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By the end of this section, you will be able to:

  • Interpret labor-leisure budget constraint graphs
  • Predict consumer choices based on wages and other compensation
  • Explain the backward-bending supply curve of labor

People do not obtain utility just from products they purchase. They also obtain utility from leisure time. Leisure time is time not spent at work. The decision-making process of a utility-maximizing household applies to what quantity of hours to work in much the same way that it applies to purchases of goods and services. Choices made along the labor-leisure budget constraint , as wages shift, provide the logical underpinning for the labor supply curve. The discussion also offers some insights about the range of possible reactions when people receive higher wages, and specifically about the claim that if people are paid higher wages, they will work a greater quantity of hours—assuming that they have a say in the matter.

According to the Bureau of Labor Statistics, U.S. workers averaged 38.6 hours per week on the job in 2014. This average includes part-time workers; for full-time workers only, the average was 42.5 hours per week. [link] shows that more than half of all workers are on the job 35 to 48 hours per week, but significant proportions work more or less than this amount.

[link] breaks down the average hourly compensation received by private industry workers, including wages and benefits. Wages and salaries are about three-quarters of total compensation received by workers; the rest is in the form of health insurance, vacation pay, and other benefits. The compensation workers receive differs for many reasons, including experience, education, skill, talent, membership in a labor union, and the presence of discrimination against certain groups in the labor market. Issues surrounding the inequality of incomes in a market-oriented economy are explored in the chapters on Poverty and Economic Inequality and Issues in Labor Markets: Unions, Discrimination, Immigration .

(Source: http://www.bls.gov/news.release/empsit.t18.htm)
Persons at work, by average hours worked per week in 2013 (total number of workers: 137.7 million)
Hours Worked per Week Number of Workers Percentage of Workforce
1–14 hours 6.9 million 5.0%
15–34 hours 27.6 million 20.1%
35–40 hours 68.5 million 49.9%
41–48 hours 11.9 million 8.6%
49–59 hours 13.3 million 9.6%
60 hours and over 9.3 million 6.8%
(Source: http://www.bls.gov/news.release/pdf/ecec.pdf)
Hourly compensation: wages, benefits, and taxes in 2014
Compensation, Wage, Salary, and Benefits $30.92 per hour
Wages and Salaries $20.92
Benefits
Vacation $2.09
Supplemental Pay $0.84
Insurance $2.15
Health Benefits $2.36
Retirement and Savings $1.24
Defined Benefit $0.57
Defined Contribution $0.064
Legally Required $2.46

The labor-leisure budget constraint

How do workers make decisions about the number of hours to work? Again, let’s proceed with a concrete example. The economic logic is precisely the same as in the case of a consumption choice budget constraint , but the labels are different on a labor-leisure budget constraint.

Questions & Answers

what's economics
Peace Reply
how do I answer aquestion in econmics
Blessing Reply
A thorough thought through the questions alongside examining ressearch materials.
Frank
I what I think is by observing the question and analysing the question and use the economic terms to answer the particular question and what it required for.
Muhammed
why the demand slopping down word? plz I need an answer
Salami
as price increases fewer people want to buy it
Sean
When the quantity of goods is more, price falls and demand increases. Remember, demand is sensitive to price change and so the curve slopes downward when consumers demand more goods because of price falls. A.E.
Frank
what is modelling economics growth?
Dagim Reply
I would like to know
Muhammed
Meaning of a monopolist
Lindah Reply
single line product
Muhammed
I really mean by single line of products in this kind of situation the market as a feature of both perfect and monopoly , as outlined below: it is market with many buyer's and sellers, but: with differentiated commodities(not homogenous). I bet I answered your question. thanks.
Muhammed
it as a feature of both monopoly and perfect market competition.
Muhammed
🙏
aminu
the differentiation is not so much with technicalities of the commodities but with branding, packing, servicing etc.
Muhammed
what is monopoly
Sewu Reply
Monopoly is a market structure where there is single seller or producer of a commodity which has no close substitute.
Jose
explain law of increasing opportunity cost
Glennis Reply
how many labour market are there in Nigeria
Ayinde Reply
what is monopoly?
Prince Reply
it is a type of imperfect market where there are single seller of a product
Kehinde
what is society's basic economic problems?
ABDI Reply
scarcity
Solomon
another definition of economic s
Louisa Reply
what is economic s
Louisa
is the study of the individual interest
Tut
or the study of the scarcity
Tut
Is an inquiry to the nature and causes of wealth to the nation
IBITOYE
economic as social science which covers the actions of individuals and groups of individuals in the processes of producing, exchanging and consuming of goods and services.
ABDI
compar and contrast the four market structure
Alamuddin
The study or principles of the way money, business and industry organized.
Arsh
what is optimal biomass
Sheikh Reply
biological approach in economics
Sheikh
What is the difference between pure monopoly and natural monopoly
Joseph Reply
what is price elasticity demand
Alex
Explain the law of demand
Manoj
hello my name is Godwin David am an economics student
GODWIN Reply
what's the opportunity cost for free goods?
Bah
A free good is a good with zero opportunity cost . This means it can be consumed in as much quantity as needed without reducing its availability to others.
Wilfred
yes tucker, a free good is available without limit therefore, it is not scarce at all. ...Aviation economist.
Frank
I'm Daniel
Daniel
I'm new here
Daniel
U welcome
Wilfred
what is the demand and supply of QD is equal to 4040 thousand
Prince Reply
uses and limitations of elasticity of demand concept
Tinodaishe
Elasticity of demand refers to the degree of responsiveness of quantities
grace Reply
Thanks
Ogbonna
Hi everyone
Ogbonna

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Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
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