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Labour

The term ‘labour’ refers to all kinds of human efforts (both, physical and intellectual) which result in the production for which monetary payments are made. Thus, the services of a doctor, lawyer, accountant, etc. are all considered to be labour. However, the service of a housewife is not treated as labour. This is because, it is an act done out of love and affection, no monetary payment is received for it. For example: If a singer sings in an orchestra, it is labour, for which he would receive, same person, sings before his friends, it is not labour, as not monetary payment is received for it. This implies that any work done for the sake of pleasure or love does not amount to labour, despite the involvement of human efforts in it.
 
Substitution effect: Leisure will become more costly if there is an increase in wage rate as a single hour will become more expensive. So, substitute effort of leisure is labourer.
 
Income effect: An increase in wage rate increases the income of the labour. Hence demand for leisure increases. So, consumption of more leisure means less work.

Features of labour

  • ƒIt is inseparable from the labourer: This means that only the labour is sold whereas the producer of labour retains his capacity to work. It means a labourer has to work in person. He cannot stay at home and let his labour work in the work place.
     
    Example: A doctor renders his services to his patients. He sells his labour, but retains the capacity to work.
  • ƒLabour is perishable: Labour cannot be stored. A day’s work lost cannot be recovered by working on the subsequent day.
  • ƒLabour is human: Labour, as a factor of production, involves human efforts. Hence, psychological factors like leisure, motivation, laziness, etc. have an effect on the production process.
  • It differs in efficiency: All labour is not productive. The efficiency of labour depends on physical strength, skill, education, etc. However, efficiency can be improved by giving proper incentives and motivating the labourers.
  • ƒLabour has imperfect mobility: Labour doesn’t move easily from one occupation to another because of several factors like family and cultural background, limited educational and technical skills, lifestyle, housing and transport problems, language barriers, adaptability to new environments, etc.
  • ƒLaw of supply does not hold well in case of labour: Supply of labour and wage rate is directly related i.e., as the wage rate increases, the labourer will put in more hours of work and less hours of leisure (income effect). However, if the level of income rises beyond a certain level, the labourer reduces the supply of labour and increases his hours of leisure (substitution effect) i.e., he prefers to have more rest than earning money.
  • ƒWeak bargaining power: Labour has weak bargaining power, because it is highly perishable. A labourer cannot bargain more from his employer due to his illiteracy and unorganized existence.




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