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66-507: Eligible survey participants are households that have completed all eight months of the Current Population Survey (CPS). Of the eligible households, those representing a range of demographic characteristics are selected to participate in the survey. Between 2–5 months after the household's eighth and final CPS interview, one randomly-selected person of at least fifteen years of age is selected from each household to be interviewed for

132-541: A full-time job; they are sometimes said to be underemployed. The CPS reports: The survey also reports the labor force participation rate, which is the labor force as a percentage of the population, and the ratio of the employed to the total population of the United States. Although the primary purpose of the CPS is to record employment information, the survey fulfills a secondary role in providing demographic information about

198-527: A particular calendar week. Based on responses to questions on work and job search activities, each person 16 years and over in a sample household is classified as employed, unemployed, or not in the labor force. The CPS began in 1940, and responsibility for conducting the CPS was given to the Census Bureau in 1942. In 1994 the CPS was redesigned. CPS is a survey that is: employment-focused, enumerator-conducted, continuous, and cross-sectional. The BLS increased

264-413: A positive wage elasticity ). This positive relationship is increasing until point F, beyond which the income effect dominates the substitution effect and the individual starts to reduce the number of labour hours he supplies (point G) as wage increases; in other words, the wage elasticity is now negative. The direction of the slope may change more than once for some individuals, and the labour supply curve

330-554: A single employer and thus do not satisfy the perfect competition assumption of the neoclassical model above. The model of a monopsonistic labour market gives a lower quantity of employment and a lower equilibrium wage rate than does the competitive model. In many real-life situations, the assumption of perfect information is unrealistic. An employer does not necessarily know how hard workers are working or how productive they are. This provides an incentive for workers to shirk from providing their full effort, called moral hazard . Since it

396-570: A time constraint, with respect to the choices of labour time and leisure time: This is shown in the graph below, which illustrates the trade-off between allocating time to leisure activities and allocating it to income-generating activities. The linear constraint indicates that every additional hour of leisure undertaken requires the loss of an hour of labour and thus of the fixed amount of goods that that labour's income could purchase. Individuals must choose how much time to allocate to leisure activities and how much to working . This allocation decision

462-403: A variety of interesting effects. This is because the absolute value of the slope of the budget constraint is the wage rate. The point of optimisation (point A) reflects the equivalency between the wage rate and the marginal rate of substitution of leisure for income (the absolute value of the slope of the indifference curve). Because the marginal rate of substitution of leisure for income is also

528-517: Is a derived demand; that is, hiring labour is not desired for its own sake but rather because it aids in producing output, which contributes to an employer's revenue and hence profits. The demand for an additional amount of labour depends on the Marginal Revenue Product (MRP) and the marginal cost (MC) of the worker. With a perfectly competitive goods market, the MRP is calculated by multiplying

594-466: Is costly, and only those who excel in academia can succeed in becoming doctors. The port cleaner, however, requires relatively less training. The supply of doctors is therefore significantly less elastic than that of port cleaners. Demand is also inelastic as there is a high demand for doctors and medical care is a necessity, so the NHS will pay higher wage rates to attract the profession. Some labour markets have

660-593: Is defined as the number of people of working age , who are either employed or actively looking for work (unemployed). The labour force participation rate ( LFPR ) is the number of people in the labour force divided by the size of the adult civilian noninstitutional population (or by the population of working age that is not institutionalized ), LFPR = LF/Population. The non-labour force includes those who are not looking for work, those who are institutionalized (such as in prisons or psychiatric wards), stay-at-home spouses, children not of working age, and those serving in

726-558: Is different for different individuals. Other variables that affect the labour supply decision, and can be readily incorporated into the model, include taxation, welfare, work environment, and income as a signal of ability or social contribution. A firm's labour demand is based on its marginal physical product of labour (MPP L ). This is defined as the additional output (or physical product) that results from an increase of one unit of labour (or from an infinitesimal increase in labour). (See also Production theory basics .) Labour demand

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792-524: Is difficult for the employer to identify the hard-working and the shirking employees, there is no incentive to work hard and productivity falls overall, leading to the hiring of more workers and a lower unemployment rate. One solution that is used to avoid a moral hazard is stock options that grant employees the chance to benefit directly from a firm's success. However, this solution has attracted criticism as executives with large stock-option packages have been suspected of acting to over-inflate share values to

858-449: Is due to numerous factors including labour supply and demand shifts as well as institutional changes in the labour market. On the shifts in labour supply and demand, factors include demand for skilled workers going up more than the supply of skilled workers and relative to unskilled workers as well as technological changes that increase productivity; all of these things cause wages to go up for skilled labour while unskilled worker wages stay

