Supply for Labour

5 Key excerpts on "Supply for Labour"

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  eBook - ePub

  Labour Economics

  • Stephen W. Smith(Author)
  • 2003(Publication Date)
  • Routledge

    (Publisher)

  1 Labour supply INTRODUCTION

  Currently labour supply is one of the most active research areas in labour economics. According to Blundell and MaCurdy (1999) ‘research on labour supply during the past decade has been at the forefront of developments in empirical microeconomics’ (p. 1560). The surveys by Killingsworth (1983), Pencavel (1986) and Heckman (1993) bear witness to this activity at both the theoretical and empirical levels. It is not our intention either to replicate or to replace such near-exhaustive treatments. Instead this chapter will outline the dominant neoclassical theory of labour supply before extending the analysis to examine the effects of varying wage rates, incorporate income taxation, and introduce non-work welfare benefits. We shall distinguish between male and female labour supply both in theory and empirically. The more dynamic lifecycle modelling of labour supply will also be considered. There are important topical policy aspects of labour supply that need to be addressed, ranging across: concern over demographic changes; discussion about the role of women in the paid labour market; and consideration of the impacts of the tax and welfare benefit regimes. Our analysis of labour supply will touch upon all of these policy issues. It will also lay the foundation for the subsequent treatment of the other areas of labour economics, in particular, job search (Chapter 9 ), education, training and employee signalling (Chapter 5 ) and the supply-side view of unemployment (Chapter 10 ). An understanding of labour supply will also enter into an assessment of movements in labour productivity through an examination of labour supply responses to varying wage rates, a link that will be made explicit in Chapter 3 .

  INDIVIDUAL LABOUR SUPPLY

  The supply of labour can be analysed at two levels: the microeconomic level, concerned with individual and household labour supply, and the macroeconomic or aggregate economy level. The following account of the economic analysis of labour supply begins with a microeconomic theory based upon the neoclassical solution to the consumers’ allocation problem.

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  Economics

  A Contemporary Introduction

  • William A. McEachern(Author)
  • 2016(Publication Date)
  • Cengage Learning EMEA

    (Publisher)

  You have already considered the demand for resources. Demand depends on a resource’s marginal revenue product. The first half of this chapter focuses on the supply of labor, then brings demand and supply together to arrive at the market wage. The second half considers the role of labor unions. We examine the economic impact of unions and review recent trends in union membership. Topics discussed in this chapter include: 12-1 Labor Supply As a resource supplier, you have a labor supply curve for each of the many possible uses of your labor. To some markets, your quantity supplied is zero over the realistic range of wages. The qualifier “over the realistic range” is added because, for a high enough wage (say, $1 million per hour), you might supply labor to just about any activity. In most labor markets, your quantity supplied may be zero either because you are willing but unable to perform the job (professional golfer, airline pilot, novelist) or because you are able but unwilling to do so (soldier of fortune, prison guard, taxi driver). You have as many individual supply curves as there are labor markets, just as you have as many individual demand curves as there are markets for goods and services. Your labor supply to each market depends, among other things, on your abilities, your taste for the job, and the opportunity cost of your time. Your supply to a particular labor market assumes that wages in other markets are constant, just as your demand for a particular product assumes that other prices are constant. 12-1a Labor Supply and Utility Maximization Recall the definition of economics: the study of how people use their scarce resources in an attempt to satisfy their unlimited wants—that is, how people use their scarce resources to maximize their utility. Two sources of utility are of special interest in this chapter: the consumption of goods and services and the enjoyment of leisure. The utility derived from consumption serves as the foundation of demand.

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  Understanding Unemployment

  New Perspectives on Active Labour Market Policies

  • Eithne Mclaughlin(Author)
  • 2013(Publication Date)
  • Routledge

    (Publisher)

  White and McRae 1989 ). One of the reasons for giving attention to labour quality is that improved labour supply may provide a way of outflanking the impasse of wage rigidity.

  Labour quality has considerable importance, over and above its influence on wage fixing, for international economic competitiveness. Appreciation of this has grown during the past decade (Hayes and Fonda 1984 ; OECD 1989a) so that the assertion no longer seems controversial. To compete with other advanced industrial countries, an economy needs considerable powers of innovation, in services as well as in products, and the ability to provide high standards of quality. These competitive characteristics can best be achieved through investment in human resources.

