How wages are set: skills, demand for workers and unions

Grade 12 Social Studies Worksheet - Challenge Me

Circle the best answer.

1. Read this first

   Use this

   Cards A to C on unions and pay (card A is BLS data; cards B and C are made up). Card A, "Union members, 2024". Source: BLS, Union Members 2024 (news release of January 28, 2025), read Nov 14, 2026. Table, columns Measure | Figure: Union membership rate, 1983 | 20.1 percent; Union membership rate, 2024 | 9.9 percent; Public sector rate, 2024 | 32.2 percent; Private sector rate, 2024 | 5.9 percent; Median usual weekly earnings, full-time union members, 2024 | $1,337; Median usual weekly earnings, full-time nonunion workers, 2024 | $1,138. Note: BLS says its earnings comparisons are broad and do not control for many factors that can explain earnings differences. Card B, "A controlled study (made up)". Written for this sheet. Summary in our words, not a quotation: a study compares union members and nonunion workers in the same occupation, industry and firm size. It finds union members earn about 8 percent more. Card C, "Two views (made up)". Written for this sheet. Summary in our words, not a quotation: Speaker S says the BLS figures show a union raises a worker's weekly pay by $199. Speaker T says unions have almost vanished, since the rate fell from 20.1 percent in 1983 to 9.9 percent in 2024.

2. 1.

   Esme tests speaker S's claim that a union raises weekly pay by $199, using cards A and B. What is the best verdict?

   • Cannot be judged: medians cannot be compared across groups, so neither card gives any information on the effect
   • Weakly supported: the raw gap mixes in other differences, and a controlled study finds about 8 percent, not 17.5
   • Refuted: card B finds union members earn 8 percent more, which shows the union effect is zero
   • Supported: a $199 gap in median weekly earnings is large, and the medians are for the same kind of full-time workers
3. 2.

   A writer says card B's 8 percent is the full union effect. What evidence would most challenge the writer, in Ren's view?

   • Whether the public sector rate of 32.2 percent has risen, since public jobs may pay differently
   • Whether union members work more hours than nonunion workers, since BLS counts full-time workers
   • Whether the study's workers live in the same state, since local wages differ from place to place
   • Whether nonunion employers raise pay to head off unions, which lifts the comparison wage

4. Use this

   Cards A to C on who bears a payroll tax (all made up for practice). Card A, "Elasticity estimates (made up)". Written for this sheet. Summary in our words, not a quotation: economists estimate the elasticity of labor supply at 0.2 and the elasticity of labor demand at 0.8. In a tax like the employer's 6.2 percent share, the share borne by workers is the demand elasticity divided by the sum of the two elasticities. Card B, "A proposal (made up)". Written for this sheet. Summary in our words, not a quotation: a legislator proposes to cut the employer's 6.2 percent share to zero. She says it will create many jobs, because the tax falls on jobs. Card C, "The size of the effect (made up)". Written for this sheet. Summary in our words, not a quotation: with these elasticities, a cut of 6.2 points in the employer's share raises wages about 5 percent and raises employment about 1 percent.

5. 3.

   Pia uses card A. Who bears more of the employer's tax, and why?

   • Employers, about 80 percent: demand is more elastic, so firms can least avoid a tax placed on them
   • Employers, since the law names them as the ones who pay the tax and the law decides who bears it
   • Workers, about 20 percent: supply is 0.2, and the elasticity of supply equals the workers' share
   • Workers, about 80 percent: supply is less elastic than demand, so workers have fewer ways to avoid it
6. 4.

   Zee tests the legislator's job claim on card B with card C. What is the best verdict?

   • Weakly supported: the cut adds only about 1 percent to jobs; most of the gain goes to wages
   • Cannot be judged: the elasticities are guesses, so no number of jobs can be worked out from them
   • Supported: the tax falls on jobs, so removing it creates many jobs, as the legislator says
   • Refuted: the tax cut would cost jobs, because employers would pay less and so hire fewer workers
7. 5.

   Luz wants to answer the legislator with cards A to C. Which is the strongest objection to the plan?

