Chapter 2 - Labour supply: individual attachment to the labour market. In this chapter, the following content will be discussed: Labour market attachment, labour force participation rate, labour supply, changes in market wage, overtime premiums. | Chapter Two Labour Supply: Individual Attachment to the Labour Market Created by: Erica Morrill, Fanshawe College © 2002 McGraw-Hill Ryerson Ltd. Chapter Focus Labour market attachment Labour Force Participation Rate Labour supply Changes in market wage Overtime premiums Chapter 2- © 2002 McGraw-Hill Ryerson Ltd. Labour Supply How individuals earn a living by selling labour services through the labour market. Question: Is labour supply an upward sloping function of the wage rate? Chapter 2- © 2002 McGraw-Hill Ryerson Ltd. Quantifying Labour Market Attachment Labour Force Participation the decision to participate in paid labour market activities influences the size and composition of our labour force impacts the economy Chapter 2- © 2002 McGraw-Hill Ryerson Ltd. Labour Force Participation Rate LFPR the fraction of the eligible population that participates in the labour force LFPR=LF/POP LF (Labour Force) individuals in the eligible population who participate in labour | Chapter Two Labour Supply: Individual Attachment to the Labour Market Created by: Erica Morrill, Fanshawe College © 2002 McGraw-Hill Ryerson Ltd. Chapter Focus Labour market attachment Labour Force Participation Rate Labour supply Changes in market wage Overtime premiums Chapter 2- © 2002 McGraw-Hill Ryerson Ltd. Labour Supply How individuals earn a living by selling labour services through the labour market. Question: Is labour supply an upward sloping function of the wage rate? Chapter 2- © 2002 McGraw-Hill Ryerson Ltd. Quantifying Labour Market Attachment Labour Force Participation the decision to participate in paid labour market activities influences the size and composition of our labour force impacts the economy Chapter 2- © 2002 McGraw-Hill Ryerson Ltd. Labour Force Participation Rate LFPR the fraction of the eligible population that participates in the labour force LFPR=LF/POP LF (Labour Force) individuals in the eligible population who participate in labour market activities either employed or unemployed Chapter 2- © 2002 McGraw-Hill Ryerson Ltd. Figure Labour Force Participation Rates by Sex, 1901-1991 Chapter 2- © 2002 McGraw-Hill Ryerson Ltd. Hours of Work Variety of dimensions Institutional arrangements Affects quantity and quality of labour supply Short run hours appear fixed altered by the need for flexible hours, part time and working structures Chapter 2- © 2002 McGraw-Hill Ryerson Ltd. Basic Income - Leisure Model The choice of hours worked given opportunities and value of nonmarket time. preferences and constraints individuals choose the feasible outcomes which yield the highest level of satisfaction Chapter 2- © 2002 McGraw-Hill Ryerson Ltd. Preferences Two “goods” consumption leisure Represented by indifference curves Indifferent between various combinations of consumption and leisure Chapter 2- © 2002 McGraw-Hill Ryerson Ltd. Figure Indifference Curve Leisure 0 Consumption B B-abundance of .
