Análisis de Función, Actividades y Espacio

A person’s choice of whether or not to enter the labor force is based on a multitude of factors, the most obvious being the wage that can be earned and the

individual’s non-labor income. Increases in the first raise the probability of participating in labor markets, while increases in the second result in a lower probability of working.

Other factors which may come into play include the individual’s private valuation of leisure time, other responsibilities, and health status.

2.4.1. General Labor Market Models

Much research has focused on the individual choice of whether or not to work; however, most people do not make this decision in isolation. The vast majority of people, either in the work force or out of it, are members of a multi-person household. Because of this, the characteristics, abilities, and responsibilities of other household members come into play. For example, a person whose spouse has a large earned income would be less likely to work than someone with the same characteristics whose spouse makes significantly less. In the case of a nuclear family with young children present, the husband and wife may make a joint work choice, with the individual with higher earning potential working outside the home, while the other remains with the children. In other cases, adults may alternate shifts to allow one of them to be at home at all times or may turn to other individuals for the care of their children. No matter what work choice is made, the characteristics of the household and its members are sure to influence that choice.

More recent models of labor supply often contain two parts. In the first, a potential worker decides whether or not to take part in the labor market. This choice, known as the participation decision, depends on his own private valuation of his time. This valuation, or “shadow” wage (w*), is the minimum wage at which the individual would choose to participate in the labor market. For those who choose not to participate,

the opportunity cost of their time is governed by their private “shadow” wage (Deaton & Muellbauer, 1980; Heckman, 1974).

If the worker’s desired labor supply is defined as L*, then the observed labor supply is defined as    < ≥ = L₀*_ifif _w w w_w*_* L (2.5)

Those who choose to participate in the employment market do so because the wage they receive meets or exceeds their “shadow wage.” As such their earned wage determines the opportunity cost of their time. Increases in the market wage make it more likely that the prevailing wage is at or above any individual’s shadow wage and therefore increase the probability of someone participating in the labor market.

For those who have already chosen to participate in the market, an increase in the wage rate has two effects, known as the substitution and income effects. The substitution effect occurs because increases in the wage rate increase the opportunity cost, or price, of leisure relative to consumption goods. When this happens, the worker will tend to choose less leisure and more other goods based on the relative price change. However, increases in wages also increase the earning potential of individuals, giving them more real income. The higher level of income, combined with the fact that leisure is, by its nature, a normal good, creates the income effect, whereby the individual chooses to consume more leisure, which means working less. These two effects work in opposite directions, making it unclear what the overall impact of a wage increase will be. However, according to conventional wisdom, at low levels of income, additional consumption is preferable to more leisure because the marginal value of consumption goods is higher at low levels of

consumption, and the substitution effect dominates the income effect. Thus an increase in the wage rate increases the number of hours worked for workers with low income levels. For those with high levels of income, the opposite is believed to be true, as they have greater levels of consumption goods, making the marginal utility of additional consumption low relative to the marginal value of leisure. This results in a situation where increases in wage rates can cause a decline in work hours.

2.4.2. Rural Labor Market Models

Rural labor market models are more complex than general models of labor markets. In rural areas individuals have both more constraints and more choices than their urban counterparts. The geography of rural areas often limits the scope of available jobs and employers; however, this same geography also provides an additional

employment choice not available to urban labor market participants, that of working one’s own land.

While participation in labor markets in general depends on the characteristics of the market, individual and household, participation for farm families also depends on the characteristics of the farm, including “the farm’s financial status”(Findeis, Lass, & Hallberg, 1991). This adds an additional layer of complexity to the analysis of

participation in labor markets. Now, instead of simply choosing between market work and leisure, a potential worker has the additional choice to work on his own farm. This results in a greater level of complexity in the theoretical model.