# Work (economics)

Work ( English labor ) is in the economics a production factor that any human activities with the aim of income generation comprises.

## General

Work can also be defined as any human activity that is directed towards the satisfaction of other people's needs in return for payment . In this sense, the economic definition does not include, for example, unpaid work in the subsistence economy , work performed without consideration such as housework and family work , do-it-yourself work or favors , as well as non-profit or voluntary activities, but rather reduces the term work to gainful employment .

In addition to human labor, economics knows the soil as a further original production factor. Together with the derivative production factor capital , they form the three classic production factors. Since these production factors are scarce , they have a price in classical economics which is called wages for labor , rent for land, and interest for capital . In recent times, some authors have also counted knowledge as one of the factors of production.

## history

For Adam Smith , in the standard work The Wealth of Nations , published in 1776, human labor was the source of wealth and not the agricultural land. He assumed that the division of labor would increase productivity and compared the economy based on the division of labor with the so-called “ Robinson Crusoe economy”. The decisive result of an economy based on the division of labor are possible increases in productivity and greater efficiency increases. For the population pessimist Thomas Robert Malthus in 1798, people were by nature "lazy, lazy and averse to any work unless necessity forces them to". In 1803, Jean-Baptiste Say put the work with land and capital on the same level for the first time, and in 1828 added the production factor “entrepreneurial activity” to the factor system. Strictly speaking, entrepreneurial activity is also work; today it is recognized in business administration as a derivative production factor.

In 1837 David Ricardo gave the factor labor a special position through his labor theory of value. In 1875, John Stuart Mill distinguished between productive ( agriculture , industry , transport , trade ), indirectly productive ( education , training , science , public services ) and unproductive work. The latter makes “society and the world as a whole not richer in material products, but poorer”. He understood it to be entertainment by actors , musicians , opera singers or dancers .

Work already played a central role for Karl Marx in the Paris manuscripts of August 1844 . He looked at work both in the economic (work as a commodity and " added value ;" see abstract work ) and in the philosophical - anthropological (work as " metabolism between man and nature" (Marx); see work (philosophy) , work (social sciences) ) as well as in the political sense (see ibid.). For Marx, “ (concrete) useful work ” is the formation of use values and the use of creative power in the exchange relationship between man and nature, which, in contrast to classical economics, cannot be measured with exchange value . Marx placed his understanding of human labor and the importance that changes in the mode of production have on humans ( alienated labor ) at the center of his theories. The starting point of his labor value theory in 1867 was the distinction between use value and exchange value. On the other hand, in connection with abstract work (see above) - Marx contrasts this term with that of concrete, useful work - he spoke of an “ alienation of man from work”. The worker no longer experiences the goods as his own, but as foreign ones, to the production of which he only contributes in part. In a capitalist economic system (→  market economy ) the work would only serve the achievement of market- enabled order amounts . The worker had his labor power to the capitalists to maintain its existence sell and add the Good addition to the living wage corresponding work a value in, but the appropriating to the capitalist. Building on this, Marx justified his idea of ​​the theory of labor values ​​and his theory of exploitation .

In 1930, Adolf Weber described work as the epitome of human effectiveness ( willpower , physical strength and insight ) and production factor .

While classical economics looked at work primarily from a natural-scientific point of view, modern teaching recognized that workers are not just factors of production, but represent the actual purpose of economic activity and that work behavior cannot be explained by the rational principle alone . Today, work is also viewed from a socio-economic perspective and the world of work is examined through work sociology and work psychology .

## labour market

Typical labor market diagram: It shows the factor labor and its factor price (wage)

The labor market is a typical factor market , on which the wage is the factor price . On the labor market, the labor supply of employees meets the labor demand of employers ; the price on the labor market is wages (wages or salaries). For the demanders of labor, the factor price represents factor costs , for the labor providers it is labor income . A worker's time budget , which can be divided at will, consists either of the work available or of free time . The personal freedom to divide one's time for different purposes is therefore subject to time restrictions ${\ displaystyle T}$ ${\ displaystyle H}$ ${\ displaystyle F}$

${\ displaystyle T = \! \, H + F}$.

