Since the demand for labour is highly seasonal, demand is depicted in terms of two seasons, the peak and the slack. The number of such categories could be increased to capture some middle ranges; however the nature of the analysis would be essentially the same. For simpUcity, only two seasons are included.
For each season two aspects of demand for labour are distinguished. First, there is the demand for workers and second, the demand for labour days. Due to the falling marginal productivity of labour, the demand for the number of workers will be a decreasing function of the wage rate. Similarly, the demand for labour days (or in other words, number of workers each day) will be a decreasing function of the wage rate.
Determination of the equilibrium wage rate: peak season
In each season, the wage rate and the number of workers employed will be determined by the intersection of the functions describing the supply of 'workers' and the demand for 'workers' during the season. In Figure 5.2(a), S ^ R ^ shows the supply of workers and DvvpQwp shows the demand for workers during the peak season. They intersect to give the equilibrium wage rate O W j and the number of workers employed is O L j .
The supply curve of 'workers' is drawn with a discontinuity at point 'P' close to the equilibrium point, to reflect the fact that in mral areas few workers are totally unemployed in the peak season. Therefore it is likely that the workers who are not employed have a much higher supply price. The supply curve of 'days' has a corresponding discontinuity at point 'Q'.
Figure 5.2 Peak season wage determination in the female labour market on the basis of separate demand and supply for workers over a season and on each day
(a) (b)
0 Li Number 0 of workers
Note: Horizontal axes in figure (a) and (b) do not have the same scale
Li Sz N u m b e r o f d a y s
Figure 5.2(b) shows the demand for labour each day (D^pOdp^ supply of labour days (S^R^j) as functions of wage rate per day. From the demand and supply curves of labour days (in contrast to workers), it can be seen how much of the days will be hired at the equilibrium wage rate OW]^ and how much may remain unemployed. The total time hired is less than the maximum available at this wage rate and there is some underemployment In Figure 5.2(b), OL2 amount of days will be used and L2S2 is not hired.
The underutilisation of days occurs because the equilibrium wage rate equating the number of workers demanded during a season with their supply, is not a wage rate which would clear the supply of labour every day. The number of workers demanded in the peak season is such that their total labour time supplied each day cannot be fully utilised. The demand for workers during a season is based on factors different firom the demand for labour every day. The reasons of this speciality in demand is explained below.
The peak season is spread over a few weeks. During these weeks, all the potential employers will wish to hire workers. As a result the wage rate is bid up so
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employers are not sure about one another's needs and cannot identify exactly at which point in time within the peak period simultaneous demand will be greatest. As a consequence the wage rate is kept at the higher level of peak point equilibrium over a plateau of peak weeks.
Within these weeks demand for workers on each day may vary. But it is not a practical proposition to arrive at a new equilibrium wage rate each day and employ workers offering to work at that wage even if that would be a lower wage rate than given by the seasonal equilibrium. The hiring practices in the female labour market are responsible for this. Hiring does not take place at a central location where all employers and female workers gather and bidding of wage rate takes place, as is often the case with the hiring of male casual workers. Given social customs, women would be unlikely to go to a market place to offer their services for hire. As a result, it takes time and effort to contact a worker when she is required. Zohir (1989) argues that daily wage determination and daily employment may not be feasible even for the male labour market.
Hiring in the female labour market is usually done in such a way that the same worker continues for a few weeks. They are usually given the responsibility of finishing a specific job. Renewed hiring each day would have many problems. The workers work within the household premises. Therefore the employment of the same worker contributes to familiarity between the worker and the household members. The job would have to be explained to a worker everyday if a new worker was engaged.
The overbidding of wage rates to create an excess supply of days over those needed is also necessitated by the fact that casual employment causes some uncertainty about the availability of workers. This is more important for female workers than for male workers. Women with responsibility for child care and housework must make arrangements for substitutes before they take up wage
employmenL As a result, to meet the requirement of any season, if the actual number of workers required simultaneously is 'n', then n+m workers need to be retained in the labour market so that at least n are readily available.
In sum, the marginal benefit of retaining one more female worker are higher than the direct marginal productivity of a day of her labour input. As a consequence, she is offered a higher wage but is not fully employed.
Determination of the equilibrium wage rate: slack season
In the slack season we can think of the employers using only those workers who have the lowest reservation wage rates. Employers without urgency for their services can spend time informing them and waiting until these workers are free, if they had been working with other employers. There are, however, limits to such flexibility and situations similar to the peak season arise; a few workers need to be retained even if the slack in labour demand is reflected in a lower demand for workers as well as their labour days compared to the peak period. This is described in figure 5.3. The supply curve is assumed to remain unchanged.
Figure 5.3 Determination of the wage rate and employment in the slack season compared to the peak season
Wage rate per day
0 (a) Rvv Dwp Dws w, . \ y p W2 S w l \ ! \ jQws 1 Q-p 1 1 L2 L| Number 0 H4 of workers
Note: HorizonUil axes in figure (a) and (b) do not have ihc same scalc
Number of days