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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 is labor productivity
Lizzy Reply
if the demand function is q=25-4p+p² 1.find elasticity of demand at the point p=5?
Puja Reply
what are some of the difference between monopoly and perfect competition market
Obeng Reply
n a perfectly competitive market, price equals marginal cost and firms earn an economic profit of zero. In a monopoly, the price is set above marginal cost and the firm earns a positive economic profit. Perfect competition produces an equilibrium in which the price and quantity of a good is economic
Naima
what are some characteristics of monopoly market
Obeng Reply
explicit cost is seen as a total experiences in the business or the salary (wages) that a firm pay to employee.
Idagu Reply
what is price elasticity
Fosua
...
krishna
it is the degree of responsiveness to a percentage change in the price of the commodity
Obeng
economics is known to be the field
John Reply
what is monopoly
Peter Reply
what is taxation
Peter
why do monopoly make excess profit in both long run and short run
Adeola Reply
because monopoly have no competitor on the market and they are price makers,therefore,they can easily increase the princes and produce small quantity of goods but still consumers will still buy....
Kennedy
how to identify a perfect market graph
Adeola Reply
what is the investment
jimmy
investment is a money u used to the business
Mohamed
investment is the purchase of good that are not consumed today but are used in the future to create wealth.
Amina
investment is the good that are not consumed
Fosua
What is supply
Fosua
 Supply represents how much the market can offer.
Yusif
it is the quantity of commodity producers produces at the market
Obeng
what is the effect of scarce resources on producers
Phindu Reply
explain how government taxes and government producer subsidies affect supply
Chanda
what is economic
Charles Reply
what are the type of economic
Charles
macroeconomics,microeconomics,positive economics and negative economics
Gladys
what are the factors of production
Gladys
process of production
Mutia
Basically factors of production are four (4) namely: 1. Entrepreneur 2. Capital 3. Labour and; 4. Land but there has been a new argument to include an addition one to the the numbers to 5 which is "Technology"
Elisha
what is land as a factor of production
Gladys
what is Economic
Abu
economics is how individuals bussiness and governments make the best decisions to get what they want and how these choices interact in the market
Nandisha
Economics as a social science, which studies human behaviour as a relationship between ends and scarce means, which have alternative uses.
Yhaar
Economics is a science which study human behaviour as a relationship between ends and scarce means
John
Economics is a social sciences which studies human behavior as a relationship between ends and scarce mean, which have alternative uses.....
Pintu
how will a country's population be equal to it's labour force
Hope Reply
what is the meaning of ppf
Obeng Reply
Production Possibility Frontier
Igbekele
What is Economic
Governor Reply
economic
Nwosu
Economics is the social science that deals with the unlimited human wants in the face of scarce (limited in supply) resources.
Azka
what is market
Gift Reply
marker is the interaction of buying and selling
David
market refers to the interaction of the processes of buying and selling of commodities between the buyer and the seller.
stephen
market is a place where two parties gather to facilitate exchange of goods and services.
Yhaar
what are some good sources of information to find trends in various Industries
James
how do on know that marketing is going on
Mutia
what is consumption
Raj
Using revenue
Prince
What is stock market
Prince
what is inadequate supply of labour
Fosua
what is elasticity demand
Lizzy
when the number of workers is not equal to the height of job on ground d work load may b too much thereby causing delay on the work
Lizzy
market is the process of moving in and out of items that are used in future
Ibrahim

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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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