924-417: Is education, whereby employers assume that high-ability workers will have higher levels of education. Employers can then compensate high-ability workers with higher wages. However, signalling does not always work, and it may appear to an external observer that education has raised the marginal product of labour, without this necessarily being true. One of the major research achievements of the 1990–2010 period

990-427: Is informed by the indifference curve labelled IC 1 . The curve indicates the combinations of leisure and work that will give the individual a specific level of utility. The point where the highest indifference curve is just tangent to the constraint line (point A), illustrates the optimum for this supplier of labour services. If consumption is measured by the value of income obtained, this diagram can be used to show

1056-424: Is on "how firms establish, maintain, and end employment relationships and on how firms provide incentives to employees," including models and empirical work on incentive systems and as constrained by economic efficiency and risk/incentive tradeoffs relating to personnel compensation. Inequality and discrimination in the workplace can have many effects on workers. In the context of labour economics, inequality

1122-442: Is shown by the shift from point A to point B. The relative magnitude of the two effects depends on the circumstances. In some cases, such as the one shown, the substitution effect is greater than the income effect (in which case more time will be allocated to working), but in other cases, the income effect will be greater than the substitution effect (in which case less time is allocated to working). The intuition behind this latter case

1188-400: Is that the individual decides that the higher earnings on the previous amount of labour can be "spent" by purchasing more leisure. If the substitution effect is greater than the income effect, an individual's supply of labour services will increase as the wage rate rises, which is represented by a positive slope in the labour supply curve (as at point E in the adjacent diagram, which exhibits

1254-430: Is unique to study because it is a special type of good that cannot be separated from the owner (i.e. the work cannot be separated from the person who does it). A labour market is also different from other markets in that workers are the suppliers and firms are the demanders. There are two sides to labour economics. Labour economics can generally be seen as the application of microeconomic or macroeconomic techniques to

1320-722: Is used as a method to attain cost efficiency. Variables like employment level, unemployment level, labour force, and unfilled vacancies are called stock variables because they measure a quantity at a point in time. They can be contrasted with flow variables which measure a quantity over a duration of time. Changes in the labour force are due to flow variables such as natural population growth, net immigration, new entrants, and retirements . Changes in unemployment depend on inflows (non-employed people starting to look for jobs and employed people who lose their jobs that are looking for new ones) and outflows (people who find new employment and people who stop looking for employment). When looking at

1386-537: Is used by the Bureau of Economic Analysis (BEA) to account for the value of household production, the Bureau of Transportation Statistics (BTS) in their Passenger Travel: Facts and Figures report, and the Economic Research Service (ERS) to examine how time use patterns of eating affect health. ATUS data has also been used to help research worker productivity, social isolation, and how working parents balance

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1452-518: Is usually referring to the unequal distribution of earning between households. Inequality is commonly measured by economists using the Gini coefficient . This coefficient does not have a concrete meaning but is more used as a way to compare inequality across regions. The higher the Gini coefficient is calculated to be the larger inequality exists in a region. Over time, inequality has, on average, been increasing. This

1518-472: The price of the end product or service by the Marginal Physical Product of the worker. If the MRP is greater than a firm's Marginal Cost, then the firm will employ the worker since doing so will increase profit . The firm only employs however up to the point where MRP=MC, and not beyond, in neoclassical economic theory. The MRP of the worker is affected by other inputs to production with which

1584-679: The ATUS and asked questions about their time use. Since December 2003, the ATUS sample has been 2,190 households per month (approximately 26,400 households per year). The ATUS sample was initially 3,375 households per month (approximately 40,500 households per year), but was reduced to lower costs. The selected households are categorized into one of twelve strata based on race/ethnicity (Hispanic, Non-Hispanic black, Non-Hispanic non-black) and household type (child under age six, child between age six and age seventeen, single adult no children, two or more adults no children). The ATUS data includes: From 2005–2010,

1650-448: The ATUS included questions relating to overnight trips. In January 2011, the overnight trips questions were replaced by questions relating to eldercare . The ATUS sometimes includes special questions, called modules, at the end of the interview. The ATUS added an Eating & Health module from 2006–2008 and 2014–2016, a Well-Being Module in 2010, 2012, and 2013, and a Leave module, relating to workers' access to leave, in 2011. ATUS data

