Thursday, April 5, 2012

Labor Supply Functions are Real

I meant to share this the other day. It's a great follow-up coverage by Bill Maher on welfare recipients. If you think labor supply theories are just things that mean neoliberal economists invent to trash poor people, you're wrong. Labor supply curves are upward sloping, and there's a good reason for that, and that's something policymakers should be cognizant of. That's not to say by any stretch that there aren't good arguments for policies that may have negative labor supply effects. There are.


  1. I don't like the labour supply curve approach (surprised?) - seems to me, by looking out of the window, that people can't simply work more or fewer hours is they choose. If you work in an office, you work a working week. Same for manufacturing, construction, etc.

    However, I do accept two realities:

    - Welfare *can* encourage people not to work at all.

    - On an economy wide scale, labour supply effects can occur (e.g. the working week for *everybody* will adjust).

    I do think the 'working week' issue needs to be incorporated into economics, though.

    1. "If you work in an office, you work a working week. Same for manufacturing, construction, etc."

      There are some jobs like that, Unlearningecon. Most today aren't.

    2. I would agree with the point, but would not say this is a reason not to like the labor supply curve. It's a reason to figure out how to talk about conventions in addition to the labor supply curve. In a sense, it's simply adding another constraint to optimize against around the 40-hour-a-week mark.

      You should read my response to Jonathan's post on the GT, a couple posts back - I actually talk about some of these issues there.

      Labor supply curve is about the utility trade-offs faced by the worker. The vagaries of the corporate world don't change those utility trade-offs. Thus, there seems to be no reason to poo-poo the labor supply curve. What the vagaries of the corporate world change are the constraints faced by labor suppliers. Does that sound reasonable?

    3. It does.

      Gene, it seems to me that most full time jobs are like that. Do you have any statistics on the modal number of hours worked?

      Daniel in response to your above post: I agree, at least for the purposes of this discussion.

    4. Hours data is easily available, but even that distribution doesn't entirely get at this.

      Part-time people whose hours move around a lot are not necessarily choosing that any more than professional workers are choosing a strict forty hour work week. In fact, part-time workers probably have less choice and certainly less stability in their hours. It's the same analytic problem as with "traditional" 9 to 5s, only its even harder to specify in a model!

  2. I do have to add that seeing those types of people doesn't really bother me that much - sure, they exist, but people always try to game the system. I'm more worried about the leechers at the top.

  3. The effects those functions describe are real. The functions are just an abstraction.

  4. Apparently Pelosi never read Wayne Flint's masterpiece "Poor But Proud."


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