Key Topics Covered “Producing” and maintaining workers Paid and unpaid labour in the home Reproduction, work, and gender The economic importance of households Closing the “little” circle of capitalism Income and expenditure
Key Terms Introduced reproduction household consumption labour supply discrimination sexism unpaid labour labour force participation labour market segmentation income expenditure
Reproduction: Where do Little Workers Come From??? For economists, “reproduction” is more than about sex and making babies! In the economic sense, reproduction means reproducing the ability of human beings to work and produce –Yes, this involves making babies! –But it also involves raising and training children –Caring for workers (food, shelter, rest) –Ensuring that the labour force is able to go back to work again the next day
The “Cost” of Workers In a way, the household is like a “factory” that produces workers. –Classical economists actually thought of it that way. How much does it “cost” to “produce” a new worker? –The cost of subsistence: that is, the cost of keeping workers alive and ready to work the next day. For classical economists: wages will tend to equal the cost subsistence – which is, after all, the “cost” of producing workers. –In reality, workers can win wages that are higher than subsistence wages. –But it’s not automatic and depends on their bargaining power (more on this in Session 7).
The Work of Households A great deal of productive work occurs inside the home. –Perhaps one-third of all economic work occurs in the household. –Child care, elder care, cooking, cleaning, household maintenance. Much of that work is unpaid, and most of it is done by women. Analyzing household work (who does it, how they do it, how is it valued) should be a central issue in economics. –But neoclassical economists tend to ignore household work, since it isn’t usually paid.
The Evolution of Household Labour Household work has evolved in recent years: 1.Mechanization of household work: appliances. 2.Commercialization of household work: purchases for money from nannies, cooks, take-out restaurants, cleaners, etc. 3.Socialization of household work: some tasks (like caring for children, the sick, and the elderly) are now partly performed through public services. These trends have both assisted, and reflected, women’s growing participation in the formal (paid) labour market. –In most developed countries, women’s participation is approaching that of men (especially young women).
Women’s Work: Paid and Unpaid Women carry an unfair burden of household work: –They do more of the work –They often do the less rewarding, less valued work (eg. cleaning, cooking, caring) This division of labour reflects sexist attitudes, reinforced by: –Religion ̶ Tradition –Economic pressures ̶ Violence & coercion Women’s heavier burden of homework undermines their paid work participation
The Wage Gap Women in the labour market earn about half as much over their working lives as men, reflecting three causes: –Discrimination: Women make less on average for performing the same job. –Segmentation: Women are concentrated in jobs that tend to pay less. –Working hours: Women work less paid hours over their lives than men (part-time work, career interruptions), mostly because of their home responsibilities.
Fighting for Equality It will take a multi-dimensional effort to improve women’s economic equality: 1.Men must be challenged to perform a fair share of unpaid work in the home. 2.Employers must be challenged to treat women more fairly at work: Access to good-paying jobs; employment equity Pay equity; equal wages for equal work Provisions to allow better work-family balance (time off, flexibility) 3.Governments must be challenged to provide more reproduction services (eg. child & elder care).
Economic Road Map: Closing the “Little Circle” of Capitalism (Ch.10) Where are we going, anyway?
Drawing the Map: The Core Elements So far, we have learned about several key economic concepts: –Workers and capitalists –Investment –Work and production –Consumption and reproduction –Profit Now we will now assemble them into a picture of the core “circle” of capitalism.
It all starts with our “capitalist” (or, more precisely, the “major owners and top managers”).
Seeking profit, he or she decides to make an initial investment (I).
The investment is used to purchase real capital goods and set up a workplace. But notice that nothing is happening yet in this workplace. (…Why not?)
Work requires workers. They live in the working class neighbourhood.
The workers are hired, and only then can production begin. NOW something is finally happening!.
WHY do the workers agree to work? Not for the joy of it. Rather, they seek to earn wages (W) through wage labour in order to live. They have no other way to support themselves.
With their wages they purchase the consumer goods and services (C) that (together with unpaid labour in the home) allows for their reproduction. Workers spend essentially all their income on consumption (reproduction). This is summarized in the slogan: “Workers spend what they get.”
After the bills are paid (especially wages for the workers), the capitalist gets what’s left over as profit (symbolized by the Greek letter pi, Π). After all, that profit was the point of investing in the first place!
The capitalist also likes to consume (usually high- quality stuff). Their consumption (C) is diamond- studded!
Finally, if the whole process has unfolded suitably, and the capitalist received a healthy profit, then he starts the whole cycle over again with another investment.
Ta-da! That’s the “little circle” of capitalism. It portrays the core relationships at the centre of the whole system.
What We Learned From This Simple Map There are two dominant classes in society. The capitalist’s investment is the initial force that starts the cycle going. Workers work to survive – and their wages are how they pay for survival. –And hence their income, once generated, is immediately pumped back into the economy in the form of consumption spending. The economy is a circular process: –Investment production income consumption profit –This cycle repeats itself over and over again
Income and Spending For the whole cycle to be completed (and then started again), the capitalist must sell all their output. In other words, all income generated in production, must be spent, in order for: –All output to be purchased. –The capitalist to receive (or “realize”) their profit. This balance between income and expenditure is very important to the smooth functioning of the cycle.
The capitalist has 3 potential markets to sell their output: mass consumption, luxury consumption, and investment goods (capital equipment). They must sell all their output into one of those markets. ClassIncomeExpenditure WorkersWages (W)Consumption (C) CapitalistsProfits ( Π) Investment and Luxury Consumption (I + C ) Total Economy W + Π C + C + I Income and Expenditure: The Little Circle (p.125)
Making it Work This is a simple map. But it captures the essence of capitalism: –Production is motivated by profit-seeking investment. –Work is performed by wage labourers. And now we see what’s required for capitalism to successfully function: –Initial investment by the capitalist. –Successful work by the workers. –The successful sale of all output. If capitalist is optimistic, it happens again