1716-1082: The United States population. CPS microdata for the period since 1962 are freely available through the Integrated Public Use Microdata Series . Since 1948, the CPS has included supplemental questions (at first, in April; later, in March) on income received in the previous calendar year, which are used to estimate the data on income and work experience. These data are the source of the annual Census Bureau report on income, poverty, and health insurance coverage. Other regular or occasional survey supplement topics, in various months and years, have included after-tax money income, benefits that are not cash, displaced workers, job tenure, occupational mobility, temporary and contingent work, adult education, volunteering, tobacco use, food availability, fertility, and information about veterans. Labour (economics) Labour economics , or labor economics , seeks to understand

1782-406: The ability to create a higher derivative efficiency of labour, especially on a national and international level, compared to simpler forms of labour distribution, leading to a higher financial GDP growth and output. An efficient labour market is important for the private sector as it drives up derivative income through the reduction of relative costs of labour. This presupposes that division of labour

1848-541: The activities in their lives. Current Population Survey The Current Population Survey ( CPS ) is a monthly survey of about 60,000 U.S. households conducted by the United States Census Bureau for the Bureau of Labor Statistics (BLS). The BLS uses the data to publish reports early each month called the Employment Situation. This report provides estimates of the unemployment rate and

1914-432: The aggregate demand for labour. Likewise, the supply curves of all the individual workers (mentioned above) can be summed to obtain the aggregate supply of labour. These supply and demand curves can be analysed in the same way as any other industry demand and supply curves to determine equilibrium wage and employment levels. Wage differences exist, particularly in mixed and fully/partly flexible labour markets. For example,

1980-410: The cost of hiring a non-minority worker, which causes less hiring of the minority. Another taste model is for employee discrimination, which does not cause a decline in the hiring of minorities, but instead causes a more segregated workforce because the prejudiced worker feels that they should be paid more to work next to the worker they are prejudiced against or that they are not paid an equal amount as

2046-477: The decision of how many hours to work, one must look at the income effect and substitution effect . The wage increase shown in the previous diagram can be decomposed into two separate effects. The pure income effect is shown as the movement from point A to point C in the next diagram. Consumption increases from Y A to Y C and – since the diagram assumes that leisure is a normal good – leisure time increases from X A to X C . (Employment time decreases by

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2112-447: The degree of capital mobility within and between countries. According to neoclassical theory, over the relevant range of outputs, the marginal physical product of labour is declining (law of diminishing returns). That is, as more and more units of labour are employed, their additional output begins to decline. Additionally, although the MRP is a good way of expressing an employer's demand, other factors such as social group formation can

2178-480: The demand, as well as the labour supply. This constantly restructures exactly what a labour market is, and leads way to cause problems for theories of inflation. The marginal revenue product of labour can be used as the demand for labour curve for this firm in the short run. In competitive markets , a firm faces a perfectly elastic supply of labour which corresponds with the wage rate and the marginal resource cost of labour (W = S L = MFC L ). In imperfect markets,

2244-519: The detriment of the long-run welfare of the firm. Another solution, foreshadowed by the rise of temporary workers in Japan and the firing of many of these workers in response to the financial crisis of 2008, is more flexible job- contracts and -terms that encourage employees to work less than full-time by partially compensating for the loss of hours, relying on workers to adapt their working time in response to job requirements and economic conditions instead of

2310-412: The diagram would have to be adjusted because MFC L would then be equal to the wage rate divided by marginal costs. Because optimum resource allocation requires that marginal factor costs equal marginal revenue product, this firm would demand L units of labour as shown in the diagram. The demand for labour of this firm can be summed with the demand for labour of all other firms in the economy to obtain

2376-400: The difference in wages that occurs because of differences in skills versus the returns to those skills. A way of modelling discrimination in the workplace when dealing with wages are Gary Becker 's taste models. Using taste models, employer discrimination can be thought of as the employer not hiring the minority worker because of their perceived cost of hiring that worker is higher than that of

2442-411: The employer trying to determine how much work is needed to complete a given task and overestimating. Another aspect of uncertainty results from the firm's imperfect knowledge about worker ability. If a firm is unsure about a worker's ability, it pays a wage assuming that the worker's ability is the average of similar workers. This wage under compensates high-ability workers which may drive them away from

2508-404: The functioning and dynamics of the markets for wage labour . Labour is a commodity that is supplied by labourers , usually in exchange for a wage paid by demanding firms. Because these labourers exist as parts of a social, institutional, or political system, labour economics must also account for social, cultural and political variables. Labour markets or job markets function through

2574-423: The hours available to them. Let w denote the hourly wage, k denote total hours available for labour and leisure, L denote the chosen number of working hours, π denote income from non-labour sources, and A denote leisure hours chosen. The individual's problem is to maximise utility U , which depends on total income available for spending on consumption and also depends on the time spent in leisure, subject to