   • The cut mostly raises workers' wages, about 5 percent, and adds only about 1 percent to jobs
   • Employers would keep the whole cut as profit, since they were the ones who paid the tax
   • The cut would lower revenue for Social Security, so it cannot be paid for without other taxes
   • Workers' wages would fall about 5 percent, since a tax cut lowers pay for those who receive it

8. Use this

   Cards A to C on two models of the minimum wage (all made up for practice). Card A, "The competitive model (made up)". Written for this sheet. Summary in our words, not a quotation: in a competitive labor market a minimum wage above the market wage cuts the number of workers hired. Card B, "The single-buyer model (made up)". Written for this sheet. Summary in our words, not a quotation: if one employer is the main buyer of labor in a town, it holds wages below the competitive level and hires fewer workers than it would. A minimum wage in a range above that wage can raise hiring. Card C, "A study (made up)". Written for this sheet. Summary in our words, not a quotation: a state raised its minimum wage 20 percent. In its restaurants, jobs fell 1 percent. In a neighboring state with no change, restaurant jobs rose 0.5 percent. Wages in the state's restaurants rose about 18 percent.

9. 6.

   Milo reads the study on card C beside the two models. Which statement fits the evidence best?

   • The result fits a small job loss, but it cannot tell the two models apart without more evidence
   • The result is useless, since one study of one state cannot say anything about either model
   • The result supports the single-buyer model, since wages rose by 18 percent while jobs fell a little
   • The result confirms the competitive model, since jobs fell when the minimum wage rose
10. 7.

    Noah reviews the study on card C. Which is the strongest objection to using the neighboring state as the comparison?

    • Restaurants in the neighboring state pay lower wages than those in the study state, which makes the comparison unfair
    • The neighbor might have had different restaurant trends anyway, so its +0.5 percent may mislead
    • The neighboring state has a different name and a different capital, which makes its restaurants differ
    • Comparison states are not useful, since two states differ in ways that cannot be measured
11. 8.

    Kira wants evidence that would separate the single-buyer model from the competitive one. Which is best?

    • Whether prices on restaurant menus rose, since higher prices show firms passed on the cost
    • Whether quits and unfilled jobs fell after the raise, which only the single-buyer model predicts
    • Whether the neighboring state's jobs kept rising, since that shows if the control is steady
    • Whether average wages rose by 18 percent, since a rise in wages shows the single-buyer model at work

12. Use this

    Cards A to C on the labor market, 2019 to 2024 (cards A and B are BLS data and notes; card C is made up). Card A, "Unemployment and participation". Source: BLS, unemployment rate (series LNU04000000) and labor force participation rate (series LNU01300000), annual averages, read through the BLS public data API on Nov 14, 2026. Table, columns Year | Unemployment rate | Participation rate: 2019 | 3.7 percent | 63.1 percent; 2020 | 8.1 percent | 61.7 percent; 2021 | 5.3 percent | 61.7 percent; 2022 | 3.6 percent | 62.2 percent; 2023 | 3.6 percent | 62.6 percent; 2024 | 4.0 percent | 62.6 percent. Card B, "What the two rates count". Source: BLS. Summary in our words, not a quotation: the participation rate is the share of the civilian population age 16 and over that is working or looking for work. The unemployment rate is the share of those in the labor force who have no job and are looking. People not looking for work are in neither count. A population with more older people has a lower participation rate even when jobs are plentiful. Card C, "Two commentators (made up)". Written for this sheet. Summary in our words, not a quotation: Commentator P says the labor market in 2023 was as strong as in 2019, because unemployment was lower, 3.6 percent against 3.7. Commentator Q says it was weaker, because fewer people were in the labor force.

13. 9.

    Tala weighs commentators P and Q on card C against cards A and B. Which statement fits the evidence best?

    • P is right: the unemployment rate is the main measure of labor market strength, and it was lower in 2023
    • Q is right: a drop in participation of 0.5 point shows that the labor market was weaker in 2023 than in 2019
    • Not settled: unemployment was 0.1 point lower but participation 0.5 point lower, and aging explains some
    • P is right: 3.6 percent is 0.1 point below 3.7 percent, and a lower rate signals a stronger market
14. 10.

    Bo wants better evidence to judge Q's claim. Which would help most?

    • The participation rate for 2018, since an earlier year would show whether 63.1 percent was unusual
    • The unemployment rate for ages 16 and over in each month of 2023, since monthly figures are more exact
    • The participation rate for ages 25 to 54, since it removes most of the effect of an older population
    • The unemployment rate for 2025, since another year of data would show which commentator is right