MicroEcon

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 nonwork activities.

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 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. (The more you make the less you want to work)

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. (AFL; American Federation of Labor)

Industrial Union

A union of both skilled and unskilled workers from a particular industry, such as autoworkers or steelworkers. (CIO; 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

Negotiation in which union and management must accept an impartial observer’s resolution of a dispute.

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 State

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