Supply of Labor to the Economy: The Decision to Work

Abstract

165 This and the next four chapters will focus on issues of worker behavior. That is, chapters 6–10 will discuss and analyze various aspects of labor supply behavior. Labor supply decisions can be roughly divided into two categories. The first, which is addressed in this chapter and the next, includes decisions about whether to work at all and, if so, how long to work. Questions that must be answered include whether to participate in the labor force, whether to seek part-time or full-time work, and how long to work both at home and for pay. The second category of decisions, which is addressed in chapters 8–10, deals with the questions that must be faced by a person who has decided to seek work for pay: the occupation or general class of occupations in which to seek offers (chapters 8 and 9) and the geographical area in which offers should be sought (chapter 10). This chapter begins with some basic facts concerning labor force participation rates and hours of work. We then develop a theoretical framework that can be used in the analysis of decisions to work for pay. This framework is also useful for analyzing the structure of various income maintenance programs.