The demand for labor is determined by wages , capital , labor input and marginal costs and can be summarized as ${\ displaystyle W}$ ${\ displaystyle K}$ ${\ displaystyle L}$ ${\ displaystyle G}$

${\ displaystyle \! \, {\ frac {W} {G_ {L} (K, L)}} = {\ frac {K} {G_ {K} (K, L)}}}$,

which means that a profit-maximizing company modifies its labor and capital input until the marginal costs that would arise in the production of another unit of goods through labor are identical to those that arise in production through capital.

If the labor supply is higher than the labor demand, then there is unemployment ( underemployment ), conversely, there are vacancies and overemployment .

Work is measured as a homogeneous quantity in working hours, so that work can be represented as follows:

${\ displaystyle {\ mbox {Work}} = {{\ mbox {Worker}} \ cdot {\ mbox {Working hours}}}}$

For example, if the working hours are reduced with the same number of workers, the work output is reduced and vice versa.

## Types of work

In general, a distinction can be made between paid and unpaid work. Both have the following criteria in common:

Physical and mental work is regularly combined; their classification chooses to focus on the operation ( leadership skills or detailed competence ), but also takes into account aspects of the health and load of work safety . By exercising control and decision-making tasks, executive work is also increasingly entrusted with management tasks ( job enrichment ). Unskilled and semi-skilled workers have no completed vocational training , semi- skilled workers have limited training (between three months and less than two years), and unskilled workers can prove neither vocational training nor a semi-skilled worker . The tax classification differentiates according to how high the level of authority is.

### Paid work

The work performance and the work suffering of the employee are compensated by the wages . Studies have shown that employees generally spend 1.5 to 3 hours of their daily working time on non-work-related (private) activities that are also remunerated.

### Unpaid work

Since the second half of the 20th century, the understanding has gradually gained acceptance that the unpaid production of goods and services also contributes to the efficiency of an economy. But to this day household production is viewed as a satellite system and not shown in the national accounts.

In 2016, the following average times were spent on work in the OECD :

Average work

in minutes per day (2016)

OECD

total

in % Men in % Women in %
paid 271.9 57.1 328.5 70.5 215.3 44.2
unpaid 204.6 42.9 137.6 29.5 271.7 55.8
total 476.5 466.1 487.0

The OECD records the average time spent per day in paid and unpaid work. Depending on the country, there is a different degree of gap between the sexes:

OECD Men Women
Average work

in minutes per day (2016)

total paid unpaid total paid in % unpaid in % total paid in % unpaid in %
OECD total 476.5 271.9 204.6 466.1 328.5 70.5 137.6 29.5 487.0 215.3 44.2 271.7 55.8
Germany 447.5 231.2 216.3 445.4 281.6 63.2 163.8 36.8 449.7 180.9 40.2 268.8 59.8
Austria 508.9 306.8 202.1 500.1 364.8 72.9 135.3 27.1 517.7 248.8 48.1 268.9 51.9
Sweden 475.5 295.3 180.2 475.9 321.9 67.6 154.0 32.4 475.2 268.7 56.5 206.5 43.5
Norway 447.0 260.1 186.9 454.2 291.8 64.2 162.4 35.8 439.8 228.4 51.9 211.4 48.1
Turkey 488.5 242.0 246.5 476.7 360.3 75.6 116.4 24.4 500.3 123.7 24.7 376.7 75.3

## Development of work

Over the centuries, the nature of work has changed with a view to increasing specialization . There was an increasingly pronounced division of labor and the associated increases in productivity. At the same time, both the exchange of goods in order to receive goods that the individual household does not produce itself and the total amount of goods continued to increase.

With industrialization and the rise of factory work, the production process was broken down into ever smaller individual steps. In contrast to the previous manual work, not every work step had to be mastered by every worker. This strong specialization of the workforce enabled them to develop more skill and routine. Efficiency gains increased through increased experience and learning effects. Especially at the beginning of the industrial age, there was a large potential workforce and hardly any social security due to rationalization in agriculture and increased population growth. Often, wages were around the subsistence level. With the later strengthening of the trade unions , wages were increasingly set through collective agreements. If there is a collective bargaining agreement, collective wages increasingly form the lowest wage limit, even if many unemployed people are willing to work for a lower wage.

The production factor work, or work itself, also changed over time. While in the pre-industrial age work was mainly performed in agriculture, machine-based forms of work increasingly appeared with the beginning of industrialization. This does not contradict the basic classification of the term work. Machines and automats are tools or means of production and today contribute significantly to efficiency and quality, especially in monotonous and repetitive work steps. So far, they can only be produced through the use of human labor.

