Most labor economists believe that many adult males are on the vertical section

Question

Most labor economists believe that many adult males are on the vertical section of their labor supply curves. Explain when and why someone's supply of labor curve would be vertical, using the concepts of income and substitution effects.

Source: Robert Whaples, "Is There Consensus among American Labor Economists? Survey Results on Forty Propositions," Journal of Labor

Research,

Vol. 17, No. 4, Fall 1996.

Suppose an adult male is on the vertical section of their labor supply curve.

If the wage decreases, then the substitution effect would prompt the individual to work (The same number of // fewer // more) hours and the income effect would prompt the individual to work (The same number of // fewer // more) hours, with the size of the substitution effect being (The same number of // fewer // more) the size of the income effect (in absolute value).

THIS is a MICROECONOMICS Problem. - If need be, refer to Chapter 17: The Markts for Labor and Other factors of Production - "Microeconomics (6th edition) (Hubbard, O'Brien)

Explanation / Answer

Given that the adult male is on the vertical section of the supply curve. This implies that the worker will be working for same number of hours even if the wage rate is increased.

Hence, when the wage rate decreases, substitution effect would prompt the individual worker to work for fewer number of hours. Income effect would prompt the individual worker to work for the same number of hours. The size of the substitution effect will be smaller than the size of the income effect. This implies that Income effect will be stronger and the worker will remain on its vertical section of supply curve.

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