Unit 11: Labor and Labor Markets

Market Work

time sold as labor

Nonmarket Work

time spent getting an education or producing goods and services for personal consumption

Leisure

time spent on non work activity

Substitute 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 worker's income, increasing the demand for all goods, including leisure, so that the quantity of labor supplied to market work decreases

Backward-Bending Supply Curve of Labor

as the wage 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

Winner-Take All labor Markets

Markets in which a few key employees critical to the overall success of an enterprise are richly rewarded

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

Industrial Union

a union of both skilled and unskilled workers from a particular industry, such as autoworkers or steelworkers

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

negotiation in which union and management must accept an impartial observer's resolution of a dispute; win or lose

Strike

a union's attempt to withhold labor from a firm to stop production

Featherbedding

union efforts 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 or pay union dues