  Perhaps the most important reason for emphasizing the quality dimension of labour supply is its bearing on equity for individuals. Without an adequate preparation in terms of education and training, individuals will be placed at a disadvantage in relation to both opportunities and to economic hazards during their working lives (see Chapter 4 ).

  The demand for labour quality

  Demand for different sorts of labour over the next decade can be assessed partly by extrapolating the established trends and partly by considering the major developments likely to be continuing or taking place over the period. The trends are clear, although it must be emphasized that these represent the interaction of supply and demand rather than demand as such. The 1989 Labour Force Survey (

  Employment Gazette, 1990a

  ) shows that nearly four-fifths of the employment growth in 1984–9 was attributable to non-manual occupations, and about one-half to what may loosely be called ‘higher’ occupations. The manual occupations accounted for a little over one-fifth of total employment growth; but most of that growth came in 1988–9 (see Figure 2.2

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  Price Theory and Applications

  • Steven Landsburg(Author)
  • 2013(Publication Date)
  • Cengage Learning EMEA

    (Publisher)

  C H A P T E R 16 The Market for Labor T here are two types of decision makers in the economy: individuals and firms. Individuals supply factors of production, such as labor, to firms and demand output in return. Firms demand factors of production, use them to produce output, and supply that output to individuals. In Chapters 3 and 4, we studied the demand for output by individuals and in Chapters 5 through 7, we studied the supply of output by firms. In Chapter 15, we studied the demand for inputs by firms; now in this chapter and the next, we complete the picture by studying the supply of inputs by individuals. In a competitive economy, all prices and quantities are determined by the intersections of supply and demand curves. We know that the firm ’ s supply of output and demand for inputs depend on available technology (encoded in marginal product curves, isoquants, and the like) and that the individual ’ s demand for output depends on his tastes (encoded in indifference curves). Now we discover that the individual ’ s supply of inputs also depends on his tastes. It follows that ultimately all prices and quantities are determined by just two things: the technology available to firms and the tastes of individuals. We begin Section 16.1 by studying individual labor supply curves, and then in Section 16.2 we study equilibrium in the labor market. Sections 16.3 and 16.4 survey two special topics related to labor markets: Why do some people earn more than others? and What are the extent, causes, and effects of discrimination in labor markets? 16.1 Individual Labor Supply Individuals supply labor to the market at a price called the wage rate of labor. We begin by deriving an individual ’ s labor supply curve. Consumption versus Leisure Each individual is endowed with 24 hours per day that he can allocate between labor and leisure. Labor consists of working in the marketplace for the going wage.

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  Labor and the Economy

  • Howard M. Wachtel(Author)
  • 2013(Publication Date)
  • Academic Press

    (Publisher)

  On the other hand, most jobs are by convention stated at 40 hours per week, and the employee accepts either 40 hours per week or nothing. Hence, decisions at the margin are precluded for most full-time workers for less than 40 hours per week. Decisions at the margin occur for some workers who have access to overtime hours. 12 This amounts to 4.5 percent of the labor force. U.S. Department of Labor, Handbook of Labor Statistics, 1980 (Washington: Government Printing Office), p. 106. 6 2 CHAPTER 4 / WAGE THEORY: LABOR SUPPLY Elasticity of Labor Supply Implicit in the previous discussion of hours of work and wages in this century is the concept of the elasticity of labor supply. The elasticity of labor supply measures the sensitivity of hours worked to changes in the wage rate. It reflects the change in hours worked that occurs in response to a change in the wage rate. More specifically, the elasticity of labor supply is measured by the percentage change in hours worked in relation to the percentage change in wages. 13 Whenever some percentage change in wages produces a more than equiv-alent percentage change in hours worked, the measured elasticity of labor supply will be greater than 1. In such circumstances the labor supply curve is said to be elastic. If some percentage change in wages leads to a less than proportional change in hours worked, the elasticity of labor supply will be less than 1. This is called an inelastic labor supply curve. When the percentage change in wages is followed by exactly the same percentage change in hours worked, the elasticity of labor supply is equal to 1 and is called unitary elasticity. Many investigators have attempted to estimate the elasticity of labor supply. Because their studies differ in the time period investigated (long run or short run), the type of workers examined, and the methodology used, their estimates vary as to the elasticity of labor supply.

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