Indivisibility of labor
Encyclopedia
Indivisibility of labor in macroeconomics
refers to the concept that labor cannot be used in continuous units but must be purchased from workers in blocks of time such as eight hours a day or forty hours a week. This model can result in differences in the number of hours worked even though the workers are assumed to be identical: some workers may be unemployed while others are fully employed or even overemployed.
The opposite presumption would be that that labor may be purchased in continuous units, that workers are identical, and workers' utility functions as concave in leisure and income. Under this model, an optimal outcome is for all workers to work some of the time: all workers are at least partially employed and none are unemployed.
Labor is sold in blocks rather than in continuous units because there are fixed costs to the employer attributable to each employee and fixed costs to the employee attributable to each employer.
The concept of labor as indivisible has been introduced by Gary Hansen, a macroeconomist at UCLA, who describes wages as "lumpy" in an attempt to supplement Real business cycle theory. Because cost
s occur in lumps, there is unemployment
. It has since then be used in variety of economic theories, especially in Real business cycle theory.
Macroeconomics
Macroeconomics is a branch of economics dealing with the performance, structure, behavior, and decision-making of the whole economy. This includes a national, regional, or global economy...
refers to the concept that labor cannot be used in continuous units but must be purchased from workers in blocks of time such as eight hours a day or forty hours a week. This model can result in differences in the number of hours worked even though the workers are assumed to be identical: some workers may be unemployed while others are fully employed or even overemployed.
The opposite presumption would be that that labor may be purchased in continuous units, that workers are identical, and workers' utility functions as concave in leisure and income. Under this model, an optimal outcome is for all workers to work some of the time: all workers are at least partially employed and none are unemployed.
Labor is sold in blocks rather than in continuous units because there are fixed costs to the employer attributable to each employee and fixed costs to the employee attributable to each employer.
The concept of labor as indivisible has been introduced by Gary Hansen, a macroeconomist at UCLA, who describes wages as "lumpy" in an attempt to supplement Real business cycle theory. Because cost
Cost
In production, research, retail, and accounting, a cost is the value of money that has been used up to produce something, and hence is not available for use anymore. In business, the cost may be one of acquisition, in which case the amount of money expended to acquire it is counted as cost. In this...
s occur in lumps, there is unemployment
Unemployment
Unemployment , as defined by the International Labour Organization, occurs when people are without jobs and they have actively sought work within the past four weeks...
. It has since then be used in variety of economic theories, especially in Real business cycle theory.