2640-444: The household survey doesn't relate or depend on the eligibility of the worker to receive unemployment insurance benefits. Those who are not classified as employed or unemployed are not counted as part of the labor force. These people—those who have no job and are not looking for one—are counted as "not in the labor force". Many who are not in the labor force are going to school or are retired. Family responsibilities keep others out of

2706-500: The household. As part of the demographic sample survey redesign, the CPS is redesigned once a decade, after the decennial census. The most recent CPS sample redesign began in April 2014. Respondents are generally asked about their employment as of the week of the month that includes the 12th. To avoid holidays, this reference week is sometimes adjusted. All respondents are asked about the same week. People are classified as employed if they did any work at all as paid employees during

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2772-501: The interaction of workers and employers. Labour economics looks at the suppliers of labour services (workers) and the demanders of labour services (employers), and attempts to understand the resulting pattern of wages, employment, and income. These patterns exist because each individual in the market is presumed to make rational choices based on the information that they know regarding wage, desire to provide labour, and desire for leisure. Labour markets are normally geographically bounded, but

2838-454: The labor force. " Discouraged workers " are a subset of those who are "not in the labor force". In 1994 the administration and questions in the CPS were overhauled. Prior to 1994, the alternate measures of unemployment had different names because the BLS drastically revised the questions in the CPS and renamed the measures: U3 and U4 were eliminated; the official rate U5 remained the same measure but

2904-418: The labour market as well as at the same time attracting low-ability workers. Such a phenomenon, called adverse selection , can sometimes lead to market collapse. One way to combat adverse selection, firms will try to use signalling , pioneered by Michael Spence , whereby employers could use various characteristics of applicants differentiate between high-ability or low-ability workers. One common signal used

2970-436: The labour market may act as a non-clearing market . While according to neoclassical theory most markets quickly attain a point of equilibrium without excess supply or demand, this may not be true of the labour market: it may have a persistent level of unemployment. Contrasting the labour market to other markets also reveals persistent compensating differentials among similar workers. Models that assume perfect competition in

3036-427: The labour market, as discussed below, conclude that workers earn their marginal product of labour. Households are suppliers of labour. In microeconomic theory, people are assumed to be rational and seeking to maximize their utility function . In the labour market model, their utility function expresses trade-offs in preference between leisure time and income from time used for labour. However, they are constrained by

3102-402: The labour market. Many sociologists, political economists, and heterodox economists claim that labour economics tends to lose sight of the complexity of individual employment decisions. These decisions, particularly on the supply side, are often loaded with considerable emotional baggage and a purely numerical analysis can miss important dimensions of the process, such as social benefits of

3168-474: The labour market. Microeconomic techniques study the role of individuals and individual firms in the labour market. Macroeconomic techniques look at the interrelations between the labour market, the goods market, the money market, and the foreign trade market. It looks at how these interactions influence macro variables such as employment levels, participation rates, aggregate income and gross domestic product . The labour market in macroeconomic theory shows that

3234-452: The military. The unemployment level is defined as the labour force minus the number of people currently employed. The unemployment rate is defined as the level of unemployment divided by the labour force. The employment rate is defined as the number of people currently employed divided by the adult population (or by the population of working age). In these statistics , self-employed people are counted as employed. The labour market has

3300-450: The net of exports minus imports (X−M), since AE = C + I + G + (X−M). Neoclassical economists view the labour market as similar to other markets in that the forces of supply and demand jointly determine the price (in this case the wage rate) and quantity (in this case the number of people employed). However, the labour market differs from other markets (like the markets for goods or the financial market) in several ways. In particular,

3366-419: The numbers of employed and unemployed people in the United States based on the CPS. A readable Employment Situation Summary is provided monthly. Annual estimates include employment and unemployment in large metropolitan areas. Researchers can use some CPS microdata to investigate these or other topics. The survey asks about the employment status of each member of the household 15 years of age or older as of

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3432-418: The overall macroeconomy, several types of unemployment have been identified, which can be separated into two categories of natural and unnatural unemployment. Natural Unemployment Unnatural Unemployment Aggregate expenditure (AE) can be increased, according to Keynes, by increasing consumption spending (C), increasing investment spending (I), increasing government spending (G), or increasing

3498-478: The past 12 months (e.g. they replied to a "wanted" ad) but have not actively sought work in the past 4 weeks. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for a job (e.g. they believe that no work was available). This group is about 50 percent smaller than the marginally attached group." Persons employed part-time for economic reasons are those who want full-time work and are available to take