Due to increasing rationalization and automation in modern industrial nations, qualified and knowledge-based work is becoming more and more important.

According to US economist Jeremy Rifkin , the digital revolution will make work disappear in the long term. Rifkin emphasizes that the non-profit sector is becoming increasingly important.

Richard Buckminster Fuller noted in his book Critical Path (1981) that unemployment is based directly on the technical possibility of ephemerization . Norbert Wiener , a co-founder of cybernetics , made a similar statement , who pointed out in 1947 that the progress in computer technology would trigger mass unemployment.

The French social philosopher André Gorz also believes that for centuries more and more jobs have been done by machines. The resultant increase in productivity means that less human labor is required even as production increases. The idea of full employment becomes an illusion. That is why Gorz advocates a utopian basic income that enables people to live without working. Everyone receives a monetary basis to realize themselves. How this basic income should be generated in the state and how the few workers should finance the pensions of the pensioners , he left open.

As early as 1958, Gutenberg noticed that automation was alienating work . According to Witte, the importance of the production factor labor decreases, that the factor capital increases through automation or mechanization .

## The job offer

Normal labor supply curve
Backward sloping job supply
Abnormal course without a social system

The main determinants of the supply of work are the size of the population, the percentage of people actually participating in the labor force, the average annual number of hours worked by employees, the quality and quantity of the work performed and the qualifications of the workforce. From the population point of view, the labor supply depends on fertility , mortality and net migration . The number of economically active people is determined by people's attitudes towards work and leisure, the view of work as a meaning in life and the possibility of realizing oneself or work as a means to the purpose of generating income. The number of economically active persons can e.g. B. by the entry of baby boomers into working life or increasing employment of women.

The supply curve of good work has, as with other goods also, generally a rising course, since rising price more work is offered on the labor market. For the production factor labor, the supply curve, as illustrated in the adjacent graphics, can have a typical upward curve as well as a backward sloping curve. This is justified by the preference weighting of the employee for leisure on the one hand and work for income generation and consumption on the other. The wage rate represents the price with which the worker values ​​his free time, since he foregoes money in the amount of the wage rate in order to gain more free time. As wages rise, the price of leisure time increases from the employee's point of view. On the one hand, the higher wages represent an incentive for the employee to increase the number of jobs available and thereby forego free time (substitution effect). On the other hand, the employee's purchasing power increases due to the higher wage rate. He can now consume the same amount as before with less work (income effect). If the income effect exceeds the substitution effect, the result is that less work is offered overall at a higher wage rate. This results in the backward running labor supply curve. The model assumes, however, that the employees can organize the proportion of work and free time according to their own ideas, which is not possible in practice due to the requirements of the company .

The labor supply curve can also show an abnormal course, as in the previous example, mirror-inverted, as in the graphic opposite. This trend can occur in economies without a minimum social security, such as B. occur in developing and emerging countries. First, as in the normal course, the labor supply decreases as the wage rate falls. If the wages to be achieved are too low to survive, the workers concerned are forced to work more in order to be able to secure their livelihood. There is an expansion of the job offer in this area.

## Labor and investment / technology

Labor supply curve after decline in investment
Labor supply curve with technical progress

A change in capital expenditure leads to a shift in the demand for labor. If investment is reduced, fewer workers or older machines are available, which in turn reduces labor productivity. The labor demand curve is shifting to the left; H. companies are asking for less workers and real wages are falling.

Technological progress also leads to a shift in the demand for labor. Workers are more productive and the demand for labor from companies increases. The labor demand curve is shifting to the right and real wages are rising. When the demand for work increases, however, a distinction must be made according to the qualifications of the workers. An increase in investments or the effectiveness of technical progress usually increases the demand for qualified workers and decreases the demand for unskilled workers.

## Regulation of work

If the production factor labor is practically freely tradable as a commodity, one speaks of a free labor market. A free labor market is demanded primarily by neoclassics with reference to efficient labor markets with comparatively low unemployment such as in the USA and Great Britain. In continental Europe, the labor factor is more strictly regulated. Here, minimum wages are increasingly stipulated that are above the nominal wages , dismissal protection regulations are made more employee-friendly, and working conditions and pay levels are more often negotiated across the board between collective bargaining parties. There are also more extensive co-determination and say rights for employees, such as B. in Germany through the Works Constitution Act and the Codetermination Act. Overall, the labor market has a higher level of regulation here.

