South-Western College Publishing - Economics  
Ad Agencies' Problems Multiply As Workers Are Taken Away and Actors Won't Act
Subject Labor supply
Topic Labor Markets
Key Words Ad business, dot-coms, industry, recruitment, awards, money, talent shortage, strike, negotiations
News Story

Ironically, while the ad business is celebrating a vibrant market due largely to the ad spending of dot-coms, it is also worried that potential talented staffers are choosing to work for dot-coms rather than the ad agencies.

The response of the industry has been to produce a ten-minute recruitment infomercial called "Want a Job in Advertising?" that could be shown in college classrooms and at job fairs, for example. The industry also wants to change its staid image to one of creativity. One proposal is to enhance the creative awards given out by offering more money and publicity.

Another facet of the talent shortage is that actors who appear in ads are on strike after negotiations between the industry and the Screen Actors Guild and the American Federation of Television and Radio Artists broke down. Some agencies are signing interim deals with the unions to ensure they can continue to produce commercials.

(Updated July 1, 2000)

Questions
1. The dot-coms are enticing staffers away from ad agencies. Why do you think that they are being successful? (Think about the determinants of the supply of labor.)
2. The ad industry's recruitment video is intended to make the business appear more attractive.
  a) Which determinant of labor supply is the industry attempting to manipulate?
  b) What would be the effect on the labor supply curve if it were successful? Illustrate your answer on a wage-employment diagram of the market for ad agency staff.
3. If potential recruits perceive that they have a realistic chance of winning more lucrative advertising awards, they may be persuaded to join the industry.
  a) If so, which determinant of labor supply would have changed?
  b) What would have happened to the labor supply curve? Illustrate your answer on another wage-employment diagram of the labor market for ad agency staff.
4. How has the strike by unionized actors who appear in commercials affected the supply curve for actors? Represent your answer on a labor supply diagram.
Source Michael McCarthy, "Ad agencies see 'bright, young' workers turn to dot-coms," USA Today, May 17, 2000.

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