3564-409: The productivity of the worker. Many regions and countries have enacted government policies to combat discrimination, including discrimination in the workplace. Discrimination can be modelled and measured in numerous ways. The Oaxaca decomposition is a common method used to calculate the amount of discrimination that exists when wages differ between groups of people. This decomposition aims to calculate

3630-448: The ratio of the marginal utility of leisure (MU ) to the marginal utility of income (MU ), one can conclude: where Y is total income and the right side is the wage rate. If the wage rate increases, this individual's constraint line pivots up from X,Y 1 to X,Y 2 . He/she can now purchase more goods and services. His/her utility will increase from point A on IC 1 to point B on IC 2 . To understand what effect this might have on

3696-451: The reference week; worked in their own business, profession, or on their own farm; or worked without pay at least 15 hours in a family business or farm. People are also counted as employed if they were temporarily absent from their jobs because of illness, bad weather, vacation, labor -management disputes, or personal reasons. People are classified as unemployed if they meet all of the following criteria: The unemployment data derived from

3762-417: The rise of the internet has brought about a 'planetary labour market' in some sectors. Labour is a measure of the work done by human beings. It is conventionally contrasted with other factors of production , such as land and capital . Some theories focus on human capital , or entrepreneurship , (which refers to the skills that workers possess and not necessarily the actual work that they produce). Labour

3828-456: The same amount as leisure increases.) But that is only part of the picture. As the wage rate rises, the worker will substitute away from leisure and into the provision of labour—that is, will work more hours to take advantage of the higher wage rate, or in other words substitute away from leisure because of its higher opportunity cost . This substitution effect is represented by the shift from point C to point B. The net impact of these two effects

3894-477: The same or decline. As for the institutional changes, a decrease in union power and a declining real minimum wage, which both reduce unskilled workers wages, and tax cuts for the wealthy all increase the inequality gap between groups of earners. As for discrimination, it is the difference in pay that can be attributed to the demographic differences between people, such as gender, race, ethnicity, religion, sexual orientation, etc, even though these factors do not affect

3960-473: The sample size by 10,000 as of July 2001. The sample represents the civilian noninstitutional population . Approximately 60,000 households are eligible for the CPS. Sample households are selected by a multistage stratified statistical sampling scheme. A household is interviewed for 4 successive months, then not interviewed for 8 months, then returned to the sample for 4 months after that. An adult member of each household provides information for all members of

4026-452: The supply of labour exceeds demand, which has been proven by salary growth that lags productivity growth. When labour supply exceeds demand, salary faces downward pressure due to an employer's ability to pick from a labour pool that exceeds the jobs pool. However, if the demand for labour is larger than the supply, salary increases, as employee have more bargaining power while employers have to compete for scarce labour. The Labour force (LF)

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4092-448: The wages of a doctor and a port cleaner, both employed by the NHS , differ greatly. There are various factors concerning this phenomenon. This includes the MRP of the worker. A doctor's MRP is far greater than that of the port cleaner. In addition, the barriers to becoming a doctor are far greater than that of becoming a port cleaner. To become a doctor takes a lot of education and training which

4158-507: The worker can work (e.g. machinery), often aggregated under the term " capital ". It is typical in economic models for greater availability of capital for a firm to increase the MRP of the worker, all else equal. Education and training are counted as " human capital ". Since the amount of physical capital affects MRP, and since financial capital flows can affect the amount of physical capital available, MRP and thus wages can be affected by financial capital flows within and between countries, and

4224-473: The worker they are prejudiced against. One more taste model involves customer discrimination, whereby the employers themselves are not prejudiced but believe that their customers might be, so therefore the employer is less likely to hire the minority worker if they are going to interact with customers that are prejudiced. There are many other taste models other than these that Gary Becker has made to explain discrimination that causes differences in hiring in wages in

4290-429: Was renamed U3; U6 and U7 were revised and renamed U5 and U6. CPS-based measures of unemployment before 1994: CPS-based measures of unemployment after 1994: Marginally attached workers are persons who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work in the recent past. In addition, marginally attached workers have actively sought work in

4356-570: Was the development of a framework with dynamic search , matching, and bargaining. At the micro level, one sub-discipline eliciting increased attention in recent decades is analysis of internal labour markets , that is, within firms (or other organisations), studied in personnel economics from the perspective of personnel management . By contrast, external labour markets "imply that workers move somewhat fluidly between firms and wages are determined by some aggregate process where firms do not have significant discretion over wage setting." The focus

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