## literature

• Rainer Fischbach: Volkswirtschaftslehre I, 12th edition, Management knowledge for study and practice, Oldenburg, 2003
• Edwin Böventer, Richard Illing: Introduction to Microeconomics, 9th edition, Oldenbourg, 1997
• Paul A. Samuelson, William D. Nordhaus: Economics - Fundamentals of Macro and Microeconomics, 8th edition, Cologne, 1987
• Helge Majer: Modern Macroeconomics: 1st Edition, Oldenbourg, 2001
• Joseph Stiglitz: Economics, 2nd edition, Oldenbourg, 1999
• Karl Marx: Das Kapital - Critique of Political Economy. The production process of capital, 4th edition, Cologne, 2003
• Stephan Laske, Manfred Schweres (Ed.): Work orientation in economics - diversity as a crisis indicator or as a potential? Series of publications on interdisciplinary ergonomics, Volume 2. Munich and Mering, 2014

## Individual evidence

1. Horst Hanusch / Thomas Kuhn / Uwe Cantner , Volkswirtschaftslehre 1 , 6th edition, Berlin, 2002, p. 12
2. Hartwig Bartling / Franz Luzius / Frank Fichert, Grundzüge der Volkswirtschaftslehre , 2019, p. 160
3. Olaf Katenkamp, Quo vadis knowledge management , in: Journal of Labor Research, work design and labor policies, No. 1/2003, p 19
4. ^ Adam Smith, An Inquiry into the Nature and Causes of Wealth of Nations , 1776, translation Claus Recktenwald, 1995, p. 3
5. ^ Thomas Robert Malthus, An Essay on the Principle of Population , 1798, translation 1977, p. 157
6. ^ Jean-Baptiste Say, Traité d'économie politique , 1803, p. 85
7. ^ Jean-Baptiste Say, Comprehensive Textbook of Practical Economics , German translation, 1845, p. 121
8. David Ricardo, Principles of Economics and Taxation , 1837, pp. 2 ff.
9. ^ John Stuart Mill, Principles of Political Economy with some of their Applications to Social Philosophy , 1875, p. 29
10. Karl Marx, Das Kapital : Critique of Political Economy . The production process of capital , 4th edition, Cologne 2003, p. 186
11. Karl Marx, Das Kapital: Critique of Political Economy , Volume 1, 1867, 1985, p. 50
12. Karl Marx, Das Kapital : Critique of Political Economy . The production process of capital , Cologne 2003, p. 196
13. ^ Adolf Weber, Allgemeine Volkswirtschaftslehre , 1930, p. 67
14. ^ Wilhelm Hasenack / W. Kilger / Johannes Fettel / Hermann Böhrs / Erich Kosiol / Josef Kolbinger / Fritz Ottel / Karl Hax / August Marx, work and wages as a research object in business administration , 1962, p. 44
15. Ronald G. Ehrenberg / Robert S. Smith, Modern Labor Economics: Theory and Public Policy , 1997, p. 72 f.
16. ^ Rainer Fischbach / Klaus Wollenberg, Volkswirtschaftslehre 1 , 2007, p. 29
17. ^ Roland Paulsen: Non-work at work: Resistance or what? In: Organization . tape 22 , no. 3 , December 26, 2013, p. 351-367 , doi : 10.1177 / 1350508413515541 ( sagepub.com [accessed December 16, 2017]).
18. Maria Funder: Sociology of the economy: An introduction . Munich 2011, p. 162 .
19. a b OECD: Time spent in paid and unpaid work, by sex.OECD Stat, 2016, accessed on March 23, 2017 .
20. Horst Hanusch / Thomas Kuhn / Uwe Cantner, Volkswirtschaftslehre 1 , 6th edition, Berlin, 2002, p. 14
21. Stuttgarter Zeitung , April 29, 2005: Interview about the end of work with Jeremy Rifkin ( Memento of May 3, 2005 in the Internet Archive ).
22. Jeremy Rifkin: The End of Work , ISBN 3-596-16971-2 , pp. 205-208.
23. Stuttgarter Zeitung , April 29, 2005: Interview about the end of work with Jeremy Rifkin ( Memento from May 3, 2005 in the Internet Archive ), p. 4 ( Memento from December 14, 2008 in the Internet Archive )
24. . Attac over Gorz ( Memento from September 27, 2007 in the Internet Archive )