nature of capitalism, where profit—not the human consequences—guides managerial decisions.
The economy is undergoing a profound transformation.
The next few generations will be caught in the nexus between one stage and another, and many will suffer because of the dislocations.
