Explanation of the Disappointed Labor Principle, urgent use

The so-called Disillusioned Labor Principle means that when the economic situation is not good, the demand for labor will drop, which will cause the labor force to lose the confidence and opportunity to find a job and become "disappointed workers". The labor force participation rate is bound to fall.

On the contrary, when the economic situation improves, the demand for labor will increase. At the same time, there will be more employment opportunities for the labor force, and the labor force participation rate will inevitably increase.

Extended information:

1. The principle of supplementing workers:

The principle of supplementing workers means that when the economic situation is not good and the demand for labor decreases, the first The first worker may have a lower income or may face unemployment, which requires the second worker to go out to work to increase his income and become a supplementary worker, thus increasing the labor force participation rate in society.

On the contrary, when the economic situation is relatively good and the demand for labor increases, the first worker will have enough income and will not need the second worker to work, which will cause the labor participation rate to decline.

2. Labor substitution effect:

It means that the higher the wage, the more willing workers are to increase labor supply to replace leisure. In other words, the cost of leisure has increased, and workers are willing to work instead of leisure, thus increasing their wage income.

3. Labor income effect:

It means that because the higher the wage, workers are still willing to maintain a fairly high wage income and living standard after reducing their working hours. And enjoy more leisure time.

Both of these effects show that income and leisure will have effects, and there is a substitution relationship between the two, both of which are the result of wage increases. But when the substitution effect is greater than the income effect, the labor supply curve will have a positive slope, indicating that as the wage rate increases, labor supply also increases.

However, when the substitution effect is smaller than the income effect, the labor supply curve has a negative slope, indicating that as the wage rate increases, the labor supply becomes less and less.