IntrotoLaborDemand.2011A

IntrotoLaborDemand.2011A - Econ145.IntrotoLaborDemand.2011A...

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1 The corporation is a legal entity distinct from the stockholders, owners, and officers who are not liable for the firm’s debts. Econ145.IntrotoLaborDemand.2011A John Pencavel INTRODUCTION TO THE DEMAND FOR LABOR In the monthly household survey, each employed individual is asked whether he or she was employed during the reference week (which is the week containing the 12 th of the month) by a private company, a nonprofit organization, by government, or was he or she self-employed. If self- employed, the individual is asked “Is this business incorporated?” 1 Wage & salary workers consist of the sum of 1. those employed by a private company including a nonprofit organization 2. those employed by government 3. those self-employed by an incorporated business (i.e., they are treated as employees of their own business) Distribution of employment (workers aged $ 16 years) by class of worker in April 2011 in thousands (not seasonally adjusted): NON- AGRICULTURE AGRICUL TURE ALL INDUSTRIES wage + salary workers in private employment 107,702 1,198 108,900 wage + salary workers in government employment 21,112 21,112 all wage + salary workers 128,814 1,198 130,012 self-employed workers 8,693 830 9,523 unpaid family workers 94 33 127 all workers 137,601 2,061 139,662 http://www.bls.gov/web/empsit/cpseea22.pdf
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2 In all industries, % self-employed = (9,523)/(139,662) = 6.82 ; % government workers = (21,112)/(139,662) = 15.12 Thus most U.S. workers are employees in private employment. Percent (unincorporated) self-employed 1948-2009 YEAR NON-AGRICULTURE AGRICULTURE ALL 1948 12.0 61.1 18.5 1960 10.4 51.2 13.8 1970 6.9 52.3 8.9 1980 7.3 48.8 8.7 1990 7.5 42.8 8.5 2000 6.8 41.0 7.5 2011 6.3 40.3 6.8 Selected from “Self-employment in the United States: an update”, Monthly Labor Review , July 2004, pp. 13- 23. 2008 figures from BLS web site In most firms, Capital hires Labor, i.e., the individual who supplies the capital acts as the entrepreneur and hires workers (perhaps indirectly through managers) and an employer-employee relationship develops. We assume employment-at-will. We illustrate the analytical methods used in this course by understanding the determinants of the number of workers hired by a price-taking profit- maximizing employer. This is a model of the micro unit, the firm. Initially, assume that the firm uses labor as the only input in production and the firm’s price (output and input) environment is given and beyond its control. Suppose E = the number of workers or the number of worker-hours, w = the wage per worker or per worker-hour.
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3 In this reference model, E is selected by the employer to maximize Π (E) = R(E) - w.E - C Π = net revenues or profits, R = gross revenues and C = total nonlabor costs.
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IntrotoLaborDemand.2011A - Econ145.IntrotoLaborDemand.2011A...

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