labor

(noun)

The workers used to manufacture the output.

Related Terms

Examples of labor in the following topics:

  • Deriving the Labor Demand Curve

    • Firms will demand labor until the marginal revenue product of labor is equal to the wage rate.
    • Firms demand labor and an input to production.
    • The cost of labor to a firm is called the wage rate.
    • The additional revenue generated by hiring one more unit of labor is the marginal revenue product of labor (MRPL).
    • For example, is capital becomes more expensive relative to labor, the demand for labor will increase as firms seek to substitute labor for capital.

  • The Wage Rate

    • The wage rate is determined by the intersection of supply of and demand for labor.
    • When labor is an input to production, firms hire workers.
    • The marginal benefit of hiring an additional unit of labor is called the marginal product of labor: it is the additional revenue generated from the last unit of labor.
    • Thus, shifts in the demand for labor are a function of changes in the marginal product of labor.
    • In the long run, the supply of labor is a function of the population.

  • Marginal Revenue Productivity and Wages

    • When the supply of labor increases the equilibrium price falls, and when the demand for labor increases the equilibrium price rises.
    • In the long run the supply of labor is a simple function of the size of the population, so in order to understand changes in wage rates we focus on the demand for labor.
    • To determine demand in the labor market we must find the marginal revenue product of labor (MRPL), which is based on the marginal productivity of labor (MPL) and the price of output.
    • Conceptually, the MRPL represents the additional revenue that the firm can generate by adding one additional unit of labor (recall that MPL is the additional output from the additional unit of labor).
    • Thus, workers earn a wage equal to the marginal revenue product of their labor.

  • Changes in Equilibrium for Shifts in Market Supply and Market Demand

    • A shift in the supply or demand of labor will cause a change in the market equilibrium.
    • Labour supply curves are derived from the 'labor-leisure' trade-off.
    • Considering this tradeoff, workers collectively offer a set of labor to the market which economists call the supply of labor.
    • We have already seen that the demand for labor is based on the marginal product of labor and the price of output.
    • All of the above may cause the demand for labor to shift and change the equilibrium quantity and price of labor.

  • Conditions of Equilibrium

    • Equilibrium in the labor market requires that the marginal revenue product of labor is equal to the wage rate, and that MPL/PL=MPK/PK.
    • The labor market differs somewhat from the market for goods and services because labor demand is a derived demand; labor is not desired for its own sake but rather because it aids in producing output.
    • The MRPL represents the additional revenue that a firm can expect to gain from employing one additional unit of labor - it is the marginal benefit to the firm from labor.
    • Under the above assumptions, the MRPL is decreasing as the quantity of labor increases, and firms can increase profit by hiring more labor if the MRPL is greater than the marginal cost of that additional unit of labor - the wage rate.
    • The curved line represents the falling marginal product of labor, the y-axis is the marginal product/wage rate, and the x-axis is the quantity of labor.

  • Marginal Product of Labor (Physical)

    • The marginal product of labor is the change in output that results from employing an added unit of labor.
    • In economics, the marginal product of labor (MPL) is the change in output that results from employing an added unit of labor.
    • gives another example of marginal product of labor.
    • The second column shows total production with different quantities of labor, while the third column shows the increase (or decrease) as labor is added to the production process.
    • This table shows hypothetical returns and marginal product of labor.

  • Labor Union Impacts on Equilibrium

    • A labor union is an organization of workers who have banded together to achieve common goals.
    • The primary activity of the union is to bargain with the employer on behalf of union members and negotiate labor contracts.
    • The effect of unions on the labor market equilibrium can be analyzed like any other price increase.
    • If employers (those who demand labor) have an inelastic demand for labor, the increase in wages (the price of labor) will not translate into a drop in employment (quantity of labor supplied).
    • Examine the role of unions and collective bargaining in labor-firm relations

  • Marginal Product of Labor (Revenue)

    • The marginal revenue product of labor is the change in revenue that results from employing an additional unit of labor.
    • The marginal revenue product of labor (MRPL) is the change in revenue that results from employing an additional unit of labor, holding all other inputs constant.
    • The marginal revenue product of a worker is equal to the product of the marginal product of labor (MPL) and the marginal revenue (MR) of output, given by MR×MP: = MRPL.
    • Because the MRPL is equal to the marginal product of labor times the price of output, any variable that affects either MPL or price will affect the MRPL.
    • Define the marginal product of labor under the marginal revenue productivity theory of wages

  • Measuring the Unemployment Rate

    • The labor force is the actual number of people available for work; economists use the labor force participation rate to determine the unemployment rate.
    • In an economy, the labor force is the actual number of people available for work.
    • The unemployment rate is measured using two different labor force surveys.
    • U1: the percentage of labor force unemployed for 15 weeks or longer.
    • U2: the percentage of labor force who lost jobs or completed temporary work.

  • The Labor Movement's Early Years

    • Labor's rise did not come easily; the movement had to struggle for more than a century and a half to establish its place in the American economy.
    • Since the early labor movement was largely industrial, union organizers had a limited pool of potential recruits.
    • The first significant national labor organization was the Knights of Labor, founded among garment cutters in 1869 in Philadelphia, Pennsylvania, and dedicated to organizing all workers for their general welfare.
    • AFL labor organizers faced staunch employer opposition.
    • The labor movement suffered a setback in 1905, when the Supreme Court said the government could not limit the number of hours a laborer worked (the court said such a regulation restricted a worker's right to contract for employment).