Jay and Claire partner up with a local design company to expand their operations. Pritchett’s closet has a lot of space to manufacture, but the design company has new ideas that are revolutionizing the closet industry. They believe this merger is mutually beneficial given each others’ strengths and weaknesses.
It turns out that the design company spends a lot of time on non-pecuniary benefits for its employees to make the company a “cool” place to work, but they lose a lot of money. Jay wants to go back to a more traditional workplace that focuses on production and not fun. The concept of efficiency wages means that firms pay above equilibrium wages in order to motivate and incentivize workers to perform better. Jay doesn’t agree with this management style, and we learn later that the design company wanted to merge because they needed more discipline in their finances.
See More: comparative advantage, compensation, costs, efficiency wages, labor, mergers, nonpecuniary benefits, production, worklife balance
Manny’s girlfriend Sherry is staying with the Pritchett’s for a while and she and Manny have taken up improv in the hopes of becoming an improv actor one day. Jay isn’t amused and feels like Manny should focus on trying to get a different job.
See more: labor, nonpecuniary benefits, preferences, skills, talent
Claire feels like she is not contributing to the family because she doesn’t have a job. She has applied to 5 jobs recently, but despite her college degree, she is rejected from all of them. Because she has been out of the labor force for so many years, her human capital has depreciated. The second important component of this scene is to consider the non-pecuniary benefits of work. Not all workers are income maximizers as some have other motivations for working in paid employment.
See more: college, education, human capital, human capital investments, human capital depreciation, job search, labor force, labor force participation, labor market, nonpecuniary benefits, skills, unemployment
With Lilly in school and Cam & Mitchell unsure about adopting another baby, Mitchell thinks it’s a good time for Cam to get a job. Mitchell works with his friend Longeness to secure Cam a job at a local boutique under the guise that the shop needs someone to work and Cam just happens to be available. Cam initially accepts because it seems like a great match for his tastes and skill set, but Jeoux lets the cat out of the bag that it wasn’t a sincere offer, and Cam is offended that Mitch thinks he is too lazy to get a job.
In the Household Production model, decision makers must decide whether to supply their labor for paid employment or supply their labor at home in household production. Cam lists many of the household production items that he produces with his labor, including paying bills, grocery shopping, and maintaining the house. Each of these items produce utility for the household, which could be purchased with Cam’s income. A secondary consideration of work, beyond the household production model is nonpecuiniary benefits of work like social interaction and purpose.
See more: household production, human capital, labor force, labor-leisure tradeoff, labor supply, marginally attached, nonpecuniary benefits, search, tastes and preferences, tradeoffs, unemployment
It is Phil’s birthday and also the day the iPad is being released. Phil is willing to spend his birthday waiting in line to be sure he gets the new iPad, but Claire offers to do it for him. Instead of getting there early, she ends up falling asleep on the couch. When she finally gets to the store, they are all out, and Phil ends up wishing he had handled it himself.
See more: costs, demand, early adopters, gift giving, innovation, nonpecuniary benefits, preferences, tastes and preferences, technological change, technology
Alex is graduating from high school soon so Phil, Claire and the kids are visiting Cal Tech. Claire thinks Cal Tech is the perfect place for Alex but she’ll find out soon that she and Alex have different preferences. College is one of the ways that we build human capital. As we learn more things, we become more productive and our labor is more valuable. Alex is already really bright and loves academics so college is a good fit to set her up for doing impressive things in the future.
Claire wants a great school that’s close. Alex wants a great school that’s far away. We also learn that Cal Tech has 5 Nobel Laureates on staff, suggesting that Cal Tech itself has a lot of human capital, making it a highly productive college.
Alex learns why Cal Tech might be a better choice for her than an East Coast school. What is more important: the quality of the program or proximity to home? Choices are tough and everything has a cost. Here’s Alex’s current dilemma: stay close to home and attend the best program in the country OR go to a college on the east coast with a weaker program.
See more: cost benefit analysis, incentives, human capital, nonpecuniary benefits, opportunity cost, preferences, self interest, school choice, signaling, skill building, tradeoffs, utility
Cameron gets a new job at a greeting card store and loves it because he is able to buy greeting cards with the employee discount. This greatly increases his greeting card purchases, and Mitchell points out that it is not saving them money, but costing them money. The discount represents a price reduction, which causes Cam to increase the quantity of cards he purchases. This can also be seen as a form of mental accounting where Cam prioritizes the savings instead of seeing the cost of each card.
See more: demand, income effect, mental accounting, nonpecuniary benefits, prices, quantity demanded, rationality
There are two concepts shown in this clip that can be used based on the portion of the course. First, Haley weighs two different career options and must consider the costs of each. Haley meets a woman who is interested in searching for a new husband who will die soon so that she can take their inheritance. The woman essentially offers to hire Haley as her personal assistant, but she’ll get to do leisurely activities. Luke tries to convince Haley to stick with the golf course because it provides a better future for her. Selecting one jobs means she can’t enjoy the benefits of the other.
The second concept covers the notion of labor-leisure tradeoffs. In the standard Income Leisure Tradeoff model, consumers are given a choice of determining their distribution of time based on the available number of hours in a day. Haley considers similar options here in terms of one job, with Luke, that requires a more work, but higher income while the other job provides more leisure activities. In this section, it helps students to realize that leisure has value similar to income and decisions makers are willing to give up income in exchange for leisure.
See more: employment, income leisure tradeoff, indifference curves, labor, leisure, nonpecuniary benefits, preferences, tradeoffs, wages