microeconomics 3

Market work

time sold as labor

nonmarket work

time spent getting an education or producing goods and services for personal consumption without monetary incentive such as household chores, caregiving, sewing, gardening, painting, etc.

leisure

time spent on nonwork activities such as running, volunteering, gaming, playing cards,etc

substitution effect of a wage increase

a higher wage encourages more work because other activities now have a higher opportunity cost

income effect of a wage increase

a higher wage increases a workers income, increasing the demand for goods, including leisure, so that the quantity of labor supplied to market work decreases

backward-bending supply curve of labor

as the wages rises, the quantity of labor supplied may eventually decline. the income effect of a higher wage increases the demand for leisure, which reduces the quantity of labor supplied enough to more than offset the substitution effect of a higher wage

your labor supply curve for the summer

At first, higher wages encourage you to work more hours because taking time off becomes more expensive (the substitution effect outweighs the income effect). Beyond a certain wage, you make enough money that you prefer having more free time over earning extra cash, so you reduce the hours you work and your supply curve bends backward (the income effect dominates).

why people might not take 4 week vacations

1. a person enjoys work a lot

2. someone wants to spread out their vacation days

3. they don’t want to fall behind on work

4. people are afraid that the company will replace them with someone better while they’re away

Winner take all labor markets

markets in which few key employees critical to the overall success of an enterprise are richly rewarded (creator of the mustang was brought in to run Chrysler).

labor union

a group of workers who organize to improve their terms of employment

craft union

a union whose members have a particular skill or work at a particular craft, such as plumbers or carpenters. (American federation of labor)

industrial union

A union of both skilled and unskilled workers from a particular industry such as autoworkers or steelworkers (Congress of Industrial Organizations).

collective bargaining

the process by which union and management negotiate a labor agreement

mediator

an impartial observer who helps resolve differences between union and management.

binding arbitration

A process where union and management bring in a neutral third party to resolve a disagreement, and both sides are legally required to accept whatever final decision is made.

strike

a unions attempt to withhold labor from a firm to stop production

featherbedding

union effort to force employers to hire more workers than wanted or needed

right-to work states

states where workers in unionized companies do not have to join the union of pay union dues