Over-Supply of Labor: Behavioral Economic Roots of Labor Supply, Overwork and Overemployment

Global Business & Economics Review, 2002

Posted: 24 Jan 2010

See all articles by Lonnie Golden

Lonnie Golden

Pennsylvania State University - Abington College; Economic Policy Institute; Project for Middle Class Renewal

Morris Altman

University of Newcastle

Date Written: 2002

Abstract

Contrary to the neoclassical theory of labor supply, it is argued here that the supply of labor is best modelled as a function of target market income and target non-market time which are, in turn, structured by an individual's hierarchy of needs. Thus, increasing wage rates need never result in a reduction of labor supply. Moreover, greater labor supply, even when it is a product of a worker's preferences, as well as when it is a product of work hours constraints imposed by the firm on the worker, can generate systematic and sustained welfare losses in the form of overwork and overemployment, respectively. These represent market failures not easily captured by conventional economic theory. Some of the microeconomic and macroeconomic sources of contemporary increases in both overwork and overemployed and also discussed.

Keywords: Labour supply, Income, Time, Wage rates, Work hours, Market failure, Overemployment

JEL Classification: D03, J21, J22

Suggested Citation

Golden, Lonnie and Altman, Morris, Over-Supply of Labor: Behavioral Economic Roots of Labor Supply, Overwork and Overemployment (2002). Global Business & Economics Review, 2002. Available at SSRN: https://ssrn.com/abstract=1540242

Lonnie Golden

Pennsylvania State University - Abington College ( email )

1600 Woodland Rd.
Abington, PA 19001
United States
215-881-7596 (Phone)
215-881-7333 (Fax)

Economic Policy Institute ( email )

1660 L Street NW, Suite 1200
Washington, DC 20036
United States

Project for Middle Class Renewal ( email )

1408 W. Gregory Dr.
Urbana, IL 61801
United States

Morris Altman (Contact Author)

University of Newcastle ( email )

University Drive
Callaghan, NSW 2308
Australia

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